COVID-19 Update for employers on employment tax and global mobility matters

February 2021
The Revenue Commissioners has issued updated guidance on various employment tax and global mobility matters for employers that were originally published in March 2020.

The key changes are included below.

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Real-time Foreign Tax Credit (FTC) for Restricted Stock Unit (RSU) cases

Share schemes filing obligations

Special Assignee Relief Programme (SARP)

Trans-Border workers relief

Foreign employments - PAYE dispensation applications and operation of PAYE

Multi-state workers

PAYE exclusion orders

Holiday/flight cancellation

Employer-provided equipment

e-Working and tax

Covid-19 testing

Flu vaccination

Payment of taxi fares

Small benefit exemption

Employer provided accommodation

Seasonal parties

Refund of healthcare insurance premiums

Training costs as part of redundancy package

Real-time Foreign Tax Credit (FTC) for Restricted Stock Unit (RSU) Cases

Background

Some internationally mobile employees may, in addition to having a liability under the PAYE system in Ireland, also have a liability to income tax in a foreign country on the RSU or a portion of the RSU. Where this arises, and a double taxation agreement is in place with the other country, the individual may be entitled to a credit in relation to any amount subject to double taxation.  As part of the conditions for this, the company had to provide information for 2019 cases to their Revenue district by 31 March 2020, and the individual also had to file his/her 2019 personal tax return by the same date. 

2021 update 

For 2020 cases, the 31 March deadline has also been suspended. The standard tax return filing date of 31 October 2021 applies for the relevant individuals.

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Share Schemes Filing Obligations

Revenue update 

The filing deadline for all 2020 share scheme returns is 31 March 2021.  In 2020, the filing deadline was extended to 30 June, however, this extension will not apply this year.

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Special Assignee Relief Programme (SARP)

Background

For employees who arrive in Ireland and meet the conditions for SARP relief, certification is required to be made by the employer on Form SARP 1A, for each employee availing of SARP relief, within 90 days of the employee’s arrival in Ireland to perform the duties of his or her employment in Ireland.

2021 update

Revenue  extended the deadline for filing a SARP1A by a further 60 days in 2020. However, this concession will cease to apply on 31 December 2020. From 1 January 2021 onward, all SARP 1A forms should be submitted within 90 days of an employee’s arrival to take up duties in Ireland.

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Trans-Border Workers Relief

Background

Transborder workers relief is designed to give income tax relief to individuals who are resident in the Republic of Ireland (ROI) but who work outside the ROI. It applies to individuals who commute daily or weekly to their place of work outside the ROI and who pay tax in the other country on the income from their employment. Individuals who travel to the UK and Northern Ireland typically benefit from this relief.

2021 update

Revenue has stated that if employees are required to work from home in the ROI due to COVID-19, such days spent working at home in the ROI will not preclude an individual from being entitled to claim this relief, provided all other conditions of the relief are met.

This concession will continue to apply for the 2021 tax year where:

  • an employee is required to work from home in Ireland due to COVID-19, and
  • provided all conditions of the relief are satisfied.

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Foreign Employments - PAYE Dispensation Applications and Operation of PAYE

Background

Where a Short Term Business Visitor (STBV) or short term assignee who holds a foreign employment, from a country in which Ireland has a Double Tax Agreement, works temporarily in Ireland for a local Irish entity, Irish PAYE implications can arise for either the foreign employer or the local Irish entity.  However, where a temporary assignee exercised the duties of employment in Ireland for more than 60 work days but less than 183 days, employers could apply to Revenue for a release from the obligation to operate Irish payroll. Up to now, the application had to be made by employers within 30 days of the employee taking up duties in Ireland.

2021 update

  • Given the unprecedented restrictions on travel as a result of COVID-19, Revenue did not strictly enforce the 30 day notification requirement for PAYE dispensations, up to 31 December 2020. From 1 January 2021 onward, the normal 30 day notification requirement will apply. Exceptional cases may be notified to Revenue, as required.
  • Revenue did not seek to enforce Irish payroll obligations for foreign employers in genuine cases where an employee was working abroad for a foreign entity prior to COVID-19 but relocated temporarily to Ireland during the COVID-19 period to perform duties for his or her foreign employer while in Ireland. This concession ceased to apply on 31 December 2020.It is important to note that this measure only provides for a temporary concession relating to the employer’s obligation to operate payroll withholding. It does not provide a concession with regard to the individual’s underlying income tax liability and filing obligations.

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Multi-State workers

Background

Where an employee who holds a foreign employment works in Ireland, an Irish PAYE liability arises for the foreign employer on employment income attributable to their Irish workdays only. For employees who have an established work pattern in Ireland (e.g. 2 workdays a week), the PAYE liability will arise on employment income attributable to those workdays.

