Temporary Assignees to Ireland
New Revenue Guidance
Where a non-resident individual who holds a non-Irish employment works temporarily in Ireland for a local entity, Irish PAYE implications can arise for either the foreign employer or the local entity.
Revenue guidance on this area has existed since 2007. The 2007 guidance was updated in 2016 and again in 2018 to incorporate certain OECD commentary (which is not reflected in Irish law). While the updated guidance in 2018 clearly set out Revenue’s position, it was broadly unworkable for employers in a practical sense.
Revenue issued updated guidance on 11 December 2019 which appeared to re-introduce a single tax year threshold and remove the multi-year aggregate tests introduced in the earlier guidance. The December guidance note promised that additional clarification would be provided on this.
On 24 June 2020, Revenue released the updated guidance which states for employees who are travelling to Ireland from a country with which Ireland has a Double Taxation Agreement (“DTA”) and who satisfy certain treaty conditions:
“With effect from 1 January 2020, Revenue will not enforce the operation of PAYE in cases where 60 or less workdays are spent in the State in a tax year. Each year should be considered on a standalone basis.”
Separately, Revenue have confirmed that where an individual employed under a foreign employment performs duties in Ireland for no more than 30 days in aggregate in a tax year, those days may be disregarded. Again, Revenue have confirmed from 1 January 2020, each year should be considered on a standalone basis.
This is a very welcome amendment and removes some of the cumbersome administration for employers when dealing with temporary assignees and Short Term Business Visitors (STBVs).
Impact of New Guidance - Temporary assignees from 1 January 2020 - up to 60/30 workdays per year
The first item to consider is where the individual is tax resident, specifically if the individual is tax resident in a country with which Ireland has a DTA or in a country with which we do not have a DTA (referred to as non-DTA countries). This is important, as separate thresholds apply depending on the country of residence.
Where the individual is tax resident in a DTA country, no Irish PAYE obligations arise provided the employee is in Ireland for 60 workdays or less in the tax year and the conditions for exemption under the DTA are met.
The guidance separately provides that where an individual is employed under a foreign contract of employment, provided the total workdays in Ireland in the tax year do not exceed 30 workdays, these days may be disregarded. It would appear that Revenue are allowing a 30 day threshold for individuals who are either not resident in a DTA country or for those who do not satisfy the conditions set out in the DTA. Where the 30 day threshold is exceeded in these scenarios, Irish PAYE would apply.
It is important to note that each tax year is now viewed in isolation. Days spent performing duties in Ireland in earlier consecutive tax years are no longer considered in determining current year PAYE reporting obligations.
Previous Guidance Temporary assignees position pre 1 January 2020 up to 60/30 workdays per year
For a summary of the prior guidance, please see our prior newsflash here.
Impact of New Guidance - Temporary assignees from 1 January 2020 – greater than 60 workdays per year
Where an individual resident in a DTA country spends more than 60 workdays in Ireland during a tax year, Revenue are prepared to grant a PAYE Dispensation provided the conditions as set out in the relevant DTA article are satisfied: “Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if:
1. The recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in any twelve-month period commencing or ending in the fiscal year concerned, and;
2. The remuneration is paid by, or on behalf of, an employer who is not a resident of the other State, and;
3. The remuneration is not borne by a permanent establishment which the employer has in the other State.”
Revenue have also set out their technical interpretation of the conditions and what would be required for these to be met. The main points are set out below;
- In relation to (b) above, Revenue have stated “In a change from previous practice, Revenue will consider the legal nature of the term employer in determining whether a genuine foreign employment exists”
- In relation to (c) above, Revenue have stated that where the foreign employer has no permanent establishment in the State, Article 15(2)(c) is not relevant and requires no further consideration. Where a permanent establishment does exist, the re-charge of costs must be considered and the guidance indicates that where the costs are borne fully or partially then the condition will not be met.
- The guidance does however confirm that “management charges (with a mark-up) are not considered recharges for the purpose of interpreting this article”.
Where the conditions outlined above are met, it will be necessary to apply for a dispensation from the operation of PAYE. A new simplified procedure is now in place which appears to remove the obligation for employers to sign a written acknowledgement of liability and provide evidence of withholding in the foreign jurisdiction.
The application will still need to be submitted to Revenue within 30 days of arrival however Revenue will not penalise an employer for failure to give the required notice where it was not expected or readily apparent that the individual will be present in Ireland for more than 60 workdays.
The application will need to be made for each year of assessment.
Where a PAYE dispensation is not granted, payroll should be operated in respect of all workdays spent in Ireland in the tax year. The Revenue Payroll Notification will operate on a week 1 basis.
The re-introduction of a single year threshold removes the uncertainty and also the time-consuming administration burden of employees with multiple year travel created by the 2016 and 2018 guidance notes and provides much needed clarity for employers. It is very welcome that Revenue have provided a practical approach for business travel which will encourage companies to continue bringing temporary assignees and business visitors to Ireland. The fact that the new guidance has reverted to applying DTA conditions effectively aligns the PAYE withholding position with the employee’s income tax position, and removes much of the ambiguity in this area.