Ireland: Finance Act 2022 introduces new pensions-related measures
By Alliant Global Knowledge Center
On 15 December 2022, the Seanad Éireann (the second house of Parliament) passed the Finance Act 2022, which among its many measures includes notable retirement fund related measures, namely provisions pertaining to the tax treatment of:
- Lumpsum payments from foreign pension funds
- Pan-European Personal Pension Product (PEPP)
- Employer PRSA contributions
These measures which come into effect starting 1 January 2023 are detailed below.
Taxation treatment of lumpsums from foreign pension funds
Effective 1 January 2023, Article 19 of the Finance Act 2022 amends Part 7 of the Principal Act (State Guarantees Act, 1954) setting the tax treatment of lumpsum payments from foreign pension funds received by residents of Ireland will be treated in the same manner as lumpsum pension amounts paid from a local pension fund.
Specifically, a first lumpsum payments up to a lifetime limit of EUR 200,000 will be exempt from income tax, additional lumpsum foreign pension payments beyond EUR 200,000 and up to a lifetime limit of EUR 500,000 will be subject to 20% income tax, and any amounts beyond EUR 500,000 will be subject to the marginal tax rate applicable to the individual, as well as to the universal social charge (USC).
Tax treatment of PEPPs
Effective 1 January 2023, Article 20 of the 2022 Finance Act amends Part 30 of the Principal Act by inserting a new Chapter 2D setting out the tax treatment and relief applicable to PEPPs. PEPPs are voluntary personal pension plans introduced by the Pan-European personal pension product (PEPP) - Regulation 2019/1238 that starting on 22 March 2022 allowed a wide range of financial institutions across the European Union (EU) to offer EU citizens a new retirement savings option that supplements existing national pension regimes.
A PEPP is much like the Personal Retirement Savings Account (PRSA) and will qualify for the same tax treatment as PRSAs.
Employer PRSA contributions
Effective 1 January 2023, the Article 22 of 2022 Finance Act provides that employer contributions to PRSAs made on behalf of an employee are no longer considered a taxable in kind for the employee.
