Would you trust an overseas bank with your savings? That’s what thousands of Irish people are now doing. Irish savings in euro-zone banks have grown from €1.9 billion at the end of June 2021 to €3.5 billion at the end of June 2024, according to European Central Bank (ECB) figures.
Shiny new fintechs and “neobanks” have been muscling in on Irish banks' business, making it easy for Irish savers to shop for the best interest rates across much of the continent.
Their greater choice of savings products and snazzy banking apps have also been a draw.
So, if you’re curious about sending your euros to Europe, is there still value to be had, and what are the pitfalls to avoid?
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For most of us, our bank isn’t a branch any more. It’s a phone. Money isn’t a physical thing either; it’s just data connected to your profile. With everything getting so abstract and the concept of personal service a receding memory, keeping your money “at home” seems almost quaint.
“People have tended to be quite hesitant to trust banks abroad. That seems to be changing,” said the ECB’s Matthias Rumpf in a blog post for the regulator last year.
“Recently, private households have increasingly made cross-border deposits with banks in other euro-area countries. While the volume still is relatively low, it is growing at an impressive rate,” said Rumpf.
Euro-zone banks are all policed by the ECB anyway, so does it really matter where your money is?
Online-only “neobanks” such as the Dutch group Bunq, Germany’s N26 and Revolut have been making steady inroads in Ireland. So too have savings platforms such as Trade Republic and Raisin, which offers savers access to rates in 24 banks across 12 different European countries.
The number of savers in Europe moving their money about for better rates is increasing. Cross-border deposits increased between mid-2022 and September 2023, when the ECB raised interest rates, suggesting households were actively shopping for better savings rates, says the regulator.
The trend started earlier however, likely due to increased cross-border marketing by online banks.
German and Dutch households have really come on board with the concept, accounting for most of the growth in savings across national borders since 2020, the ECB says. Irish households are mid-table in the euro zone, with €3.5 billion on deposit in other euro-zone countries as of September last year.
That amounts to about 2 per cent of Irish households’ deposits. If you are tempted to join their ranks, here are five things you should know.
1. Shop the market
The size of your deposit and how long you can lock it away will determine where you will get the best savings rate. And this could be Ireland, so shop the market before jumping ship.
Some overseas rates were significantly better than in Ireland last year. In January 2024, Rasin.ie was offering access to a headline-grabbing 4.1 per cent gross interest rate for 12-month deposits with Portugal’s Banco Português De Gestão.
An Irish saver putting €20,000 on deposit for 12 months would have earned €834 in gross interest. Not too shabby.
Such compelling rates have since fallen, however. At the same time, some rates with Irish banks have edged up.
At the time of writing, one of the best savings rates for a 12-month term deposit is 2.76 per cent with Latvian bank BluOr. This is available through Raisin.ie. Put €20,000 on deposit for one year and it will earn gross interest of €552.
In fairness, the rate is not wildly different from what is available at home – 2.75 per cent with PTSB, for instance, which will give you gross interest after a year of €550.
Overseas banks offer more six- and nine-month fixed-term savings products, which can have good rates.
And if it’s a demand deposit account you’re after, where you can access your money any time you want, then you’ll certainly fare better overseas. You can get a variable rate of 2.81 per cent with the Swedish Northmill Bank through Raisin where your €20,000 could earn €570 gross interest.
You’re looking at hundreds less for the same account in Ireland.
AIB’s personal demand deposit account will give you just 0.25 per cent, or a €50 gross return. Bank of Ireland’s instant access demand account offers an even less attractive 0.1 per cent, or €20 gross return.
That’s between €520 and €550 less than with Northmill. It’s certainly worth sending your money overseas for that.
2. Check the small print
When choosing a rate, make sure you read the details – the terms and conditions. With Bunq, for example, there is one interest rate on savings up to a certain threshold, with a higher rate kicking in only on amounts above that.
At the moment, Bunq is advertising a variable rate of 2.67 per cent. But savers earn 2.01 per cent on savings up to €31,694 with the higher 2.67 per cent “bonus interest” applicable only on balances above that threshold up to €100,000.
3. Pay your tax
If you are Irish with a savings account in Ireland, the tax you owe on any interest earned here – the 33 per cent deposit interest retention tax (Dirt) – is deducted automatically. It’s deducted by the bank before the interest is paid to you.
