Trans-border Workers’ Relief is a tax relief for people who are resident in Ireland but work and pay tax in another jurisdiction, such as Northern Ireland. Where certain conditions are met, the relief removes foreign earnings from the charge to Irish tax where foreign tax has been paid on those earnings and ensures that Irish tax will only arise where the worker has income other than income from a foreign employment.
The relief is claimed primarily by cross-border workers who live in the border areas and work in Northern Ireland. The Irish-resident individual must be employed in a country with which Ireland has a double tax agreement or treaty with (e.g. the UK) for a continuous period of not less than 13 weeks.
Irish workers working in Northern Ireland
Irish residents working in Northern Ireland have PAYE taxes deducted automatically from their salaries which is paid directly to HMRC. Under residency rules, these workers may also have to declare this income to Irish Revenue. A credit will be given for UK tax paid as there is a double tax agreement between Ireland and the UK. However, these workers may have a balance of Irish tax to pay to Revenue if they are taxed less in the UK than they would have been if they had paid tax on this income in Ireland or the credit for UK tax is not sufficient to cover the Irish tax due on the same income.
Trans-border Workers’ Relief operates to ensure that these workers do not pay any additional tax to Irish Revenue on employment income.
There is no equivalent relief for cross-border workers who are resident in Northern Ireland and who work in Ireland. However, under the terms of the double tax agreement between Ireland and the UK, relief from double tax is available.
Brexit should not affect the ability of workers to claim Trans-border Workers’ Relief.
Who qualifies?
To qualify for the relief, you must have paid tax in the other country and not be due a refund of tax. You must also be present in Ireland for at least one day for every week you work abroad. Therefore, the relief is confined to cases where the employee commutes on a weekly or more frequent basis.
Who/what doesn’t qualify?
- Irish public sector employment (in the treaty country)
- Employment eligible for the remittance basis of taxation
- Company directors may qualify in respect of their remuneration, but only where the company is trading and not if they are proprietary directors.
- Income arising in a split year of residence before an employee takes up residence in Ireland is not eligible for the relief.
- Relief is also not available where seafarer allowance has been claimed.
Trans-border Workers’ Relief & COVID-19
Revenue has confirmed that if employees are required to work from home in Ireland due to COVID-19, such days spent working at home in Ireland will not preclude an individual from being entitled to claim this relief, provided all other conditions of the relief are met.
How does the relief work?
The relief operates by reducing the individual’s Irish tax liability to the ‘specified amount’, calculated by the following formula:
A × B / C where:
A is the individual’s total tax liability before any foreign tax credit;
B is the individual’s total income excluding the foreign employment; and
C is the individual’s total income.
The relief therefore excludes foreign income from Irish tax, but the level of foreign income has an impact on the Irish tax payable by effectively reducing tax credits and bands proportionately.
If there is no income other than the foreign employment, Irish tax is eliminated.
Example
Michelle is a single woman who lives in Dundalk but travels on a daily basis to work in Newry. She has employment with a Newry-based company and earns a salary of €23,360 per annum and pays UK tax on this salary. In addition to her employment income, she has net rental income of €5,000 from a rental property in Galway.
What is Michelle’s Irish income tax position for the 2020 tax year?
Prior to Trans-border Workers’ Relief
|
NI employment income
|
23,360
|
|
Irish rental income
|
5,000
|
|
Total income(C)
|
28,360
|
|
Taxable @ 20%
|
5,672
|
|
Tax Credits:
|
|
|
Personal
|
(1,650)
|
|
PAYE
|
(1,650)
|
|
Irish tax liability (A)
|
2,372
|
|
Credit for UK tax paid(for illustrative purposes)
|
(1,787)
|
|
Tax liability on claiming double tax relief
|
585
|
With Trans-border Workers’ Relief
The specified amount is:
Irish tax liability X Income other than NI employment income
Total income
2,372 x 5,000 = €418
28,360
Total tax now due is €418. This is lower than the tax due before Trans-border Worker’s Relief is applied.
Benefit of Trans-border Workers’ Relief
The savings are €1,954 (€2,372 – €418)
If the taxpayer had no rental income, the specified income would be zero.
It is important to note that sometimes claiming double tax relief gives more tax savings than applying Trans-border Workers’ Relief. Taxpayers can choose which relief is applied.
How do you apply for Trans-border Workers’ Relief?
You must apply in writing to Revenue for this relief. In your application you must include a final statement of Income Tax (IT) liability from the other country.
Further guidance
More guidance can be found on Revenue.ie and in the Trans-Border Workers Tax and Duty Manual.
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