The Irish tax authority has released new guidance following changes to the Pay As You Earn tax rules for employers of foreign temporary assignees.
The guidance highlights that when a foreign person undertakes work temporarily in Ireland, the employer may be required to deduct taxes from their remuneration at source, under Ireland's PAYE system.
The assignee may then be entitled to claim relief from this Irish tax under a double tax agreement between Ireland and another country.
Irish tax rules provide for exceptions where payroll tax should not be deducted. Where this is the case, this does not necessarily mean that the assignee is absolved from tax liability in Ireland but that the employer need not collect tax under the PAYE system.
Generally, employers are released from the obligation to operate PAYE where an assignee is unlikely to be liable to tax in Ireland. However, they may later become required to take on these administrative obligations if the assignee's circumstances change, such as if they become tax resident in Ireland or a change is made to their employment contract.
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Ireland changed its rules with effect from 1 January 2020. The change provided that when determining whether a dispensation from the operation of Pay As You Earn (PAYE) is required, employers need only consider the number of workdays spent in Ireland in the year of assessment concerned.
As such, there is no longer a requirement to consider work spent in Ireland in two consecutive years or to be so spent in future years.
Under the new rules, Revenue will not require an employer to operate PAYE in respect of income attributable to duties exercised in Ireland where:
- the assignee exercises the duties in Ireland for not more than 60 workdays (either consecutively or cumulatively) in a tax year; and
- the assignee is not on the payroll of an Irish entity; and
- the assignee is resident in a double tax agreement (DTA) country and is not resident in Ireland for the relevant tax year.
For the purpose of these rules, a workday is:
"a day during any part of which an individual performs any work in [Ireland]."
Where these conditions are met, Revenue accepts that the assignee is taxable solely in his or her country of residence on the relevant employment income. Employers need not request a dispensation from PAYE obligations where the above conditions are met.
The change removes some burdensome rules that employers had to contend with. For instance, under the old rules, if an employee spent 60 workdays or less in Ireland in any one tax year but intended to have short-term business visits to Ireland on a recurring annual basis over more than two tax years, an application would have been required from the employer to be released from the obligation to operate PAYE.
Under the new rules, the employee's activities are looked at on a year-by-year basis. Providing the assignee spends fewer than 60 workdays in Ireland during the year in question, the dispensation for the employer is automatic.
Employers should note that a PAYE dispensation may also be obtained, on request, where the temporary assignee is from a country with which Ireland has a double tax agreement. This is possible where the assignee has spent more than 60 workdays but fewer than 183 days in Ireland in the tax year. This dispensation is not available for non-DTA country assignees.
The Irish Revenue said it intends to release further guidance, in addition to the new information in Chapter 4 of Tax and Duty Manual Part 42-04-65, in the new year.