Introduction to Ireland’s Pay-as-You-Earn (PAYE)
Ireland’s Pay-as-You-Earn (PAYE) taxation is relevant to workers who are not residents of Ireland and do not hold any Irish employment but are working in Ireland for a short term for a local business or company. In this context, taxation is applicable either on the local company or the employer from across the border.
Since 2007, the Office of the Revenue Commissioners has been continuing with regular direction on this matter. The 2007 directions in this context were well accepted, still there were grey areas.
An updated set of directions were issued in 2016. These included observations from the Organization for Economic Co-operation (OECD) that are not included in Ireland’s law. As a result of these changes, employers faced a lot of ambiguity and difficulties in implementation. It was almost unfeasible for an employee to receive waiver in PAYE even after spending 30 work days in Ireland in a financial year. Office of the Revenue Commissioners started consultation with various aggrieved parties. After prolonged consultations, Office of the Revenue Commissioners (‘Revenue’) has come up with updated directions which have been announced in April 2018. In its updated guidelines, the ‘Revenue’ has been able to illustrate its points without any ambiguity but the guidelines are not as feasible in practicality as the earlier ones.
One of the important factors to be considered is the employee’s tax residency status, i.e. in which country or location the individual is a tax resident. If the employee has tax residency in a country that has Double Taxation Agreement (DTA) with Ireland a particular threshold will be applicable. However, if an employee is tax resident in a country that does not have DTA with Ireland a certain threshold will apply that will be different to what is applicable in above case.
Detail under new guidance for an employee who is non-resident is illustrated in below table:
|Tax resident of a DTA country||Tax resident of a Non-DTA country|
|Duration of work in Ireland||Employment days in Ireland||Payroll Management||Employment days in Ireland||
|One financial/tax year||Up to 60 employment days in a financial year||No payroll implication, but whether the individual will return to Ireland in a following year should be taken into account||Up to 30 employment days in a financial year||No payroll implication, but whether the individual will return to Ireland in a following year should be taken into account|
|One financial/tax year||61 employment days or greater than that||Refer to “Specific DTA workers to Ireland” segment||31 employment days or greater than that||Irish PAYE needs to be applied on earnings while employed in Ireland|
|Two consecutive financial/tax years||Up to 60 employment days in two consecutive financial years||No payroll implication, but consideration must be given to whether the employee will return to Ireland in a subsequent year||Up to 30 employment days in two consecutive financial years||No payroll implication, but whether the individual will return to Ireland in a following year should be taken into account|
|Two consecutive financial/tax years||61 employment days or greater in two consecutive financial/tax years||Refer to “Specific DTA workers to Ireland” segment||31 employment days or greater in two consecutive financial years||Irish PAYE needs to be applied on earnings while employed in Ireland|
|Greater than two financial/tax years||Threshold is not applicable||Refer to “Continuous presence” segment||Threshold is not applicable||Irish PAYE needs to be applied on earnings while employed in Ireland|
Specific DTA Workers to Ireland
For a short term assignee working in Ireland for greater than 60 employment days in one financial year or consecutively in two financial years, there is no relief from tax implications under PAYE until below listed conditions are met. A company or business entity can apply to ‘Revenue’ for relief from the tax obligations under PAYE when:
With reference to (3) above, ‘Revenue” may not accept compliance of this condition if:
The new guidance illustrates on what constitutes “an integral part of the business activities.” As per the ‘Revenue’, considerations for determining integral component of business activities cannot be generalized and need to be case specific.
Also Read: How to make PAYE payment to HMRC
Ongoing or Continuous Presence
The updated guidelines have introduced a new concept of ongoing presence as per which assignees with continued requirements of returning to Ireland over a period of multiple years will not be eligible for spontaneous PAYE waiver. This will be irrespective of the number of working days an assignee remains employed in a tax year in Ireland. The business or the employer will have to put an application before the ‘Revenue’ seeking PAYE waiver. A single waiver will be applicable for a single financial year and hence application for PAYE waiver will have to be file every year.
Rotational Short Term Assignees
Additionally, the guidelines of ‘Revenue’ point out that if a series of assignees work consecutively on a rotational basis i.e. four assignees working for a period of 30 days each in Ireland in same role, considerations for PAYE should be made basis the entire period of 120 days.
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