6 Common Employer Questions Answered!

Many employers have staff “working from home” overseas for some time now. So what? On the face of it surely there is little discernible difference if staff are working from home locally or from overseas? Well, the Revenue likely will not have the same opinion. A recent FT article reports that London’s top banks are warning staff of potential hefty tax bills on the way if they don’t return to the UK.

Ref: https://www.ft.com/content/1650df6e-987a-46dc-b205-d588f23e699f

1. When will income tax be payable in the host country?

Ireland has a double taxation treaty with over 70 countries, so if the employee’s host country is one of those, there are at least options. Many countries work on 183-day rule, which means if the employee is present in the host country over a 12-month period for more than 183 days they are deemed resident for tax purposes.

Ref: https://taxsummaries.pwc.com/ireland/individual/foreign-tax-relief-and-tax-treaties

2. What are the risks to the employer?

Data protection issues – especially true if host country is outside the EEA and not subject to EU data privacy laws. Mandatory employment protections (minimum rates of pay, annual holidays, rights on termination etc.) can apply even after short periods. Local health and safety protections may apply – these vary within the EU.

3. Is any of this enforceable?

No one really knows for sure! The Irish Revenue have given an “exemption” for residency rules if people are stuck in another country due to Covid. So, the likelihood is that in the short term each individual’s case would need to be assessed separately to determine tax residency status. I’d imagine the Revenue will need to issue some clarification around all of this early next year.

4. Are contractors a solution?

Purely from a tax / employer liability stance this seems like a good solution. In some cases the contractor could even use an Irish limited company, and declare their income in their personal tax return depending on tax residence.

5. What about using a foreign LTD company?

If contractors were to use a foreign company as a contracting vehicle, then you should request a tax clearance cert or equivalent, company documentation, proof of payment of taxes, and perhaps an extra indemnity clause relating to remote working and where taxes are paid.

6. What about Brexit?

As its stands, UK contactors will be able to work remotely from the UK for Irish companies post Brexit. IR35 which is due to take effect on 6th April 2021 would be the main concern … thanks to our friends in ICON.