Sportspersons tax refund on retirement

Sportspersons tax refund on retirement

Professional sportspersons can claim a REFUND of income tax paid on retirement; USC and PRSI, unfortunately, aren’t included.

How is the refund calculated?

The sportsperson selects any 10 years of his income (directly derived from professional sports), on which tax has already been paid. He/ she may select any 10 years of income over a 15 year period up to and including the year of retirement. The sum of the income selected is reduced by 40% and the balance, 60% of the income, is re-assessed to tax. In effect, any tax paid on the exempted portion of income will be refunded.

An example is the best way to show how it works.

Let’s say the sportsperson earned income from his/her sport over the selected 10 year period of €300K :

Income                                                 300,000

Expenses                                               100,000

Taxable Income                                 200,000

Income tax @40%                               80,000

 

So if a claim is made then the taxable income would be re-calculated by allowing a deduction of €120,000 (40% X  €300,000). The resulting, revised tax calculation would be as follows:

Income                                                 300,000

Expenses                                               100,000

Less Income reduction of 40%      120,000

Revised Taxable Income                  80,000

Income tax payable @40%             32,000

Tax refund due                                     48,000      (tax paid of €80K less revised tax liability of €32K)

 

Important conditions:

  1. Professional sportspersons may only claim the relief e.g. Soccer & rugby players, athletes, golfers, jockeys, swimmers, cricket players, boxers, cyclists, motor racing drivers, badminton, tennis and squash players. GAA players, being amateurs, cannot avail of this relief.
  2. A claim can only be made for income directly derived from sport e.g. salary, wages, bonuses etc. Income from sponsorship or advertising is not included.
  3. The sportsperson must permanently retire from his/her professional sport. Continuing to play sport on an amateur basis would not disqualify a claim for relief.
  4. In the year of retirement, the sportsperson must be tax resident either in the Ireland, in an EU country or in an EEA/ EFTA state.
  5. A claim for this relief must be made within 4 years of retirement.

 

Most noteworthy about the sportspersons tax refund on retirement is that the taxpayer has the flexibility to choose the years in which their earnings were the highest.

If you have any questions the TaxMan would be happy to assist you.

 

 

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