PAYE Modernisation and Directors

Sep 30, 2019

In response to members queries raised with us recently on the treatment of payments to directors and real time PAYE, we have assembled the main information from Revenue and legislation and summarised below.  

Treatment of income

Payments to directors of Irish incorporated companies are subject to the Schedule E charge to Irish income tax and to deductions at source under the PAYE system. More information is contained in Revenue Tax and Duty Manual Part 42.04.61

The legislation (section 112 Taxes Consolidation Act 1997) provides two treatments for directors depending if the individual is a proprietary director (holds at least 15% of the company shares) or a non-proprietary director:


  • Income (i.e. Director’s fees) received by a proprietary director is taxed when the income is earned i.e. at the time it is put through the accounts and not when received. Proprietary directors also have to file an income tax return and include details of the director’s fees earned.


  • Income received by a non-proprietary director is taxed when it is actually received. Under PAYE Modernisation any payments paid to non-proprietary directors must be reported to Revenue on or before the pay date.

The PAYE system applies to both proprietary and non-proprietary directors as it does to any other employee.

For proprietary directors, emoluments paid more than six months after the end of the accounting year, are deemed paid on the last day of the previous year. In these instances, the company must make an amendment to the payroll submission for that period and resubmit to Revenue.

See the Revenue website for more information on payment to directors.

General treatment

Since 1 January 2018, income from an office/employment is chargeable to tax on a receipts basis. This means that the income is subject to tax, USC and PRSI when it is received, regardless of when it is earned. Income received by a proprietary director is still taxed on an earnings basis. Employers must, however, operate PAYE on the director’s salary at the time of payment and report this payment to Revenue on or before the date it is paid. More information on employers’ PAYE obligations can be found in Revenue's Tax and Duty Manual Part 42.04.35a.

We continue to engage with Revenue via the TALC forum on PAYE Modernisation and aspects of the system that are of concern to members.  We have specifically raised the treatment of payments to directors and guidance specific to these cases and we will report on any further clarifications in Tax eNews as they arise.