Update to Irish PAYE obligations for foreign employers

Revenue has recently published an update about the PAYE treatment of foreign employments carried out in Ireland.

Revenue issued guidance in 2018 about what foreign employers must do concerning the above. It also contained rules allowing for foreign employers to dispense with the requirement to operate the PAYE system in certain circumstances.

One of the challenges for employers arising from the 2018 guidance related to the introduction of a multi-year presence test which required employers to track the Irish workdays of its employees over consecutive years when determining its Irish PAYE requirements. In some situations, an international employer was obliged to make annual applications to Revenue for clearance from the requirement to operate PAYE in respect of assignees or short-term business visitors to Ireland.

What has changed?

With effect from 1 January 2020, when determining its requirement to operate the PAYE system, foreign employers are required to only consider the number of workdays spent in Ireland by its employees in a single tax year. In effect, the multi-year presence test no longer applies.

It is understood that the following annual workday thresholds will now be in place from 1 January 2020:

  • 60 workdays if the employee is resident in a country with which Ireland has a Double Taxation Agreement (DTA)
  • 30 workdays in other cases.

This is a welcome development for foreign employers where their employees spend consecutive tax years working in Ireland, as it should simplify the overall review of the PAYE withholding requirements arising from their Irish workdays. However, the updated guidance is silent on whether the nature of the role performed in Ireland also needs to be examined by foreign employers in conjunction with the workday thresholds. Revenue has committed to publishing further guidance on the new rule shortly, which hopefully should address this point.

What should companies consider?

1. Ensure that they continue to track workdays for employees working in Ireland under foreign employments.

2. Understand the nature of the work being carried out in Ireland by each employee.

3. Make an application to Revenue for dispensation from the requirement to PAYE, where required, within 30 days of arrival.

4. Operate Irish PAYE withholding in respect of assignees and business travellers, where required.

 

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:

Staff Member

Position

Email

Telephone

Ken Killoran

Tax Partner

kkilloran@mazars.ie

01 449 4451

John Kelly

Tax Director

John.kelly@mazars.ie

01 449 4495

Diana Barton

Tax Manager

dbarton@mazars.ie

01 449 6457

 

February 2020

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