On 20 December 2021, Revenue updated its guidance material in relation to the payroll tax withholding obligations in relation to foreign employments exercised in Ireland.
Revenue’s guidance material was updated to reflect changes in relation to the following:
- Assignees travelling to Ireland for greater than 30 workdays but not more than 60 workdays.
- The clarity in terms of “Recharge of Costs”.
1. Assignees travelling to Ireland between 30 and 60 workdays
The updated guidance issued by Revenue introduces stricter rules around employer payroll tax withholding obligations in respect of assignees who are resident in a country with which Ireland has a DTA who will spend greater than 30 workdays but not more than 60 workdays in Ireland in a rolling 12-month period.
The previous rules stated that Revenue will not enforce the operation of PAYE in cases where 60 or fewer workdays are spent in Ireland in a tax year.
However, the new guidance states that where an individual, who is a resident of a country with which Ireland has a Double Tax Agreement (DTA), is employed under the terms of a foreign employment contract and performs duties in Ireland for greater than 30 workdays but no more than 60 workdays in aggregate in a tax year, then those days may be disregarded for PAYE purposes, subject to the conditions of the employment income article in the applicable DTA being satisfied. In such circumstances, there is no requirement for the foreign employer to operate Irish PAYE withholding on the income attributable to duties carried on in Ireland.
Where the employment income of the temporary assignee is not relieved from the charge to Irish tax under the terms of a DTA, or where the workdays in Ireland exceed 60 and there is no PAYE dispensation in place, PAYE must be operated from the first workday in Ireland.
In order for an exemption to apply to an assignee travelling to Ireland for between 30 to 60 workdays, the conditions of the employment income article of the relevant DTA must be satisfied.
This updated guidance will impact inbound assignees to Ireland that are tax residents in a DTA country where the employment income article refers to 183 days in a rolling 12-month period.
This means that foreign employers need to check how many days an employee is going to spend in Ireland in any twelve-month period commencing or ending in the fiscal year concerned, which means looking at more than the calendar year for Irish payroll tax withholding purposes.
2. Recharge of costs
Revenue has also clarified the situation where there is a recharge of costs from a foreign employer to an entity that it has in Ireland.
The updated guidance removes references to a recharge of costs to an Irish subsidiary. The updated guidance only refers to a recharge of costs to a permanent establishment of the foreign employer. Therefore, in determining if the DTA conditions are met in order to exempt income from taxation, you don’t need to consider a recharge of costs to an Irish entity that is not a permanent establishment of the foreign employing entity, which is a welcome change.
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 our Employment Tax & Global Mobility Services team in Mazars, Dublin below:
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