Offshore pension savers face Revenue penalties
PENSION-SAVERS face big penalties after the Revenue Commissioners announced a clampdown on retirement funds that have been moved offshore to avoid tax.
The Revenue Commissioners said moving pension funds abroad to avoid big tax bills may "fall foul" of the conditions under which they have approved schemes.
They said approval for occupational pension schemes or P Personal Retirement Savings Accounts (PRSAs) could trigger "significant tax liabilities" on the amounts moved aboard and the withdrawal or clawback of tax reliefs.
It is understood that Revenue is now examining schemes with a view to removing their tax-exempt status,
This will happen if it is found that the driving force behind them is not a retirement abroad, but a scheme to avoid Irish taxes.
There has been a sharp rise in the number of pension savers moving their funds around Europe, particularly to Malta and Portugal.
Many have been tempted by advertisements, placed by financial advisors, claiming that their funds would be safe from any liabilities in these tax havens.
However, moving these funds from PRSAs without Revenue's approval means they would still be subject to a PAYE charge.
A Revenue spokesperson said such transactions may be regarded as tax avoidance transactions.
In addition, the promoters of these schemes, which are set up to encourage individuals to transfer their funds off shore to frustrate or avoid Irish tax rules, may face significant penalties.
The Revenue spokesperson said these businesses have a responsibility to report such transactions to the commissioners.
Pension holders may be liable to pay back all previous tax relief plus interest and PAYE.
"Moving pension funds off-shore in an effort to circumvent pension tax legislation (particularly, the condition that a scheme must be set up for the sole purpose of providing relevant benefits may fall foul of the conditions under which the scheme was approved by the Revenue Commissioners as an exempt approved scheme and could result in the withdrawal of the approval of an occupational pension scheme," said Revenue in a statement.
"Any such withdrawal of approval could trigger significant tax liabilities on the sums moved off-shore and the withdrawal or claw back of tax reliefs."