Foreign organisations employing people in Ireland must take care to fulfil their tax compliance obligations. Siobhán O’Hea outlines what they need to know
As remote working becomes popular, employees are no longer obliged to work at their employer's premises or even in the same country. This presents opportunities for employers, but also challenges.
As such, there are payroll tax compliance obligations for foreign employers with employees working in Ireland under a foreign contract of employment (inbound workers).
This can occur where:
- an employee relocates to Ireland; or
- an employer sends an employee to Ireland for a short period to fulfil part of a contract.
All foreign employers must register as an employer in Ireland and operate Irish payroll taxes on any salary attributable to employment duties carried out in Ireland by their employees. This applies even if the employer does not have a business premises, or employees work from home in Ireland. It applies irrespective of their tax residence status.
There are a few exceptions to this rule.
Business visits of up to 30 workdays in a year
A foreign employer need not operate Irish payroll taxes on the salary of an employee employed under a foreign contract of employment who carries out the duties of that employment in Ireland for no more than 30 workdays in aggregate in any year.
If the employee exceeds the 30-workday threshold and is obliged to operate Irish payroll taxes, the employer must operate Irish payroll taxes from the employee's first workday in Ireland.
Business visits greater than 30 workdays and not more than 60 workdays per year
A foreign employer can rely on this exemption when an employee who is employed under a foreign contract of employment visits Ireland and is a resident of a country with which Ireland has a Double Taxation Agreement.
In addition, the Double Taxation Agreement between Ireland and the employee's country of residence must relieve the employment income from the charge to Irish tax.
Not all Double Taxation Agreements are the same. Foreign employers wishing to rely on this exemption should carefully examine the relevant agreement's wording to establish if their employee's employment income is relieved from the charge to Irish tax.
Where the employment income of the employee is not relieved from the charge to Irish tax under the Double Taxation Agreement or where the workdays in Ireland exceed 60, and there is no PAYE dispensation in place, the employer must operate Irish payroll taxes from the employee's first workday in Ireland.
Business visits greater than 60 workdays and not more than 183 days per year
The conditions for this exemption are the same as those for business visits between 30 and 60 workdays. However, in addition, a foreign employer must apply to the Irish Revenue authorities for a dispensation from the requirement to operate Irish payroll taxes on the employee's salary.
There are several conditions to be satisfied before the Revenue authorities will grant a foreign employer the dispensation:
i. The foreign employer must register as an employer in Ireland; and
ii. The foreign employer must apply in writing to Irish Revenue for the dispensation giving the employer's full name, address, Irish employer's registration number and confirmation that the relevant Double Taxation Agreement relieves the employment income from the charge to Irish tax.
The application for a dispensation must be made within 30 days of the foreign employee starting to carry out their employment duties in Ireland. It can cover more than one employee, but a new application must be made annually.
Where an application for a dispensation is not sought within 30 days of the employee taking up duties in Ireland, Irish payroll taxes must be operated on any salary paid to the foreign employee from the date the employee takes up duties in Ireland.
If Revenue refuses to grant a dispensation, Irish payroll taxes should be based on salary in respect of all workdays spent in Ireland in the year.
Where a foreign employer must operate Irish payroll taxes on an employee's salary, Irish social security contributions (PRSI) are also due unless there is a valid certificate of coverage or exemption in place.
In addition, depending on the number of employees the employer has in Ireland, and the type of duties they carry out, the presence of an employee in Ireland may create a "permanent establishment" of the employer in Ireland.
If an employer has a branch or permanent establishment in Ireland, it may be obliged to pay Irish corporation tax on the profits of that branch.
Siobhán O’Hea is Partner of Tax Services at CrowleysDFK
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