Thinking beyond borders
An individual’s liability for Irish income tax depends on whether the individual is resident in Ireland, ordinarily resident in Ireland and is domiciled in Ireland.
An individual’s liability to Irish tax will also depend on the source of income derived by the individual.
Irish income tax is levied at progressive rates on an individual’s taxable income for the year and is calculated by subtracting allowable deductions/reliefs from the total assessable income. Tax credits are also available to reduce an individual’s overall income tax liability.
The number of days spent in Ireland by an extended business traveler will determine whether or not the individual will be taxable on employment income relating to Irish workdays, subject to the terms of the relevant double taxation agreement (if applicable).
An individual’s liability to Irish income tax is dependent on whether the individual is resident, ordinarily resident, and/or domiciled in Ireland.
An individual will be considered Irish tax resident if the individual is present in Ireland:
A day is counted if an individual is present in Ireland for any part of that day. An individual must be present in Ireland for at least 30 days in any year to be considered resident in Ireland for that year.
An individual will be considered ordinarily resident in Ireland if the individual is Irish tax resident for 3 consecutive tax years. The individual is considered ordinarily resident in the fourth tax year. Similarly, an individual will be considered non-ordinarily resident in Ireland if the individual is non-Irish tax resident for 3 consecutive tax years. The individual is considered non-ordinarily resident in the fourth tax year.
Domicile is a complex legal concept, which generally denotes the place an individual considers to be their permanent homeland. An individual can only have one domicile and acquires a domicile of origin at birth. An extended business traveler in Ireland will be considered non-domiciled in Ireland when the individual retains a domicile of origin/choice in the individual’s home country/jurisdiction. An individual who is resident and domiciled in Ireland, irrespective of whether or not the individual is ordinarily resident in Ireland, is liable to Irish income tax on their worldwide income.
An individual who is resident but not domiciled in Ireland will be liable to Irish income tax on the individual’s Irish-sourced income, including income relating to an Irish employment or work duties performed in Ireland. The individual will be taxable on any foreign income to the extent that the income is remitted to Ireland.
A non-resident, non-domiciled individual will be liable to Irish income tax on Irish-sourced income only, which may include income related to Irish employment duties.
If an individual spends 183 days or more in Ireland in the tax year, the individual is liable to income tax on any Irish-sourced income, and also on any employment income related to Irish duties.
Relief may be available under the relevant double taxation agreement if the individual travels to Ireland from a country/jurisdiction with which Ireland has concluded a double taxation agreement.
For extended business travelers who are considered non-domiciled in Ireland, the types of income that are generally taxed are employment income related to Irish employment duties, Irish-sourced income, and gains from Irish specified assets (such as Irish land and buildings).
Taxable income is taxed in Ireland at graduated rates ranging from 20 to 40 percent, depending on the level of income earned by the individual.
Individuals resident in Ireland are subject to tax at 20 percent on the first 35,300 Euros (EUR) of income and are subject to tax at the rate of 40 percent on income above this level.
Universal Social Charge (USC) is payable at a rate of 0.5 percent on income up to EUR12,012, 2 percent on the next EUR8,472 of income, 4.5 percent on the next EUR49,560 of income and 8 percent on income thereafter. For individuals with income outside their employment income an additional USC charge of 3 percent applies to income over EUR100,000.
If the taxable income for USC purposes does not exceed EUR13,000 during the year the individual will be exempt from USC for the relevant year.
Social security is payable in Ireland at a rate of 4 percent. Employer social security is payable at a rate of 11.05 percent on employment income however, contributions are funded by the employer and not paid out of the employee’s salary.
An individual who is employed in Ireland is liable for paying social security on employment income and on any non-employment income that is taxable in Ireland where the individual is within the self-assessment system.
If the individual is seconded to work in Ireland from a country/jurisdiction with which Ireland has concluded a totalization agreement or from another European Economic Area (EEA) country/jurisdiction, and is in possession of a valid certificate of coverage or A1 certificate, the individual will not be liable for paying Irish social security contributions for up to the first 5 years of the individual’s secondment to Ireland.
In the event no such agreement is in place and the individual is seconded from a jurisdiction with which there is no totalization agreement in place, a 52-week exemption application can be made to remove the obligation to operate Irish social security for the first 52 weeks of the secondment. If the duration of the secondment is beyond 52 weeks Irish social security will apply thereafter.
