Permanent Establishment (‘PE’)
A permanent establishment in a foreign country may be created by an employee carrying out duties in that country. It would be important to consider the activities being carried out by the people located in a jurisdiction in each instance.
Although the concept of what constitutes a PE is relatively common among most countries and is defined within the tax treaties, tax advice may be required to determine whether a PE exists based on the facts of the case.
It will also be interesting to monitor the changing PE rules being suggested by the BEPs project which could further lower the threshold.
PAYE Exclusion Orders
Where an Irish company engages an individual under an employment contract governed by Irish Law, the employment will be an Irish source of income regardless of where the employment is exercised.
The Irish company will therefore have payroll obligations in respect of their employees.
However, an individual working outside of Ireland who is not an Irish tax resident for a year of assessment is not within the charge to Irish income tax in respect of employments exercised aboard.
Where an Irish employer is sending someone abroad, they should consider the use of a PAYE exclusion order. This exempts the Irish employer from Irish payroll, where the duties are carried out abroad.
As with all exclusions, there are certain conditions which should be met. If a PAYE exclusion order is not obtained in such a case, the employer may be exposed to penalties if not operating PAYE correctly.
Even with a PAYE exclusion order in place in Ireland, employers should be aware that they may need to operate payroll taxes in the country the employee is being sent to work in and care should be taken in this regard.
Foreign Earnings Deduction
Relief for Irish resident employees working in certain foreign countries is available, which allows a deduction to employees working in certain specified countries where certain conditions are met.
There is a maximum deduction of €35,000 disregarded for income tax purposes.
Transborder Workers’ Relief
This relief is for people who are resident in Ireland but work and pay tax in another country. You can claim it if you travel daily or weekly to your place of work outside Ireland.
In order to qualify for this relief, you must:
• Be a tax resident in Ireland
• Work in a country that Ireland has a double taxation agreement with
• Have paid tax in the other country and are not due a refund of the tax
• Be present in Ireland for at least one day for every week you work abroad. The employment must be held for a continuous period of 13 weeks in the year.
Split-Year Treatment (SYT)
If you’ve recently moved to Ireland for employment, or if you are planning to leave Ireland to start a career some place new, Split Year treatment is a special rule that ensures you are not taxed in both countries for the same income.
It only applies to income arising from employment and means you are treated as a resident of Ireland from the date you arrive or leave.
On arrival, all your employment income from that date will be taxed in the normal way; and generally, full tax credits are allowable on a cumulative basis.
If you’re leaving Ireland, to qualify for SYT you must be a resident in the year of departure and intending to be a non-resident in the year following your departure.
Social Insurance Contributions PRSI
A person shall be insured for Social Insurance Contributions (PRSI) in a single Member State only. Generally, employment is insurable in the State where it takes place.
However, if you are an employed person who is posted from Ireland to work in another EEA State, you may be entitled to apply for an E101 Certificate or an A1 Portal Document.
This Certificate will exempt you and your employer from paying Social Insurance in the country where you are posted to and authorises it payable to the country where you were posted from.
We work closely with our international Baker Tilly network to ensure our advice covers all potential double tax issues and offer international groups the necessary local knowledge. If you are a business with a global work force looking to establish in Ireland, we would recommend you speak to us.
You can learn more about Baker Tilly’s Tax Manager, Paul Hegarty, by visiting his LinkedIn profile here.