2021 update

If a non-resident employee was prevented from leaving Ireland due to travel restrictions arising from COVID-19, they may have exercised all of their employment duties in Ireland until the lifting of travel restrictions. Revenue allowed a  foreign employer to account for PAYE by reference to the employee’s established work pattern in Ireland where:

  • the non-resident employee was carrying out duties of a foreign employment partially in Ireland and partially in a foreign jurisdiction prior to COVID-19
  • the foreign employer applied PAYE withholdings in Ireland and payroll taxes in the foreign jurisdiction based on the established work pattern prior to COVID-19
  • the employee could not return to the foreign jurisdiction as a result of the travel restrictions imposed by COVID-19
  • and
  • the employee continued to carry out their duties of employment in Ireland.

The employee and the foreign employer were required maintain a record of the facts and circumstances of the bona fide relevant presence in Ireland for production to Revenue if evidence is requested that such presence resulted from COVID-19 related travel restrictions.

The concession will cease to apply on 31 December 2020. From 1 January 2021, employers will be required to operate payroll withholding under the usual procedures.

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PAYE Exclusion Orders

2021 Update

Where an employee works abroad under an Irish employment contract, their employer may have received a PAYE Exclusion Order from Revenue confirming that PAYE should not apply to their Irish employment earnings. The PAYE Exclusion Order may be invalidated if an employee returned to Ireland to perform employment duties here. For 2020, Revenue adopted a flexible approach to such cases where an employee returned to carry out employment duties here as a result of COVID-19.This concession ceased to apply on 31 December 2020. From 1 January 2021, employers should operate payroll withholding on such employments under the usual procedure (subject to any exceptions that may be available).

It is important to note that this measure only provides for a temporary concession relating to the employer’s obligation to operate payroll withholding. It does not provide a concession with regard to the individual’s underlying income tax liability and filing obligations.

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Holiday/Flight Cancellation 

2021 update

For 2020, Revenue have allowed the tax-free reimbursement by employers of holiday/flight cancellation costs to employees who were integral to the business who were required to return to deal with issues related to the COVID-19 crisis. The tax-free treatment applied where the reimbursed costs were reasonable and the employee was not otherwise compensated (i.e. via an insurance policy or direct claim to the service provider). Revenue clarified that this also included costs relating to family members who were on holiday or due to go on holiday with the employee.

This concession ceased to apply on 31 December 2020. From 1 January 2021, the usual treatment of non-business travel will apply.

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Employer Provided Equipment

Revenue has stated that a taxable BIK charge will not arise where employers provide equipment such as laptops, printers, scanners and office furniture in order for employees to set up a working space in their homes.

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Employer-provided vehicles

Revenue update

The following applies for the duration of the Covid-19 restrictions in relation to the provision of company car or van to an employee:

(a) Employer takes back possession of the vehicle

Where an employer takes back possession of the vehicle and an employee has no access to the vehicle, no BIK shall apply for the period. 

(b) Employer prohibits use

Where an employee retains possession of a vehicle, but the employer prohibits the use of the vehicle, no BIK shall apply if the vehicle is not used for private use.

Records should be maintained to show that the employer has prohibited its use and no such use has occurred, for example communication from employer, photographic evidence of odometer etc. 

(c) Employer allows private use

Where an employee has a car provided by his or her employer and 

  • the circumstances in the previous example don’t apply
  • limited or reduced business mileage (if any) is undertaken during the period of the COVID-19 crisis
  • personal use is limited 

the amount of business mileage travelled in January 2020 may be used as a base month for the purposes of calculating the amount of BIK due.  Thus, the percentage applied in the calculation of the cash equivalent, which is based on annualised business mileage, may have regard to the actual business mileage for January 2020, for the period of the COVID-19 restrictions. Appropriate records should be kept, for example business mileage travelled in January, amount of private use, photographic evidence of odometer etc. 

Employee Continues Working

Where an employee continues to undertake business travel as usual in an employer-provided vehicle, the usual BIK rules will apply.

Use of company cars by employees in motor industry

Background

A special regime for calculating the BIK on use of company cars applies employees in the motor industry. Where an employee uses the car for one month or more, then this specific regime is not available.

Revenue update

During the COVID-19 crisis, employees in the motor industry who availed of the special rules, and who were unable to change their vehicle within the required time frame due to COVID-19 restrictions, may continue to utilise the specific rules for calculating car BIK for employees in the motor industry.

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e-Working and Tax

Revenue has provided guidance in relation to the tax treatment of e-workers and remote workers. Where certain conditions are satisfied, Revenue will allow an employer to make payments up to €3.20 per day to employees, without deducting PAYE, PRSI, or USC. Amounts in excess of €3.20 paid by the employer should be subjected to tax.

Conditions for relief

  • There is a formal agreement in place between the employer and the employee under which the employee is required to work from home;
  • An employee is required to perform substantive duties of the employment at home; and
  • An employee is required to work for substantial periods at home.

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Covid-19 testing

Where an employer:

  • tests employees for COVID-19 at the workplace; or
  • engages a third party to do such testing on the employer’s behalf; or
  • provides a COVID-19 test for employees to self-administer a taxable BIK charge will not apply.

