Update on COVID-19 related employment tax concessions and exemptions
GES Newsflash | 18 January 2021
Overview
In March 2020, Revenue announced a number of COVID-19 pandemic related concessions/exemptions on a wide-range of employment tax matters ranging from benefits-in-kind to expatriate tax matters. These concessions/exemptions were well timed and proved very helpful to employers struggling to deal with the unforeseen issues brought about by the onset of the pandemic. For a summary of the prior guidance, please see our newsflash here.
On 21 December 2020, Revenue announced that most of these concessions/ exemptions would be withdrawn from 1 January 2021. On foot of the subsequent Level 5 public health restrictions introduced by the Irish Government, on 14 January 2021, Revenue issued a further announcement where they confirmed that a number of the benefit-in-kind related concessions/exemptions would continue to apply in 2021 until further notice. However, most of the expatriate tax related concessions/exemptions have been withdrawn from 1 January 2021.
The following tables summarise the current position on these benefit-in-kind and expatriate tax concessions/exemptions.
Benefit-In-Kind concessions update
| Benefit-in-Kind |
Position from March 2020 to 31 December 2020 |
Position in 2021 |
|---|---|---|
| Reimbursement of holiday/flight cancellation costs for employees returning to Ireland |
Tax exempt |
Taxable |
| Reimbursement of taxi fares for transporting employees to/from work due to health and safety concerns |
Tax exempt |
Tax exempt (until further notice) |
| Costs of COVID-19 Testing at a workplace/Employer provided COVID-19 test kits |
Tax exempt |
Tax exempt (until further notice) |
| Costs of Flu vaccination at workplace/reimbursement to employee/direct payment to registered practitioner |
Tax exempt | Tax exempt (until further notice) |
| Employer provided equipment |
Tax exempt | Tax exempt (until further notice) |
| Temporary Employer Provided Accommodation to mitigate potential COVID-19 transmission risks |
Tax exempt | Tax exempt (until further notice) |
| Small Benefit Exemption |
More than one voucher/other tangible item (e.g. hamper) allowed in order to recognise exceptional efforts of frontline or other key staff up to a total of €500 per annum | More than one voucher/other tangible item (e.g. hamper) allowed in order to recognise exceptional efforts of frontline or other key staff up to a total of €500 per annum |
| Employer Provided Vehicles |
Concessions apply – see below for detail | Concessions apply (until further notice) – see below for detail |
Continuation of Company Car BIK Concession
This means that, for the time being:
- Where an employer takes back possession of the vehicle and an employee has no access to the vehicle, no BIK shall apply for the period.
- Where an employee retains possession of a vehicle, but the employer prohibits the use of the vehicle, no BIK shall apply if the vehicle is not used for private use.
- Where an employee has a car provided by his or her employer and
- the circumstances in the previous examples do not apply
- limited or reduced business mileage (if any) is undertaken due to the COVID-19 crisis, and
- personal use is limited
The amount of business mileage travelled in January 2020 may be used as a base month for the purposes of calculating the amount of BIK due. Thus, the percentage applied in the calculation of the cash equivalent, which is based on annualised business mileage, may have regard to the actual business mileage for January 2020, for the current period of the COVID-19 restrictions. Appropriate records should be kept, for example business mileage travelled in January, amount of private use, photographic evidence of odometer, etc.
For employees in the motor industry who have the use of company cars, the concession regarding the special rules for determining the cash equivalent will continue (until further notice) where due to current restrictions the employee is unable to change their vehicle within the normal one month limit.
