In all cases where restrictions imposed by COVID-19 affect the applicability of Irish tax legislation on an employee/employer’s tax position, records should be maintained outlining the circumstances and should be available to Revenue on request.
Residence rules - Force Majeure circumstances
Existing guidance states that where an individual is prevented from leaving the State on their intended day of departure due to extraordinary natural occurrences or an exceptional third party failure or action – none of which could reasonably have been foreseen and avoided – the individual will not be regarded as being present in the State for tax residence purposes for the day after the intended day of departure provided the individual is unavoidably present in the State on that day due only to ‘force majeure’ circumstances.
Where a departure from the State is prevented due to COVID-19, Revenue will consider this ‘force majeure’ for the purpose of establishing an individual’s tax residence position.
PAYE Exclusion Order - Irish Contract of Employment
In general, a PAYE Exclusion Order applies where an employee is hired under an Irish contract of employment but is not tax resident in the State and spends less than 30 workdays here in a tax year.
Revenue have stated that where a PAYE exclusion order is in place, the position will not be adversely impacted where the employee works more than 30 days in the State due to COVID-19.
Foreign Employments - Operation of PAYE
In a situation where an employee of a foreign employer is carrying out their employment duties in the State, this may create an Irish payroll tax obligation for the employer or, at the very least, a requirement to apply for a PAYE Dispensation in order to remove this payroll obligation.
Revenue have stated that they will not seek to enforce Irish payroll obligations for foreign employers in genuine cases where an employee was working abroad for a foreign entity prior to COVID-19 but relocates temporarily to the State during the COVID-19 period and performs duties for their foreign employer while in the State.
PAYE Dispensation Applications
A PAYE Dispensation would be generally required from Revenue if a foreign employer has an employee (tax resident in a Double Taxation Treaty country) carrying out duties in the State for more than 60 days but meets all the conditions of the Employment Tax Article of the applicable Treaty. This application must be filed with Revenue within 30 days of the employee first arriving in the State.
Revenue have stated that given the unprecedented circumstances and the restrictions on travel as a consequence of COVID-19, they will not strictly enforce the 30 day notification requirement for PAYE dispensations which is applicable to short term business travellers from countries with which the State has a double taxation treaty who are going to spend in excess of 60 workdays in the State in a tax year.
A foreign employer with employees working partially in Ireland are generally required to operate Irish payroll taxes on the employee’s salary attributable to their Irish work days.
Revenue have advised that these employers can continue to operate Irish payroll on the basis of an employee’s established work pattern pre-COVID-19. The following conditions must be met:
- the non-resident employee had been carrying out duties of a foreign employment partially in the State and partially in the foreign jurisdiction prior to COVID-19;
- the foreign employer had applied payroll taxes in the State and the foreign jurisdiction based on the established work pattern prior to COVID-19;
- the employee cannot return to the foreign jurisdiction as a result of the travel restrictions imposed by COVID-19; and
- the employee continues to carry out their duties of employment in the State.
In the absence of the above, the foreign employer would be obliged to operate Irish payroll taxes on 100% of the employee’s salary.
There is a requirement for the employer to maintain a record of the facts and circumstances of the bona fide relevant presence in the State for production to Revenue if evidence is requested that such presence resulted from COVID-19 related travel restrictions.
Trans-Border Workers Relief
Trans-Border relief generally may apply to an Irish tax resident person who works for a foreign employer exclusively abroad.
If employees are required to work from home in the State due to COVID-19, such days spent working at home in the State will not preclude an individual from being entitled to claim this relief, provided all other conditions of the relief are met.
Special Assignee Relief Programme (SARP)
SARP is a tax relief available to non-resident individuals relocating to Ireland for employment purposes. There are a number of conditions to be met but one of them is that the employer is requirement to file an application with Revenue within 90 days of the employee first arriving in Ireland. This is strictly applied by Revenue.
Revenue have now advised that this 90 day requirement has been extended to 150 days but Revenue will consider a longer time frame in exceptional cases. These cases will be considered on a case by case basis.
Real-time foreign tax credit (FTC) for Restricted Stock Unit (RSU) cases
Individuals who avail of an FTC, on their RSU’s, through their employer payroll are required to file their personal tax return by 31 March of the following year. This is one of the conditions of availing of the real-time FTC.
Revenue have advised that, in respect of 2019 cases for whom real time foreign tax credits were provided through the payroll, the 31 March 2020 filling deadline will be suspended. In such circumstances, the 2019 income tax return for such employees will revert to the standard income tax filing date (31 October 2020) for that return or any extended filing deadline for that return as appropriate.
The employer notification to Revenue in relation to such cases should be made as soon as possible but no later than the extended income tax filing date where applicable.
Share schemes filing obligations
The filing deadline for all 2019 share scheme returns is being extended from 31 March 2020 to 30 June 2020.
Benefit in Kind (BIK)
The reimbursements by an employer to an employee regarding holiday/flight cancellations or in relation to costs of assisting employees returning to the State would normally be a taxable benefit.
However, Revenue have advised that, provided the employee is integral to the business and was required to return to deal with issues related to the COVID-19 crisis by his or her employer, the costs incurred are reasonable and the employee is not otherwise compensated (i.e. via an insurance policy or direct claim to the service provider), a BIK will not arise. This may include costs related to family members who were on holiday or due to go on holidays with the employee.
Employer provided equipment
A BIK will not arise where employers provide equipment such as laptops, printers, scanners and office furniture in order for employees to set up a working space in their homes.
Employer provided vehicles – Restricted Use
For the duration of the COVID-19 restrictions, no BIK will apply where an employee has possession of a vehicle but is prohibited from using the vehicle for private purposes. Revenue expect the employer to maintain records to show that the employer has prohibited its use and that no such use has actually occurred. Examples of suitable records would be communication from employer to the employee setting out the restricted use of the vehicle, photographic evidence of odometer etc.
Employer provided vehicles – Private Use Allowed
In circumstances where there is limited or reduced business mileage undertaken during the period of the COVID-19 crisis and personal use is limited (but not prohibited) then the amount of business mileage travelled in January 2020 may be used as a base month for the purposes of calculating the amount of BIK due over the period of the COVID-19 restrictions. Again, appropriate records should be kept, for example business mileage travelled in January, amount of private use, photographic evidence of odometer etc.
Payment of taxi fares
Where an employer pays for a taxi to transport an employee to or from work due to health and safety concerns, BIK will not apply for the duration of the COVID-19 period only.
Small Gift Exemption
This exemption currently allows employers to provide one non-cash benefit, up to a maximum of €500 per annum, to an employee on a tax free basis. If more than one non-cash benefit is provided in a tax year, only the first benefit qualifies for the exemption. For example, an employee receives a €250 voucher in April and December, only the first voucher would be exempt.
Revenue have stated that where an employer wishes to recognise efforts of key staff working during the COVID-19 crisis, either by accelerating part of a reward (voucher) usually paid later in the year, or making an additional voucher award, the requirement that only one voucher issues is concessionally waived for the 2020 tax year, where the additional award is related to an employee’s exceptional efforts during the COVID-19 crisis.
Retraining costs as part of a redundancy package
Retraining up to a maximum of €5,000 is exempt from income tax provided a number of conditions are satisfied including that the retraining is completed within 6 months of the termination of employment.
Where a termination takes place during the Covid-19 crisis, Revenue is willing to extend this exemption once the retraining takes place within 6 months of the required course/training becoming available following the end of the Covid-19 crisis.