Tax returns are due for filing by 31 October following the tax year-end, which is 31 December. Individuals may use the extended deadline of mid-November if they file the tax return and pay any tax due online using the revenue online facility.
Tax returns must be filed by non-residents who derive any Irish-sourced income (unless the taxes are fully collected via the PAYE system and the individual would not otherwise be required to file a tax return).
If share options are exercised by the individual during the year, and during the grant to vest period, the individual performed duties of their employment in Ireland, the individual must submit an RTSO1 Form and pay over the relevant tax and social security within 30 days of the exercise. The individual will also have a mandatory reporting obligation.
Withholdings from employment income are covered under the Pay-As-You-Earn (PAYE) system. If an individual is taxable on employment income, the employer has a PAYE withholding requirement.
Where an employee performs duties in Ireland on behalf of a non-resident employer, an obligation is imposed on the non-resident employer to handle PAYE withholdings on compensation paid to employees carrying out employment duties in Ireland.
Where an employee works for an entity based in Ireland (a relevant person), is employed by a non-resident employer, and PAYE is not applied by the employer, the relevant person will be held accountable for the PAYE withholdings due. Where the compensation covers the performance of duties both in Ireland and in the home country/jurisdiction, PAYE withholdings need only be applied to the compensation that relates to the duties carried out in Ireland.
If an individual spends less than 60 workdays in Ireland in a tax year and a number of other conditions are met, it is possible that the individual will be automatically exempt from PAYE withholdings on employment income.
Even where an employee exceeds the workday limits outlined above, where they spend less than 183 days in Ireland in a 12-month period, it is possible that the individual will be exempt from PAYE withholdings on employment income, subject to obtaining a PAYE clearance certificate from the Irish Revenue. The above rules operate on the assumption that the employee is coming to Ireland from a country/jurisdiction with which Ireland has a Double Taxation Agreement. In order for this to apply, foreign withholding tax must be withheld in the home country/jurisdiction of the employee.
It is worth noting that Revenue is not prepared to accept, for the purposes of granting a release from the obligation to operate the PAYE system, that the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State where the individual is;
*While no one factor alone is conclusive, there are several factors that may indicate if the duties performed are integral to the Irish employer. These include who bears the risks/responsibilities for the results produced, who exercises control over the employee and whether the role or duties performed by the assignee are more typical of the function(s) of the overseas employer or of the Irish entity.
The above 60/183 day exemptions apply to individuals coming to Ireland from a country/jurisdiction with which Ireland has a Double Taxation Agreement. A 30 day di-minimus threshold is available to individuals from non-Double Taxation Agreement Treaty countries/jurisdictions (for employees working in Ireland for 1 year only). Additional rules apply where such individuals work in Ireland for 2 or more years and advice should be sought.
Individuals from certain countries/jurisdictions must apply for a visa before entering Ireland.
Broadly speaking, non-European Union (EU)/EEA individuals must apply for a work permit before commencing employment in Ireland.
In addition to Ireland’s domestic arrangements that provide relief from international double taxation, Ireland has entered into double taxation treaties with 73 countries/jurisdictions and is presently in the process of negotiating a number of additional treaties.
The aim of the double taxation treaties is to prevent double taxation and allow cooperation between Ireland and overseas tax authorities in enforcing their respective tax laws.
There is the potential that a permanent establishment could be created as a result of extended business travel, but this will be dependent on the types of services performed and the level of authority the employee has.
Value-added tax (VAT) is applicable at a rate of 23 percent on the supply of taxable goods or services above certain thresholds. VAT registration may be required in certain circumstances.
Ireland introduced a transfer pricing regime on 1 January 2011.
Ireland has data privacy laws.
With effect from 25 May 2018, The General Data Protection Regulation (“GDPR”) came into force in Ireland.
Ireland does not restrict the flow of Irish or foreign currency into or out of the country/jurisdiction. Certain reporting obligations are imposed, however, to control tax evasion and money laundering.
Financial institutions are obliged to take certain special measures to prevent money laundering. One of these measures is the requirement that financial institutions establish the identity of customers and report any suspicion of money laundering directly to the police.
There are provisions in place to allow for a deduction from employment income taxable in Ireland for contributions made by an individual to a pension scheme in another EU member state or country/jurisdiction with which Ireland has a double tax agreement, provided a number of conditions are met.
All information contained in this publication is summarized by KPMG Ireland, the Irish member firm affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity, based on the Irish tax, social security and immigration legislation in force for the period 1 January 2019 to 31 December 2019.