International Assignees I

Foreign Employment

Remuneration from a foreign employment, where the duties are carried out in Ireland is subject to Irish tax. Irish PAYE applies. Duties are not merely incidental, if they are a critical part of the office’s functions even though they are relatively brief (less than 30 days).

PAYE applies to all employment income, attributable to the performance of employment duties in Ireland.  Since 2006, this applies even if the employer is situated overseas. If the employer does not apply PAYE, the obligation applies to certain other entities, including in particular the Irish situate entity, for whom the individual is working.

Where payments are made through an intermediary, the employer may be deemed to have made the payments,  if the intermediary does not operate PAYE.  An intermediary based in the State for whom the employee works, but it is not the employer,  can be itself  liable to PAYE. Where part of the employment only is exercised in the State, an application may be made to the Revenue to apportion the income.

If an employment is exercised wholly in Ireland (regardless of the status or residence of the employer)then Irish tax and PAYE obligations apply.. If a non-Irish employment is exercised partly in Ireland and partly abroad the proportion referable to the performance of the duties and Ireland is within the scope of Irish tax and  PAYE system. The relevant proportions may be determined by  or  agreed with the Revenue.

Double Taxation Agreement

The standard article in double taxation agreement on employments sets out the conditions for double taxation relief. The general principle is that the employee’s country of residence is entitled to tax the employee on employment income unless the employment is exercised in the other country. However the country of residence maintains the exclusive right to tax (with the consequence that the host state does not tax the following conditions are complied with

The employee is not present in

• in  in the host state (Ireland for inward assignees) for more than 183 days in the tax year
• the income is paid by or on behalf of an employer who is not resident in the host state (Ireland for inward assignees)
• the income is not borne by a permanent establishment or fixed base which the employer has in the whole state (Ireland for inward assignees)

Questions of interpretation may arise in relation to who or  who is not the employer and the question of whether or not the income is borne by permanent establishment or fixed base of the employer in the host state. The question is interpreted as a matter of substance and economic reality.

Where the double taxation agreement does not allow for this exemption, tax may arise both in the home state and the host state. Generally a credit is given for tax applied in the country where the employment is exercised in respect of tax applicable  in the home state/state of residence.

Under some double taxation treaties, an exemption in different terms may apply to the income in the host or the home state as the case may be. Where there is no double taxation agreement, unilateral relief may be allowed by affording a deduction for tax incurred in the other state.

Irish Revenue may allow a real-time tax credit.

PAYE

Where part of the duties of the office or employment, are performed in the State and part are not, the income attributable to the former is charged to tax and within PAYE.  In the latter case, Irish resident individuals may be liable. If they are non-domiciled, the remittance basis may apply.   PAYE will apply to the entire income, until Revenue permit apportionment.

The issue of PAYE is separate to the tax  status of the employee.. An application may be made for a  PAYE exclusion order.

If the employee is Irish tax resident PAYE applies for non-Irish employments exercised wholly in Ireland. If it is not wholly exercised but the proportion is very clear then PAYE applies only to the Irish duties. If the position is not clear then a direction should be sought from revenue as to the the extent of remuneration within the scope of Irish PAYE.

PAYE is not required to be deducted in respect of a non- Irish tax resident temporary assignee provided

• The short-term business visits to Ireland do not exceed 60 working days in the year
• Temporary assignments do not exceed 183 days in the year of assignment
• Short-term business visits of not more than 30 days for non double taxation agreement countries
• Detailed conditions apply which are published in Revenue practice notes

PAYE Exemption

A non-resident employer must usually register for PAYE. It may be necessary to apportion the percentage of duties performed in Ireland. Application should be made to exclude or  limit PAYE where the relevant criteria apply.

The issue of PAYE is separate to the tax  status of the employee.. An application may be made for a  PAYE exclusion order.

A PAYE exemption may be available to a foreign employer where an employee is not liable to Irish income tax and is liable to tax in the home state under the relevant double taxation agreement. It applies

• where a foreign employer employs persons performing the duties of a foreign employment in the State,
• the foreign employer is registered as an employer for PAYE;
• the employer maintains records of all of its Irish employees and particulars
• the employer undertakes that it will pay if subsequently found liable in respect the payments to employees;
• supplies evidence of the withholding tax in a foreign jurisdiction on the income and
• seeks clearance.