Expatriate tax concessions withdrawn from 1 January 2021
| Requirement |
Position from March 2020 to 31 December 2020 | Position in 2021 |
|---|---|---|
| Operation of payroll taxes on foreign employments exercised in Ireland | No requirement to operate payroll taxes where foreign company employee was working outside Ireland prior to COVID-19 and temporarily relocated to Ireland Note – employee may be liable to Irish income taxes via self-assessment on their employment income depending on their residence position |
Payroll taxes must be operated unless PAYE dispensation available (see details on our previous Newsflash here) |
| Employer must file SARP1A form for Special Assignee Relief Programme (SARP) for relevant employees within 90 days from the date of arrival in Ireland (see further commentary on SARP below) | 60 days extension to application period provided; 150 day maximum application period |
90 days maximum application period for arrivals from 1 January 2021 (arrivals in late 2020 can avail of the 60 days extended period) |
| Employer must file PAYE dispensation application within 30 days from date of arrival in Ireland for short-term business travellers/assignees spending in excess of 60 workdays and less than 183 days in Ireland in a tax year (see details on our previous Newsflash here) |
30 day maximum application period not strictly enforced | 30 day maximum application period from date of arrival (exceptional cases may be notified to Revenue) |
| Operation of payroll taxes on non-resident foreign employees based on current working pattern in Ireland |
Pre-Covid 19 working pattern allowed to be used | Current working pattern must be used |
| Operation of payroll taxes where PAYE Exclusion order in place but employee exceeds 30 workdays in Ireland |
No requirement to operate Irish payroll taxes Note – employee will be liable to Irish income taxes on their employment income via self-assessment |
Payroll taxes must be operated |
SARP Relief Qualification Issues relating to COVID-19 pandemic
6 months condition
In order to qualify for SARP, an individual must have been a full time employee of a relevant employer and exercised the duties of their employment for that relevant employer outside of Ireland for the whole of 6 months prior to arrival in Ireland. The definition of a relevant employer is a company that is incorporated, and tax resident, in a country which Ireland has a double taxation agreement or a tax information exchange agreement. Many individuals will have moved/continue to move to an Irish contract of employment during the COVID-19 pandemic period but are unable to travel to Ireland and will not “arrive” in Ireland for the purposes of SARP until the COVID-19 restrictions lift. In the interim period, they will exercise their employment duties for the Irish company. Revenue have confirmed to Deloitte that employees falling into this scenario will not meet the 6 month condition for SARP as their employer during that 6 month period is not a “relevant employer”.
12 consecutive months condition
One of the conditions for SARP relief is that the employee must perform the duties of their employment in Ireland for a minimum period of 12 consecutive months. At the time the COVID-19 travel restrictions were announced, some employees, who would otherwise qualify for SARP, were outside of Ireland and have not been able to travel back to Ireland since then. Also, some individuals have been required to return to their home country during the emergency to care for family. Revenue have confirmed to Deloitte that the 12 consecutive months condition will not be relaxed even in the exceptional circumstances of the COVID-19 pandemic and therefore, these employees will not be eligible for the relief.
Trans-Border Workers Relief Concession Update
Revenue announced in March 2020 that if foreign company employees are required to work from home in Ireland due to COVID-19, such days spent working at home in Ireland will not preclude an individual from being entitled to claim this relief, provided all other conditions of the relief are met.
Revenue have announced that this concessionary measure will continue to apply for the tax year 2021.
However, many employees may not be able to claim this relief as they may not be able to meet the other conditions of the relief. In our experience, the main condition that they may not be able to meet is that their employment income must be fully subject to non-refundable foreign tax. If this is the case, Revenue have indicated to Deloitte that for the 2020 tax year, the employee must report their foreign employment income via the self-assessment system. With effect from 1 January 2021, such employments will fall within the Irish PAYE net. Many of the foreign employers impacted by this requirement are situated in Northern Ireland/the UK.
Statutory Residence Rules - Force Majeure
At the start of the pandemic in March 2020, Revenue indicated that where a departure from Ireland has been prevented due to the COVID-19 crisis that they would consider this “force majeure” for the purposes of establishing an individual’s Irish tax residence position. No further guidance was published by Revenue in the interim. Revenue have now issued detailed guidance on this concession which can be found here.
In summary, Revenue are now stating that if an individual was present in the State on or before 23 March 2020 and his or her intended departure from the State was prevented due to COVID-19, then the period from the day after the original planned departure date up until 18 May 2020, or the actual departure date if earlier, may be disregarded for the purpose of determining his or her residence.
Also, if an individual travelled to the State between the period 24 March 2020 to 5 May 2020 and his or her intended departure from the State is prevented due to COVID-19, then the period from the day after the original planned departure date up until 18 May 2020, or the actual departure date if earlier, may be disregarded for the purpose of determining his or her residence. This is subject to a maximum of 30 days permitted in all circumstances, except in the case of an individual whose departure is prevented due to him or her having a confirmed COVID-19 diagnosis.
