Revenue Note for Guidance
A tax credit (commonly known as the PAYE tax credit) is available to individuals in receipt of certain emoluments chargeable to tax under the PAYE system. The amount of the tax credit is €1,650 or 20 per cent of the emoluments, whichever is the lesser. In the case of a married couple or civil partners, both of whom are working, each spouse or civil partner is entitled to a separate tax credit.
(1)(a) “appropriate percentage” is a percentage equal to the standard rate of income tax for a year of assessment.
“emoluments” are emoluments to which Chapter 4 of Part 42 (that is, the PAYE system) applies or is applied. The exclusion of certain emoluments from the definition has the effect of denying the allowance to —
These exclusions, however, do not apply to children or children of the civil partner, of proprietary directors or self-employed individuals in certain circumstances – see subsection (2).
“specified employed contributor” is a person who is an employed contributor for the purposes of the Social Welfare (Consolidation) Act, 2005, but does not include a person —
“director” is —
and includes any person who is or has been a director.
(1)(a) & (b) “proprietary director” is a director who is either the beneficial owner of, or is able directly or indirectly to control more than 15 per cent of the ordinary share capital of the company. For this purpose, any ordinary share capital of a company which is owned or controlled by a child or spouse, civil partner or child of a civil partner, of such a director or any ordinary share capital of a company which is owned or controlled by a trustee of a trust set up for the benefit of persons, including any such person or such director, is treated as owned and controlled by the director or employee.
(2) The exclusion from the definition of “emoluments” does not apply for any year of assessment to emoluments paid, in that year, to children or the children of a civil partner, of proprietary directors and self employed individuals (other than such a child who is himself/herself a proprietary director) where certain conditions are met. The conditions are that —
(3) Certain profits/gains received by an individual from an office or employment held or exercised outside the State are treated as emoluments for the purpose of the tax credit. The conditions which need to be satisfied are that —
(4) Where for any year of assessment an individual proves that his/her total income consists in whole or in part of emoluments, the individual is entitled to a tax credit of €1,650. (i.e. €8250 @ 20% = €1,650). Where an individual’s income is less than €8,250, the tax credit is restricted to 20% of the income. For example, total income €7,000 @ 20% = 1,400 (max) PAYE Tax Credit.
In the case of a married couple or civil partners jointly assessed to tax under section 1017 or section 1031C, each spouse or civil partner is entitled to this tax credit, or the appropriate percentage of their emoluments, whichever is the lesser.
(5) In the case of a child or the child of a civil partner of a proprietary director or self employed individual who satisfies the conditions of subsection (2), the tax credit is given by way of repayment.
Relevant Date: Finance Act 2020