An Approved Retirement Fund (ARF) is a personal retirement fund where an individual can keep their money invested after retirement, as a lump sum. Income and assets retained in an ARF are beneficially owned by the ARF/AMRF* owner.
Previously Revenue allowed tax deducted by a Qualifying Fund Manager from an ARF distribution to be refunded where the taxpayer could demonstrate that the distribution had been taxed in the country in which they were resident. A copy of the relevant tax return showing the income being taxed would usually suffice.
For example, Mr. Bloggs has an Irish ARF and is resident in the UK. Irish PAYE must be deducted to distributions paid to Mr. Bloggs. This income is also taxable in the UK, where Mr. Bloggs is resident. Mr. Bloggs provides evidence to Irish Revenue that the distributions are being taxed in both the UK and Ireland. Revenue issue a refund for the relevant amount of double tax paid on the distributions.
However, Revenue have now changed the way they refund tax deducted on an ARF distributions for non-residents. For tax refund purposes, instead of reviewing the distribution arising from the ARF as a whole, Revenue will now look to the to the underlying income, gains or capital within the ARF to determine where the taxing rights lie. The relevant Double Taxation Agreement (DTA) relating to that underlying income, gains or capital will determine whether any tax paid is eligible for a refund.
The result of this amendment is that it is not just enough to confirm the ARF distribution is taxable in an individuals’ country of residence in order for a refund to issue from Revenue. The appropriate articles in the DTA should be applied for the dates on which the individual income or gains arose within the ARF, which the distribution represents.
* Before an individual can take out an ARF (Approved Retirement Fund), up to €63,500 of their fund must be used to purchase an Approved Minimum Retirement Fund or AMRF.