Proposed Legislative Framework for Individual Investment Accounts Published

Eligible Account Providers

• Only “eligible account providers” can offer IIAs.

• These include certain Irish or EEA[1] authorised investment firms, credit institutions, insurance undertakings and UCITS management companies.

• Account providers must be registered with the Irish Revenue Commissioners (Revenue) which will establish and maintain a register of eligible account providers which will be published on the Revenue website.

Eligible Investors

• The IIA will be available to Irish resident investors, aged 18 and over, who hold an Irish Personal Public Service Number.

• On launch, only one account will be allowed per person.

Eligible Investments

• Investments held within the IIA can only comprise of “eligible investments”.

• These include equities and bonds admitted to trading on an EEA regulated market or equivalent third country market, insurance-based investment products and investments in most types of UCITS with the exception of structured UCITS funds.

Tax Treatment

• A tax-free threshold of €50,000 will apply to each account.

• Any value above that amount will be taxed at a flat 1% a year (known as the Investment Account Tax).

• Investments in the IIA will fall outside the existing retail investment tax regimes. No CGT, dividend or interest withholding tax, investment undertaking or life assurance exit tax or encashment tax will apply, nor will the eight-year deemed disposal rule.

• The 1% Investment Account Tax is a final liability tax. Investors will not need to include their IIA in their annual tax return, and no other tax credits or reliefs can be set against it. The flip side is that losses made on investments within the IIA cannot be used to reduce tax on gains made elsewhere. The 1% levy on insurance premiums will also not apply to insurance-based investment products held in the IIA.

• Importantly, the investor will not be responsible for calculating whether tax is due or not. This responsibility will rest with the account provider who will calculate the tax each year as at 31 December, report to Revenue by the following 31 March (even where no tax is due) and pay any tax due on behalf of the investor by 14 April. The account provider must also issue an annual statement to the investor. However, if an account provider fails to pay tax due, Revenue may recover the unpaid tax directly from the investor.

• Contributions above the €12,000 annual limit will attract an additional 1% charge for each month that the excess remains in the account, until it is withdrawn. Account providers which accept excess contributions without reasonable excuse may also face a €3,000 penalty per account. Therefore robust monitoring of contributions will be essential.

Contribution Limits and Holding Periods

• There is an annual contribution limit of €12,000 per account.

• No minimum contribution is applied.

• In line with the Recommendation, no minimum holding or lock in period is applied meaning that money can be withdrawn at any time without a tax charge.

Portability

• In line with the Recommendation and to encourage competition between account providers, the Bill provides for the possibility of investors being able to change account providers by transferring investments held within the IIA via an in-specie transfer on a tax-neutral basis where both account providers expressly agree or otherwise via a liquidation transfer.