You don’t have to pay any further income tax or universal social charge on the interest, but you must declare the interest as income if you are making an income tax return.
It’s different with interest earned overseas. You still have to pay tax to the Irish tax authorities but you will have to take charge of this yourself by filing an income tax return.
It’s not hard but it is just an extra thing to consider when opting for an overseas bank. When comparing rates, factor in this 33 per cent deduction to get a like-for-like comparison with Irish product offerings.
If you are a self-assessed taxpayer, you should include the interest earned overseas in your usual return – just like you include the interest earned on Irish savings.
If you are a PAYE taxpayer earning interest overseas, you must make an annual PAYE income tax return on Revenue.ie using PAYE Services in MyAccount.
If the total amount of your non-PAYE income exceeds €5,000, you will have to register as a self-assessed taxpayer and make a return using a related Revenue service, ROS.
Is Revenue really going to know you have an overseas bank account with €10,000 or €20,000 in it? The answer is “yes”.
Before you can sign up for a bank account overseas, you are asked for your nationality and your PPS number. Ireland has international “exchange of financial information” agreements with lots of countries, enabling Revenue to check who holds bank accounts overseas and whether they are paying tax on the income.
4. Withholding tax
If admin is not your thing, pay attention to whether the overseas bank you are considering placing your money with charges withholding tax. There will be an extra bit of admin here. It’s not hard, but if you don’t complete the right forms before your deposit matures, you can end up owing both Dirt in Ireland on your gains, and paying full withholding tax in the country the bank is based in too.
One Irish saver, delighted to avail of the impressive 4.1 per cent rate with Banco Português De Gestão last year, tripped up on this. Signing up for the rate through Raisin in January 2024, the deposit matured in January 2025 with an impressive €833 gross gain
That Portugal charges withholding tax of 28 per cent was clearly flagged on the product. A double taxation agreement between Ireland and Portugal means Irish savers will not pay more than 33 per cent to both countries combined – the tax they would pay at home.
Ireland has double taxation agreements with many countries. Our agreement with Portugal, for example, limits the Portuguese tax on interest to 15 per cent. You pay the balance of 18 per cent to the Revenue Commissioners. As a result, no more than 33 per cent is levied.
To get this reduction in withholding tax in Portugal, however, the customer had to provide a signed “21-RFI” – a Portuguese tax form – that is available on Raisin’s website. She also needed to provide a tax residence certificate, which she requested on Revenue.ie.
The Irish saver posted the forms to Raisin in Berlin, but only a week or two after the deposit matured. This was too late.
Instead of charging 15 per cent, Portugal charged its full rate of withholding tax – 28 per cent – so an extra €108 was deducted. She still had to pay the 18 per cent Irish tax due to Revenue on the Portuguese-sourced deposit interest, or €150 as Revenue assumes the saver will take the steps required to limit their exposure to the Portuguese tax.
In the end, her €833 interest gain was hit with 46 per cent tax and dropped to €450.
The Irish customer could contact the Portuguese tax authority, sending them a 23RFI form, available on Raisin’s website, along with proof of Irish tax residency from Revenue, says Eoghan O’Hara of Raisin.ie.
“It sounds daunting, but I’ve done it myself and it’s pretty straightforward,” says O’Hara.
This clearly happens to other savers too, because Raisin has an online explainer on what to do about it.
Is the Irish saver going to fill out more forms to get back the €108? Maybe. It would have been easier to set a reminder on her phone, six weeks out from the maturity date to submit the forms.
Regardless, whether they are aware of it or not, people do not appear to be put off by the paperwork.
“There’s no trend of people not choosing banks in countries that charge withholding tax and opting for a lower rate,” says O’Hara. “They are more attracted by the return.”
It does seem counterintuitive that in the world of fintechs and neobanks, you still end up having to print and fill out forms, buy a stamp and an envelope and post something. But that’s how it is.
5. Probate
If the worst happens and you die whilst having savings in an overseas account, it can be messy.
Depending on the amount in the overseas bank, you may have to take out probate in both Ireland and in the country in which you have savings. If your deposit is earning interest of €500 but your estate has to spend €2,000 in legal fees trying to sort it out, you’ll be quids out.
Be sure to note details of overseas accounts where your executors can find them.
Having a joint account can make things simpler – if one of you dies, the funds pass to the surviving account holder. You can open a joint account with Bunq, for example, but not through Raisin.