In both scenarios above, the days disregarded must be consecutive days.
In addition, it is mandatory that the individual must have left the State as soon as he or she reasonably could, which must have occurred on or by 1 June 2020. Where a departure has not occurred on or by 1 June 2020 force majeure will not apply to any of the days. The only exception to this is where the individual contracted COVID-19 and was not in a position to leave the State on or by 1 June 2020 on health grounds. With regard to such confirmed COVID-19 cases, notwithstanding the fact a departure has not occurred on or by 1 June 2020, force majeure may still apply in respect of the period to 18 May 2020.
Share scheme concessions update
Employer Share Scheme Reporting
The filing deadline for all 2020 share scheme returns will revert to the normal 31 March 2021.
Suspension of 31 March Tax return Deadline for 2020 Returns
In a welcome move, the 31 March filing deadline for 2020 cases where real-time foreign tax credits were provided through payroll is suspended. The return date for such employees will revert to the standard filing date (31 October 2021).
Deloitte's view
While the continuation of the benefit-in-kind concessions/exemptions is welcome for many employers, the withdrawal of the expatriate tax related concessions/exemptions is a very disappointing move by Revenue, which in the context of the latest Government restrictions, will add to the multitude of issues facing multinational employers resulting from the continuing COVID-19 pandemic.
The announcement was made close to the start of the recent holiday period, giving multinational employers little time to assess the impact that the withdrawal of the expatriate tax concessions/exemptions would have on payrolls for January 2021. Also, the announcement was made at a time when it was well signposted by the Irish Government that Ireland was very likely to have to return to some form of lockdown in early 2021. Given, the new Level 5 measures recently, which closely resemble the first lockdown in Ireland in March 2020, it is very unhelpful that multinational employers can no longer rely on these expatriate tax concessions/exemptions which were originally designed to alleviate the stress on such employers.
As an example, the withdrawal of the 60 day extension to the 90 day SARP application period, is very challenging. In our experience, it is taking far longer than the 90 day period from arriving in Ireland to receive a Personal Public Service Number (PPSN) due to the impact that the Irish Government restrictions are having on the processing of such applications by the Irish social welfare authorities. Not having a PPSN means that employees cannot register for payroll taxes in Ireland and both a PPSN and payroll tax registration is required for the SARP application.
With regard to the confirmation we have received from Revenue on the lack of concessionary treatment regarding the two conditions for SARP relief mentioned above, this has a very negative impact for multinational employers and the affected employees. One of the key incentives for moving skilled talent to Ireland from abroad is SARP relief which facilitates the creation of jobs and the development/expansion of businesses in Ireland. If these employees are not eligible for the relief, it is likely that employers will retain such employees/roles outside Ireland indefinitely. In addition, employees who can no longer avail of SARP relief may not return to Ireland as the relief is no longer available to them. It is important to note that there is no additional cost to the Irish exchequer in allowing a relaxation of these SARP conditions as the employees would have been in Ireland and claiming SARP had the pandemic not began.
Employers should assess the impact that the withdrawal of these concessions/exemptions will have on their mobile employee population, particularly employees that were allowed to work remotely in Ireland and have not yet returned to work in their normal place of work outside of Ireland.
Likewise, publishing the force-majeure guidance on 21 December 2020 that has a retrospective effect back to dates in May and June 2020 is very unfair on employees who were prevented from leaving the State during the pandemic. As an example, many foreign countries where such employees normally reside and work closed their borders in March 2020 and did not open them until late 2020. These employees had a legitimate expectation, based on the limited guidance available up until the detailed announcement on 21 December 2020, that their days spent in Ireland, where they could prove that they were restricted from leaving the State, would be disregarded for Irish tax residence purposes. These employees adhered to Irish Government advice to avoid non-essential travel during the pandemic and were restricted in travelling to their country of normal residence by a foreign government. Any individual who was prevented from leaving the State due to the COVID-19 related restrictions should re-assess their tax residence position based on this new guidance and many may now unexpectedly fall within the Irish income tax net for the 2020 tax year.
We will continue to engage with Revenue on these issues affecting employers during the pandemic and will update you if there are any further announcements. If you would like to discuss this matter in more detail please feel free to contact your usual Deloitte contact.
