What are the changes?

Revenue issued revised guidance on 20 December 2021 in relation to employee payroll tax deductions related to non-Irish employments exercised in the State.

The revised guidance applies to both short term business visitors (e.g. someone who visits Ireland for business meetings, etc. during the tax year) and employees who are assigned to Ireland for a defined short term period (e.g. a 5 month secondment).

The new guidance applies with effect from 1 January 2020.

There are two main changes in the new guidance.

The first change relates to employer payroll tax obligations where there is a recharge of any of the costs of the business trip or secondment to an Irish permanent establishment of the foreign employer versus where there is a recharge of costs to an entity in Ireland which is not a permanent establishment of the foreign employer. This is a positive change as it provides clarity on situations where a recharge of costs will create employer payroll tax obligations.

The second change relates to a tightening of the rules in relation to employees with greater than 30 workdays and not more than 60 workdays in Ireland. This is specifically relevant to inbounds to Ireland who are tax resident in a country with which Ireland had a Double Tax Agreement and the employment tax article exemption refers to 183 days in a rolling 12 month period as opposed to a tax year.

Recharge of Costs

The new guidance provides clarity regarding recharges of costs. It no longer includes the wording in relation to a recharge of costs to an Irish subsidiary. It refers to a recharge of costs to a permanent establishment of the foreign employing entity.

It should also be noted that the revised guidance also still includes Revenue’s position that “Management charges (with a mark-up) are not considered recharges for the purposes of interpreting this Article”. Therefore the manner in which any recharges are made will need to be considered.

Greater than 30 workdays and not more than 60 workdays

In the previous guidance issued by Revenue they stated that “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 tax year should be considered on a standalone basis.”

The wording in the new guidance has been revised. It now states that “Where an individual, who is a resident of country with which Ireland has a DTA, is employed under the terms of a foreign employment contract and performs duties in the State for more than 30 workdays but for no more than 60 workdays in aggregate in a tax year, those days may be disregarded for PAYE purposes, subject to the conditions of Article 15(2) of the DTA being met (or the employment income article in the applicable DTA). In such circumstances, there is no requirement for the foreign employer to operate PAYE on the income attributable to duties carried on in the State. Where the employment income of the temporary assignee is not relieved from the charge to Irish tax under the terms of an applicable DTA, or where the workdays in the State exceed 60 and there is no PAYE dispensation in place, PAYE must be operated from the first workday in the State.”

The guidance now stipulates that in order for the PAYE exemption to be available the conditions of Article 15(2) must be met. This is particularly relevant in relation to inbounds that are tax resident in a DTA country where the employment tax article refers to 183 days in a rolling 12 month period as opposed to a tax year.

The change does not impact on the ultimate Irish tax position which would have been that the Irish workdays were taxable in Ireland (with the taxes collected on the employee’s Irish Tax Return) but it does impact on the employer payroll obligations.

Deloitte’s view

In the main the changes made to the Revenue guidance are positive. The guidance is easier to read and understand. The current Revenue position has been separated from the old guidance. With so many changes over recent years this can only be welcomed.

The changes that Revenue have made in relation to when and how cost recharges impact on the employer shadow payroll obligations is also positive removing any confusion and ambiguity in relation to cost recharges to an Irish entity that is not a permanent establishment of the foreign employer.

The introduction of employer payroll obligations for certain employees with greater than 30 workdays and less than 60 workdays is disappointing but overall this change does not impact on the taxability of the Irish workdays and should not have wide reaching impact. But it will unfortunately mean that employers will need to consider an employees workdays in Ireland over more than one tax year in determining its Irish payroll obligations. This includes what workdays an employee had in the previous tax year and future tax year which may not be known at that time.

Hopefully this guidance sets out Revenue’s position and there will be no need for further guidance to be issued in the short term as the all almost annual changes to the guidance is understandably creating confusion in relation to the rules.

If you would like to discuss this matter in more detail, please feel free to contact your usual Deloitte contact.