Taxation of Pension Gratuity

By Industrial Relations Officer

In recent months many members of the Defence Forces were concerned that the Government established Commission on Taxation would introduce income tax on retirement gratuities.  Retiring PDFORRA members can now look forward to receiving their retirement gratuities “tax free” as the Commission has backed away from significant taxation of pension gratuities.

Part 10 of the Commission on Taxation Report 2009 addresses pensions. In relation to lump sums, Recommendation 10.9 proposes that lump sums taken on retirement should be liable to tax as follows:
• An amount of up to €200,000 should be tax free.
• The balance of the lump sum should be subject to tax at the standard rate of income tax.

It is unlikely that the Government will introduce income tax on gratuities given the recommendations of the Commission on Taxation.

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