PAYE - Foreign Employments

Introduction

This article (which issued as Revenue eBrief 28/2006) addresses the application of a direction under Section 985E TCA 1997 - PAYE: employment not wholly exercised in the State.

Section 15, Finance Act 2006 provides that so much of the income of a foreign office or employment of an individual as is attributable to the performance in the State of the duties of that office or employment is, with effect from 1 January 2006, chargeable to income tax under Schedule E (instead of Case III of Schedule D).

Previous information on the change is contained in Revenue eBrief numbers 43/2005, 9/2006, and 16/2006; these are available on the Practitioners page of the Revenue website - www.revenue.ie

Foreign Employments not Wholly Exercised in this State:

Where only some of the duties of a foreign office or employment are performed in the State, it will be necessary to distinguish: -

1. That part of the income attributable to the performance in the State of duties of such office or employment; and
2. That part of the income attributable to the performance outside the State of duties of such office or employment.

As regards the income at (i), irrespective of the residence or domicile position of the individual, such income is now chargeable to tax under Schedule E and within the scope of PAYE. In addition, the remittance basis of taxation may no longer be claimed in respect of such income, as it is now chargeable to tax under Schedule E.

As regards the income at (ii), for Irish resident individuals, such income remains chargeable to tax under Case III of Schedule D and, where appropriate, the remittance basis of taxation continues to apply in respect of this income.

Directions Under Section 985E Taxes Consolidation Act 1997:

Where the amount of the income at (i) and (ii) above is not readily ascertainable, Section 985E TCA 1997 (as inserted by Section 16 Finance Act 2006) provides that PAYE is to apply to the whole of the income unless a direction is sought from Revenue determining the proportion of income from the office or employment to which PAYE must be applied.

In applying to Revenue for a direction, the application must include such information as is available and is relevant to the giving of the direction. Any material change in the circumstances under which the direction was sought will render the direction given as void and require a further direction having regard to the altered circumstances.

A direction given by Revenue may specify more than one employee and/or any number of years.

A direction need not be sought -

1. Where there is certainty as to the portion of the employment income assessable to income tax under Schedule E and to which PAYE may be applied (for example, where an individual works in the State under a set work pattern or is assigned into the State for a predetermined period of time): and
2. In respect of the income of temporary assignees where the obligation to operate PAYE is relieved in accordance with the criteria described in Revenue e-Brief No. 9 of 2006.

It should be noted that Section 985E only has relevance to individuals who hold an office or employment where part of the income from that office or employment is chargeable to tax under Schedule E and part is not chargeable to tax under Schedule E.