Tax Efficient Investments in Ireland

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  • Pension investing is one of the most advantageous investments provided by the Government. Take full advantage.
  • Rent-a-room scheme provide tax free income up to €14,000 per year
  • EIIS reduces your tax bill but can be high risk, look for funds to reduce the risk
  • Earning made from forestry up to €125K is tax free
  • An Post bonds and certs. safe but low interest

This is not financial advise, do your own research. This is a list of tax efficient vehicles that I have found in Ireland. I will keep adding to them as I find more.

Pensions

A pension fund is by-and-far the most efficient of investments. If you are in the high tax bracket, you are essentially earning 40% interest immediately when you contribute. If you contribute €600 of your net income, you will get €1,000 in your pension fund.

That doesn’t sound correct, I hear you say! Well it is. Think about it, that €600 of your net income was €1,000 of your earned gross income pre-tax. If you did not contribute to your pension, the taxman would take €400 or your €1,000 and give you €600. By contributing €1,000 to your pension, the taxman forfeits their €400 and puts it into your pension instead. The contribution still only costs you €600 but you ended up with €1,000 in your pension account. 

Pensions are one of the most tax efficient saving schemes in Ireland at the moment. For every €100 you put into you pension it will cost you €60 if you are on the 40% tax band.

You can contribute additional funds to your pension these are called AVCs. There is an upper limit on how much additionally you can contribute each year. The age-related earnings percentage limits are:

  • under 30: 15% of you annual salary
  • 30-39: 20% of you annual salary
  • 40-49: 25% of you annual salary
  • 50-54: 30% of you annual salary
  • 55-59: 35% of you annual salary
  • 60 or over: 40% of you annual salary

Invest in Film

A.K.A. Section 481 relief. Unfortunately, this is no longer available to the public. It is only a tax relieve now under corporate tax. [1]

Rent-a-room Scheme 

This is a great government scheme as it is tax-free. As of 2019, you can earn up to €14,000 per year tax-free by renting out your rooms. You don’t even need to be the owner of the house to do this. [2]

Tax relief scheme (EIIS)

The Employment and Investment Incentive Scheme. I haven’t tried this yet but I have been researching it. You can invest into approved companies to get tax relief on a percentage of your investment. The maximum investment that is allowed into this scheme is €150,000 per year. If you are on a high tax bracket, you can get up to 40% tax relief from your total investment. Essentially, you decrease your taxes by 30% of you investment and if the company has met certain conditions after year 4, you decrease your taxes by another 10% of your investment. [3]

For example, let’s say you invested €20,000 in an approved EIIS company, you can then get tax relief of €6,000 (€20,000 x 30%) and on year four you get another tax relief of €2,000 (€20,000 x 10%)

You can see the 2011 – 2017 revenue statistics here: https://www.revenue.ie/en/corporate/documents/statistics/tax-expenditures/eii-stats.pdf

Forestry

Any money made from forestry is not subject to tax, up to €125,000. You can get 5% – 7% return on this. You don’t have to buy land to participate in the Forestry scheme as there are funds available that you can invest in. [4]

Minimum investment €750 with an average investment of €3,500.

This one needs more research, I would pay particular interest to the export market to the U.K. most of our timber goes there. Without that marketplace the returns could be diminished quite a lot.

An Post Bonds

The interest earned on these bonds are tax-free.

  Maximum Length Interest per year Interest over life
Savings Bond 3 years 0.33% 1%
National Solidarity Bond 4 years 0.5% 2%
National Solidarity Bond 10 years 1.5% 16%

An Post Saving Certs

The interest earned on these saving certs are tax-free.

  Maximum Length Interest per year Interest over life
Savings Certificate 5 years 0.98% 5%

Do your own due diligence, get financial advice before investing in anything. I am not a financial adviser nor do I give advice in any fashion. This information is provided based on my own research and experience.


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