Money Briefs

Reproduced by permission


Francis Farrell
25 January 2009
Sunday Business Post

As was evident from a recent PricewaterhouseCoopers International Mobility survey, a number of Irish domestic companies are looking to expand their overseas operations, partially in to make up for reduced demand in the Irish market. As such, the situation outlined above is not uncommon.

Where an Irish company sends an employee to work abroad, the employee’s Irish tax position will normally be governed by their tax residence position. Under current rules, a person is treated as resident in Ireland for a tax year (same as the calendar year) if he or she is present for:

• periods totaling 183 days or more in the tax year:

Or:

• a combined total of 280 days or more in that and the previous tax year.

The second test is not applied to any year in which an individual is present in Ireland for 30 days or less.

Prior to 1 January 2009, individuals where only regarded as present in Ireland for a day if they were present at the end of the day. This rule has now changed. If a person spends any part of a 24 hour period from the beginning of the day until midnight in Ireland that period will be treated as a “tax day” for the purposes of the test.

What is the impact of tax residence?
Employees who break Irish tax residence will be exempt from Irish tax on their employment income for the duration of the time they spend working abroad. Employees who do not break Irish tax residence will be taxed in the same way as they where prior to their departure, with some small exceptions.

Mortgage interest tax relief:
In order to claim mortgage interest relief the property must be used as an individual’s principle private residence. The Irish Revenue authorities will normally disregard temporary absences for the property, (provided the property continues to be available for use) in considering if the property is still regarded as an individual’s principle private residence. Each case needs to be reviewed based on its own facts and circumstances.

Prior to departure:
Prudent employers have well developed policies for dealing with every aspect associated with employees working abroad. In planning for overseas work employees and employers should consider the following issues:

• What are the tax and social security consequences in the host location?
• Is there a continuing Irish PAYE and/or PRSI obligation?
• How can employees protect their entitlement to Irish social welfare benefits?
• Will the employee be subject to Irish or foreign employment law while working abroad?
• Should the employee continue to contribute to the Irish pension scheme?
• How does working abroad affect private health insurance cover?
• How would working abroad effect the taxability of the employee’s personal investments?
• What issues would arise from a unforeseen death while working abroad?
• How would leaving property unoccupied for a prolonged period effect any insurance policy? and
• If the employee rents out their home, how would this effect any Stamp Duty relief they claimed on purchase, CGT on disposal of the property?.

Before departure the employee should also discuss other relevant issues including repatriation planning with their employer.

Francis Farrell is with PricewaterhouseCoopers HR Services group which assists employers to implement international mobility policies.