U.S.-Ireland tax treaty: withholding rates on interest, dividends, royalties and services

What sets the U.S.-Ireland treaty apart

The U.S.-Ireland treaty exempts interest and royalties at source but, unlike the U.K., German, French and Dutch treaties, has no 0% rate for parent dividends: the best rate is 5%. Its particular rules reflect Ireland's position as a base for U.S. groups: a remittance-basis limit for individuals not domiciled in Ireland, a royalty anti-conduit rule, a triangular rule for low-taxed branches, and a limitation-on-benefits article that counts EU and NAFTA owners.

Common payments at a glance

Assumes the payee is the beneficial owner, is resident under the treaty, meets its limitation-on-benefits article and gives a valid W-8BEN, W-8BEN-E or Form 8233. Article references are to the treaty as amended.

Rates on investment and other income

Treaty in effect generally from Jan. 1, 1998. Protocols in effect from: Amending convention: Sept. 1, 2000. IRS country code EI.

"n/a" means the payment type is not covered by the royalty article: equipment leasing is business profits (no withholding without a permanent establishment) or other income. Superscript letters are the IRS's own conditions, listed at the end of this page.

Pay for personal services performed in the United States

Each row is an exemption the treaty gives, with the limits the IRS lists. All conditions in a row must be met; if any is not, the pay is withheld on at 30% (contractors) or under the wage rules (employees). Services performed entirely outside the United States are foreign-source and need no treaty claim.

Reading the U.S.-Ireland treaty as a payer

Documents and dates

The convention, its protocol and an exchange of notes were signed in Dublin on July 28, 1997, replacing the 1949 treaty, with a general effective date of January 1, 1998. Where the 1949 treaty gave more relief, it could be kept for 12 more months, but only in full. A 1999 amending convention, signed in Washington on September 24, 1999, replaced only the RIC and REIT dividend paragraph; the IRS tables list it as effective September 1, 2000.

Remittance basis

An individual resident but not domiciled in Ireland is taxed there only on income remitted to or received in Ireland, and the treaty limits U.S. relief to the amount remitted or received (Art. 24(6)). The technical explanation's example: $100 of U.S. dividends paid into a U.K. brokerage account may be withheld at 30%; paid into a Dublin account, 15%. Deductions for pension contributions are scaled down the same way.

Residence and transparent entities

Qualified governmental entities, pension trusts and exempt organizations, U.S. RICs and REITs, and Irish collective investment undertakings are residents (Art. 4(1)). Income through a fiscally transparent entity counts as a resident's only to the extent the resident's country treats it as theirs (Protocol para. 1); Irish collective investment undertakings are excluded from this look-through. Residence alone does not give benefits; the entity must also pass Article 23. Dual-resident entities are left to the competent authorities with no default rule.

Limitation on benefits

Article 23 qualifies individuals, governmental entities, companies whose principal class is substantially and regularly traded on a recognized exchange (trades in more than de minimis amounts every quarter, and at least 6% of average outstanding shares in the year), subsidiaries at least 50% owned by listed companies, pension and exempt organizations, and companies passing an ownership and base erosion test, where gross income is measured on the prior year but not below the four-year average. The active trade or business test has a substantiality safe harbor: asset, gross income and payroll ratios each at least 7.5%, averaging more than 10%. A pure headquarters company does not qualify.

Derivative benefits require at least 95% of the vote and value to be held by seven or fewer qualified persons or EU and NAFTA residents, and for dividends, interest and royalties those owners must get benefits at least as good under their own treaties. A triangular rule denies benefits to income routed through a third-country branch exempt in Ireland when the combined tax is less than half the normal Irish tax: dividends, interest and royalties are then taxed at up to 15% (Art. 23(7)).

Dividends

The rates are 5% for a company owning at least 10% of the voting stock and 15% otherwise (Art. 10(2)). The technical explanation does not count indirect holdings or non-voting shares toward the 10%, but looks through partnerships. There is no 0% rate for parents and no separate exemption for pension funds. Under the 1999 amending convention, RIC dividends get 15% and never 5%; REIT dividends get 15% only for an individual holding 10% or less, a holder of 5% or less of a listed class, or a holder of 10% or less of a diversified REIT, and otherwise the statutory 30% applies.

Interest and royalties

Interest is taxable only in Ireland (Art. 11(1)), including profit-participating debt, except that U.S.-source interest based on the profits of the issuer or an associate may be taxed at up to 15% and REMIC excess inclusions are fully taxable (Protocol para. 6). Royalties are taxable only in Ireland (Art. 12(1)). The technical explanation excludes leasing of personal property and professional services including software development, and treats retail "shrink-wrap" software as a sale.

Article 12(5) has an anti-conduit rule for royalties: the U.S. may tax royalties that an Irish company pays on to a third-country resident for the use of property in the U.S., where the Irish company itself received a U.S. royalty for that use and the arrangement is not part of its active business. The technical explanation's example applies the U.S.-Canada 10% rate in that case.

Services

Independent personal services are taxable in the U.S. only if a fixed base is regularly available here, with no day count (Art. 14). The technical explanation says a base that is available counts even if rarely used, while an occasional hotel room does not. Construction projects become a permanent establishment after 12 months; offshore exploration after 120 days in any 12 months. Employees are exempt only if present no more than 183 days in any 12-month period beginning or ending in the fiscal year, paid by a non-U.S. employer and not borne by a U.S. permanent establishment or fixed base (Art. 15). Directors' fees are taxable in the company's country with no threshold (Art. 16). Performers and athletes are taxable once gross receipts for the year, including reimbursed expenses, exceed $20,000, and then on the whole amount (Art. 17).

