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Global Mobility & Employment Taxes
Finance Bill 2021
Remote Working Tax Relief
Finance Bill 2021 provides for income tax relief for remote working allowing employees who work from home to claim 30% of the cost of broadband, electricity and heating, apportioned based on the number of days worked from home during the year. The Bill includes a formula for the relief providing that relief is allowed for 30% of the relevant expenses based on the days worked at home as reduced by any amount reimbursed to the worker by their employer. Where the relevant expenses are shared by two or more people, the total costs are apportioned between the individuals based on the amount of the expense paid by each person. Costs incurred by jointly assessed taxpayers can be claimed by the assessable person whether paid by them or by their spouse or civil partner.
The increase of the relief for electricity and heating costs from 10% to 30% is to be welcomed particularly with increased utility costs. It will be interesting to see if the increase encourages more people to claim the relief as recent media reports suggest that only one in ten people working from home have claimed the relief. Some may feel the effort of the claim outweighs the benefit. The methodology for calculating allowable costs across 365 days means that in practice the tax relief due to most individuals is minimal. The increase to this relief is welcome but may be of negligible value. For example, someone who works at home 50% of the time with circa €5,000 a year in expenses, will only benefit by around €175. Employees should however consider the amount they can claim particularly with rising bills.
Taxation of flight crew
The Bill amends Section 127B in relation to the tax treatment of flight crew in international traffic. The current legislation provides that income from an employment exercised on board an aircraft operated in international traffic, where the aircraft is operated by an enterprise managed and controlled in Ireland, is taxable in Ireland regardless of the residence status of the employee. The Bill provides that, with effect from 2022, an employee operating on such an aircraft will not be taxable in Ireland where for the tax year the individual:
- Is not resident in Ireland,
- Is tax resident in a country with which Ireland has a double tax treaty, and
- Is subject to tax on their employment income in a country with which Ireland has a double tax treaty.
This is a welcome change for Airlines managed in Ireland who have struggled with this legislation for a number of years. In our view, the amendment is well overdue and will allow flight crew to be taxed in the same way as other individuals. In some cases, Irish payroll taxes were, as a result, of Section 127B, payable in Ireland but the employees were exempt from tax under a double tax treaty and had to reclaim Irish taxes. The removal of the charge where employees are taxed in their country of residence will allow airlines to compete for talent in local markets.
As announced in Budget 2022, the tax bands are increasing by €1,500 and the personal tax credit and employee tax credit are increasing by €50 each. In addition, the Bill provides that the 2% USC rate threshold is increasing from €8,675 to €9,283.
The Bill provides for changes in relation to benefit-in-kind for electric cars and vans. Currently an electric car or van with an original market value of up €50,000 can be provided tax free with any excess over a value of €50,000 attracting a BIK charge. The BIK exemption for electric vehicles is extended out to 2025 but with a tapering effect on the vehicle value. This measure will take effect from 2023. For BIK purposes, the exempt element of the original market value of an electric vehicle will be reduced from €50,000 to €35,000 for 2023; €20,000 for 2024; and €10,000 for 2025. In our view, this is likely to be seen as confusing to employers and will not encourage them to roll-out a fleet of electric vehicles to employees at a time when encouragement is exactly what is needed.
The Bill brings into legislation certain exemptions from BIK that have currently been applied on a concessional basis by Revenue. These include exemptions for certain health and wellbeing related benefits such as qualifying medical check-ups, coronavirus testing and flu vaccines. In relation to the flu vaccine exemption, this can be in respect of the direct payment by the employer for the vaccine or the reimbursement to the employee or director of the costs incurred by them in obtaining the vaccine. Generally, for all of these exemptions there is a requirement that the benefits be made available to all staff.
The Special Assignee Relief Programme is a valuable relief that encourages skilled individuals to relocate to Ireland by providing an income tax exemption for earnings in excess of €75,000 up to a cap of €1m. This relief is currently available to individuals who arrive in Ireland up to 31 December 2022 where the relevant conditions are satisfied. Unfortunately, there is no mention in the Finance Bill 2021 of an extension of this relief. This means uncertainty for employers regarding whether this will apply for employees moving to Ireland after 2022.