Policyowners are not subject to Irish tax as long as they are resident outside the State at the time of an encashment.
The deduction of tax is a Revenue Commissioners requirement under Section 67 of the Finance Act 1997. The legislative requirement is that once a policyholder is resident within the Republic of Ireland at the time of encashment, tax is payable on the growth between the value on the date of return to Ireland and the value at encashment (i.e. the investment growth during this period). Tax is levied at the prevailing standard rate of tax which is currently 20%.
Eagle Star International Investment Plans and Bonds were issued as retirement benefits policies within the meaning of Section 710(3), TCA 1997. This means that if a policyowner encashes their policy between the ages of 60 and 70 they will be taxed on the gain since their return to the State at a reduced tax rate of 75% of the standard tax rate at the time of encashing. The current standard tax rate is 20%, so the current reduced rate of tax applicable would be 15%. Please note that if the policyowner encashes their policy after achieving age 70 they will be taxed at the full prevailing standard tax rate (currently 20%).