Dominic Coyle answers your questions

Dirt cleaned up

In your column of January 25th you addressed the issue of Dirt satisfying the full liability for income tax on deposit interest received. Could I ask you to clarify the situation in relation to RaboBank's online savings accounts. My understanding is that this bank applies interest without deduction of Dirt, leaving it up to the individual to declare and settle the resulting tax liability.

My question is how is this interest treated from a tax perspective - ie does a 20 per cent tax payment satisfy the Revenue requirement where Dirt is not deducted at source and paid directly to the Revenue authorities? Or are such accounts treated less favourably in relation to tax treatment.

Mr T O'S., Cork

RaboBank operates in the same way as all other banks in the Irish market - deducting Deposit Interest Retention Tax (Dirt) at source on accrued interest.

The interest figure in your statement would be the figure net of Dirt. I have confirmed this with the bank itself.

Thus, while you do need to return details of interest received during the year in your annual tax return, you have no further liability to income tax. You are likely, however, to be liable to the health levy and to PRSI.

For those customers whose accounts are not subject to Dirt - largely credit union customers holding an ordinary share account where dividends are credited to the account without deduction of Dirt - you would face an income tax charge at your marginal rate.

Landlord costs

I am confused about expenses incurred with the maintenance of an investment property. Once or twice a year, I carry out minor repairs to my investment property in Dublin (replacing door locks or shower parts etc). In terms of time and materials and the 300-mile round trip each time, what expenses are allowable in my rental figures?

Mr JR, Galway

The rules in relation to rental offset state that you can deduct the cost of repairs and maintenance on the investment property before assessing income tax.

Quite how far the Revenue would go in the circumstances outlined is unclear. Clearly the materials would be allowable. If you were contracting out the repair and maintenance of the property, you would be charged for labour so it would certainly be worth arguing that issue with Revenue.

However, when it comes to mileage, you might find things a little bit stickier. A 300-mile round trip to fix a door lock might stretch credulity with the tax authorities. In general, these things are judged on a case by case basis. The law clearly allows for reasonable repair and maintenance costs but is not designed to accommodate gilded claims. If your figures look too high, they will almost certainly be challenged. You really need to take advice from an accountant or other tax professional familiar with the area.

Foreign flat

I bought an apartment in Cyprus. It was a year late in completion last September and my wife and I decided to sell it without occupying it, due to changed family circumstances.

We paid capital gains tax in Cyprus (first €17,074 tax free and other deductions allowed). What declarations and taxes may be payable to Irish Revenue on this transaction?

Are any allowances claimable on possible tax liabilities?

Mr J. O'R., Dublin

I am always nervous in giving definite responses to questions relating to taxes across more than one jurisdiction. Generally, the rules in such circumstances are set down in tax treaties between the states. However, the double taxation accord between Ireland and Cyprus dates back to 1968.

For what it's worth, Article 12 of that document indicates that the type of property to which you refer is taxable "only" in the country where you are resident. That would indicate that you should not have paid capital gains tax at all in Cyprus but are liable to CGT over here.

I suggest you consult a tax practitioner familiar with the Cypriot tax code and the double taxation agreement. As to allowances, you are generally allowed to deduct costs incurred in the acquisition and sale of an asset before calculating liability to capital gains tax in Ireland.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or by e-mail.

This column is a reader service and is not intended to to replace professional advice. Due to the volume of mail, there may be a delay in answering queries. All suitable queries will be answered through this column. No personal correspondence will be entered into.