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Flu vaccination

An employer can arrange for their employees to get the flu vaccine by:

  • engaging a registered practitioner to administer the flu vaccination at the workplace
  • making a payment directly to a registered practitioner to administer the flu vaccination; or
  • reimbursing an employee for the cost of the vaccination (the employee must provide a receipt).

Revenue have confirmed that due to the unprecedented circumstances, a taxable BIK charge will not apply.

Where an employee incurs the cost of receiving the flu vaccination, they can claim a tax credit accordingly.

Payment of Taxi Fares

Where an employer pays for a taxi to transport an employee to or from work due to health and safety concerns, a taxable BIK charge will not apply for the duration of the COVID-19 period only.

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Small Benefit Exemption

Under the small benefit exemption, an employer can give employees a small benefit of up to €500 in value, tax free, each year. This benefit must not be in cash. If more than one benefit is given in a year, only the first one qualifies for tax free status. Unused allowance amounts cannot be carried over. 

Revenue update

Where an employer wishes to recognise efforts of front line or other key staff working during the COVID-19 crisis, either by accelerating part of a reward (voucher) usually paid later in the year, or making an additional voucher award, the requirement that only one voucher issues is concessionally waived for the 2020 tax year, where the additional award is related to an employee’s exceptional efforts during the COVID-19 crisis.

This concession only applies to employees who continue to work during the restricted period. All other conditions of the section must be met, for example the maximum (cumulative) value may still not exceed €500, but as stated above, the requirement to only issue one voucher will be waived. Appropriate documentation must be retained by an employer where this concession is availed of.

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Employer Provided Accommodation

The provision by an employer of accommodation to an employee is generally treated as a taxable BIK.

Due to health and safety concerns arising from COVID-19, Revenue will accept that a taxable BIK will not arise during the period of the COVID-19 crisis, where an employer provides temporary accommodation to an employee in the following circumstances:

  • the accommodation made available to an employee by his or her employer is temporary in nature and the reason is to mitigate against the risk of transmission. For example, where an employee returns from an overseas trip and requires self-isolation, or
  • where there is a concern of transmission to other front line staff members/workers residing in the same household.

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Seasonal Parties

Background

Historically, Revenue have allowed employers to host a Christmas party for staff, without a BIK arising, on the basis that the expenses were reasonable and that the party was open to all staff.

Revenue update

A BIK will not arise where an employer incurs reasonable costs when hosting a virtual seasonal party for employees. Reasonable costs include costs which would typically have been incurred in hosting a face-to-face event, including the cost of delivering/providing food or drink to employees for the event. The event must be open to all employees.

Vouchers provided to enable employees to purchase food or drink for the event are not in included in the above concession. These vouchers will be taxable unless they are exempt under the small benefit exemption.

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Refund of Healthcare insurance premiums

An employer may pay medical insurance for an employee and their family, which is considered a taxable benefit-in-kind. . An employee may claim tax relief on the medical insurance premium directly from Revenue, as they are not in a position to claim the relief at source.

Revenue update

Some healthcare providers have issued a refund of medical insurance premiums to the employee/employer and individual policy holders who have personally paid for the policy. Revenue has issued the following directions on the treatment of the refunds.

Scenario 1: Employer paid premiums – refunds made to the employer

Where the employer receives a refund of the healthcare insurance premium the following shall apply:

  • the amount subject to BIK will be reduced to reflect the new gross value of the insurance policy
  • the employer is entitled to a Schedule D Case I/II deduction in line with the reduced policy amount.

Scenario 2: Employer paid premiums – refund split between the employer and the employee

Where the refund of the healthcare insurance premium is split between the employer and the employee the following shall apply:

  • the amount subject to BIK is reduced to reflect the new gross value of the insurance policy (i.e. taking into account the refunds to both the employer and employee) and any refund made to the employee is subject to BIK
  • the employer is entitled to a Schedule D Case I/II deduction to reflect the reduced policy amount (i.e. taking into account the refunds to both the employer and employee).

Scenario 3: Payment of premium by an individual policy holder (no employer involvement)

Where the refund of the healthcare insurance premium is made to an individual policy holder the refund is not subject to tax.

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Training costs as part of redundancy package

Background

Where an employer pays training costs (up to a maximum of €5,000) for an employee as part of their redundancy package, these training costs will be exempt from income tax, provided a number of conditions are satisfied.

One of the conditions is that the training should be completed within 6 months of the termination of employment.

Revenue update

Given the COVID-19 restrictions, it may not be possible to complete training within 6 months of the end of the individual’s employment. As such, where a termination takes place during the COVID-19 crisis, Revenue have agreed to extend the exemption, provided the training takes place within 6 months of the relevant course becoming available following the end of the COVID-19 crisis.

This concession will cease to apply to redundancies after 1 May 2021. From 2 May 2021 onward, the individual should complete the training within the standard 6 month time frame.

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If you have any questions in relation to the above, or if you would like to discuss this topic further, please contact a member of the Mazars employment tax team below:

 

Position

Email

Telephone

Ken Killoran

Tax Partner

kkilloran@mazars.ie

01 449 4451