Generally, PAYE need not be operated where

• there is a genuine foreign employment or office;
• the individual is not paid by an employer resident in the State;
• he is resident in a state with which Ireland has a DTA,
• he is not resident in the State;

The cost is not borne by a permanent establishment in the State of the employer and the duties performed in a state are not more than 60 working days in the year or a continuous period of more than 60 working days.

Where the employees are  paid by an entity in the State connected with that employer, on behalf of the employer or are paid by the foreign employer, the connected local entity may assume responsibility for PAYE and PRSI obligations where the exemption does not apply.

Foreign Pension Contributions

Subject to compliance with conditions published by the Revenue, contributions made to a foreign pension scheme for such an employee, are not taxable.  The employee must

• work for the foreign employer or connected entity, for 18 months prior to the secondment to work in the State;
• be neither Irish domiciled nor resident
• have been making foreign pension contributions for 18 months prior to coming into the State and
• not be resident in the State for more than five years.

The foreign employer must be resident in an EU state or double taxation treaty state. It must have been making contributions for at least 18 months beforehand. The foreign pension scheme must be a statutory approved scheme in a State (other than state social security) or a scheme in respect of which tax relief is available in that country. Both employer and employee must comply with the rules of the foreign scheme.

Special Assignee Relief.

The relief was initially applied to non-Irish domiciled persons who are employed by an EEA/EU or double taxation agreement state employer and who have worked in Ireland for at least three years.  In 2010 it was extended to EU and EEA nationals who come to work in Ireland, other than Irish domiciled individuals.

The relief has been continued since 2010 and was  scheduled to extend to the end of 2022. It operates to reduce the taxable earnings for income tax purposes but not USC and PRSI. The assignee may remain within the scope of the home state social insurance under the relevant Social Security agreement with the state concerned.

Finance Act 2022 extends   Special Assignee Relief Programme, to extend it for a further 3 year period until 31 December 2025. To qualify for the relief, an employee is required to hold a PPS number and the employer must also confirm that it has complied with its PAYE commencement obligations as outlined in the Income Tax (Employments) Regulations 2018. 

In addition, a relevant employee who first arrives in the State on or after 1 January 2023 will require a minimum annualised relevant income of €100,000 to benefit from the relief.

The employee’s income must be at least €75,000 (and up to 1 million Euro) per annum, excluding benefit in kind bonuses share remuneration and other atypical receipts. Also excluded is amounts not subject to Irish tax such as pension contributions and elements subject to double taxation relief.

Relief is also granted on reimbursed costs of one visit home for the employee and family and school fees up to €5000 per annum per child.

The individual is effectively assessed to income tax at 30% of the excess Income over €75,000 (but less than 1 million Euro) per annum.

Conditions & Claim

The individual must

• exercise employment duties in Ireland for the foreign employer or an associated company of the employer
• be employed by an employer or associated company of the entity to which he has been assigned, prior to coming in Ireland;
• continue to be paid by the overseas employer;
• have been resident in the overseas state, prior to arrival and have exercised employment there working full-time there for at least six months; and
• become tax resident in Ireland and exercises the employment for at least a year
• performs employment duties in Ireland during at least this period
• was not tax resident in Ireland in the five years prior to arrival
• becomes tax resident in Ireland in the relevant years

The relief must be claimed within 30 days of arrival or in advance. Revenue may consent to operation of the relief at source. Special filing requirements apply in relation to the employer annually. The employee must make a return. The employer must operate PAYE on earnings referable to the Irish employment.

The employer must be established and resident in a country with which Ireland has a double taxation agreement or taxi information exchange agreement. The assignee can be assigned to an associated company, which must be one under common control.

Sea Farers

There is a special relief for persons working on sea voyages who are absent from the State for at least a 161 days for the purpose of employment, the  duties of which are performed outside the State, on board a sea going ship.  It does not apply to any earnings derived from an Irish authority.

The ship must be on an international voyage and must be registered in the EU for the purpose of carrying passengers or cargo for reward.  An international voyages is one which begins or ends outside the State.  The individual must enter an agreement with the master of the ship and a claim must be made.  A deduction of €6,350 is allowed from total income by way of relief.

A person may be deemed resident in Ireland if his is in the State  for less than a day, for the purpose of cross-border relief.