Dominic Coyleanswers your questions.
SSIA maturity tax
My SSIA matured last week. I had paid the maximum amount for five years at a fixed 4 per cent interest with Bank of Ireland. On maturity it was worth €21,148 , but in addition to DIRT tax, I was informed by the bank of another tax , namely a "maturity tax" amounting to €482 .This was explained to me as a Government tax on the interest. So the total is now €20,666. The issue is that nowhere do I see clear information on this tax in any documentation and I have looked! I feel aggrieved to have another slice of my money taken away.
Mr J.R., Wexford
To be fair, the tax situation relating to Special Savings Incentive Accounts (SSIAs) has been extensively covered over the past six plus years since former finance minister Charlie McCreevy announced his intention to establish the scheme. Certainly, readers of this column must be fed up to the back teeth with the constant reiteration of the liability to tax on SSIAs.
The first thing to note is that no Deposit Interest Retention Tax (Dirt) is levied on these accounts. Dirt is levied on normal deposit interest but, from the outset, Mr McCreevy and the Revenue outlined a different system for SSIAs.
Assuming the accountholder remains eligible to hold an SSIA until maturity, "exit tax" or "maturity tax" is levied at the rate of 23 per cent - but only on the interest accrued or the investment gain on the account. Your monthly contributions and the Government's €1 for € 4 bonus are not taxed.
Looking at the figures you present, this is exactly what has happened here.
You state you made the maximum contributions throughout the period of the SSIA. Sixty contributions of € 254 come to €15,240. The Government bonus would add €3,810 to that, bringing the total to € 19,050.
Your missing € 482 amounts to 23 per cent of € 2,098 - the difference between the € 19,050 of combined contributions to your SSIA accounts and the € 21,148 your account was worth on maturity.
It is worth noting that for those people who lose their eligibility to hold an SSIA - for instance, because they no longer satisfy the residency requirements - or those who close their accounts before the five-year term is up, the tax situation is more onerous.
In these instances, the 23 per cent exit tax is levied on everything in the account - the initial contributions which come from your income after tax, the Government bonus and any interest/investment gain.
Much as none of us likes to pay any more tax than strictly necessary, in this instance, you have no cause to feel aggrieved.
Credit card duty
I opened a credit card account with Ulster Bank last year and was issued with a credit card. However, I have never used the card. I only opened the account to take advantage of their 0 per cent balance transfer offer.
Am I still liable for the €40 credit card stamp duty?
Ms M.O'D., Dublin
Unfortunately I think you will find that you are. Stamp duty on credit cards is levied, as you note, at € 40 a year. The sum is debited by financial institutions in arrears each April and the money passed to the Revenue.
According to the Revenue website, there is a provision for people who do not activate a credit card account to escape the stamp duty charge but only if the credit card account is closed in the same April-March 12 months span in which it is opened.
As you are now in April, you have effectively entered a new tax year in relation to the credit card stamp duty.
• Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2 or e-mail to dcoyle@irish-times.ie. This column is a reader service and is not intended 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 the columns of the newspaper. No personal correspondence will be entered into.