Pensions and Social Security

Private pensions, including lump sums and IRA distributions, and annuities are taxable only in the country of residence (Art. 18(1), (2)). Social Security, including tier 1 Railroad Retirement, is also taxable only in the country of residence (Art. 18(1)(b)), so U.S. Social Security paid to an Irish resident is not withheld on. Alimony is taxable only in the recipient's country; child support is exempt in both. Cross-border pension contributions can be deducted for up to five years with competent-authority approval.

Students and other income

Students in full-time study and full-time trainees are exempt only on payments from outside the U.S. for maintenance, education or training (Art. 20). Apprentices and trainees are limited to one year; the text sets no time or dollar limit for students, but local earnings are not exempt. A trainee who is also paid a salary for services is not a trainee for this purpose. Other income, including gambling winnings, is taxable only in Ireland (Art. 22).

Where payers get it wrong

• Applying a 0% parent dividend rate. There is none in this treaty; the floor is 5%.
• Paying a non-domiciled Irish resident the treaty rate on income kept outside Ireland. Relief applies only to amounts remitted to or received in Ireland.
• Assuming all interest is exempt. Contingent interest can be taxed at up to 15%, and REMIC excess inclusions in full.
• Accepting an Irish company's claim on residence alone. It must pass Article 23, and a headquarters company fails the active business test.
• Withholding only on a performer's excess over $20,000. Above $20,000 the whole amount is taxable.

Read from the treaty documents: Convention, Protocol and Exchange of Notes of July 28, 1997; Amending Convention of Sept. 24, 1999; Treasury Technical Explanation. Texts and technical explanations: United States income tax treaties, A to Z.

How the payee claims these rates

• Individuals claim a reduced rate on interest, dividends, royalties or pensions in Part II of Form W-8BEN: treaty country, article, rate and any conditions. Most claims need a U.S. TIN or a foreign TIN on the form.
• Entities claim in Part III of Form W-8BEN-E, which also asks which limitation-on-benefits test the entity meets (the Ireland treaty's LOB provision is Article 23).
• Pay for services performed in the United States by an individual is exempted on Form 8233, not the W-8BEN, one form per tax year and per payer.
• The payer reports the payment on Form 1042-S with the income code shown above and chapter 3 exemption code 04 (exempt or reduced withholding under a tax treaty). From 2026 an exemption code is required whenever less than 30% is withheld.

Questions payers ask

The IRS notes behind the figures

Notes to the rates (IRS Table 1)

• f Includes alimony.
• g Exemption or reduced rate does not apply to an excess inclusion for a residual interest in a real estate mortgage investment conduit (REMIC).
• u If enterprise earns income from leasing of equipment in the conduct of a trade or business, covered by Business Profits article (net tax). If passive income from the leasing of equipment, and not in Royalty article, covered by the Other Income article, if any. In Pakistan payment for TV broadcasting rights are covered by the Royalty article but not rental income from motion picture films.
• jj The rate is 15% (10% for Bulgaria and Spain; 30% for Austria, Germany, and Switzerland) for contingent interest that does not qualify as portfolio interest. In general, contingent interest is interest that is determined with reference to (a) receipts, sales, income, profits or other cash flow of the debtor or a related person, (b) any change in the value of any property of the debtor or a related person, or (c) any dividend, partnership distribution, or similar payment made by the debtor or related person. For Sweden and Germany, contingent interest is covered by the dividends article of the treaty.
• mm The rate in column 6 applies to dividends paid by a regulated investment company (RIC) or real estate investment trust (REIT). However, that rate applies to dividends paid by a REIT only if the beneficial owner of the dividends is (a) an individual (or pension fund, in some cases) holding not more than a 10% interest in the REIT, (b) a person holding not more than 5% of any class of the REIT's stock and the dividends are paid on stock that is publicly traded, or (c) a person holding not more than a 10% interest in the REIT and the REIT is diversified.
• ss 15% rate applies if income is attributable to a permanent establishment which that enterprise has in a third state, if the tax that is actually paid with respect to such income in the third state is less than 60 percent of the tax that would have been payable in the treaty country if the income were earned in by the enterprise and were not attributable to the permanent establishment in the third state, unless derived in the active conduct of a trade or business in that third state.

Notes to the services table (IRS Table 2)

• 7 Exemption does not apply to the extent income is attributable to the recipient's fixed U.S. base. For residents of Korea and Norway, the fixed base must be maintained for more than 182 days (for Norway, 30 days in the case of the exploration or exploitation of the seabed and sub-soil and their natural resources); for residents of Morocco, the fixed base must be maintained for more than 89 days.
• 11 Applies only to full-time student or trainee.
• 12 Fees paid to a resident of the treaty country for services performed in the United States as a director of a U.S. corporation are subject to U.S. tax.
• 17 The exemption does not apply if the employee's compensation is borne by a permanent establishment (or in some cases a fixed base) that the employer has in the United States.
• 25 Exemption does not apply if gross receipts (including reimbursements) exceed this amount.
• 45 The time limit pertains only to an apprentice or business trainee.
• 47 Fees paid to a resident of the treaty country for services as a director of a U.S. corporation are subject to U.S. tax, unless the services are performed in the country of residence.
• 58 Remuneration derived by a resident of a contracting State in respect of an employment as a member of the regular compliment of a ship or aircraft operated in international traffic may only be taxed in that State.

Transcribed from the IRS Tax Treaty Tables. Treaty texts and technical explanations: United States income tax treaties, A to Z.

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