Mobility – International Business Travellers: The Importance of Monitoring TravelEmployment Tax Update, Winter 2012 |
All international organisations have a population of international business travellers to a greater or lesser extent. Once any employee starts to travel across international borders on a regular basis, significant tax issues can arise both in Ireland and abroad. We have set out below our considered thoughts on some of the tax issues that arise in relation to these travellers. We have also outlined why it is important for their movements to be monitored in order to ensure that tax compliance does not become a barrier to doing business on the international stage.
Firstly, what is an international business traveller? It is not an employee who is posted to work overseas on a long term basis. That group of employees are generally on some level of company-sponsored programme and subject to a well-defined process and policy. As such, the company or its advisers are assisting with the tax and social security implications associated with their move abroad. International business travellers are often driven by business or customer needs, meaning that they are often reactionary, unstructured and take place at a moment’s notice.
In practice, do you really need to worry about international business travellers coming to Ireland? Common misconceptions in this area include:
“They’re here for less than 183 days so they won’t be taxable”
“There’s a Double Tax Treaty so we don’t need to worry”
“It’s the foreign company’s problem”
If these statements ring true in your organisation you may need to challenge this thought process. Business travellers coming to Ireland should be considered as being taxable here from their first workday, unless relief is available under a Double Tax Treaty or by Revenue concession. Individuals who are entitled to claim an exemption under the terms of a Double Taxation Treaty can generally work in Ireland for up to 60 days per year without creating PAYE issues. Where a Double Tax Treaty relief is not available, Revenue allow international business travellers to exercise incidental duties of up to 30 workdays in Ireland in a year before similar PAYE issues arise.
Employer Withholding Obligations for Foreign Employees Working in Ireland
|
Treaty Relief Available |
No Treaty Relief Available |
|
|
Less than 30 workdays in a tax year |
No PAYE Obligation |
No PAYE Obligation |
|
Between 30 and 60 workdays |
No PAYE Obligation |
PAYE Obligation |
|
More than 60 workdays but less than 183 days |
PAYE may need to be operated |
PAYE Obligation |
|
More than 183 workdays |
PAYE Obligation |
PAYE Obligation |
If 30 workdays or more are spent in Ireland in the year then PAYE/USC must potentially need to be withheld and paid over to Revenue on the income earned in Ireland. A separate exemption from PRSI may exist.
Even when a Double Tax Treaty is in place, the position is still less than clear. Revenue has recently indicated that they will apply a much higher level of scrutiny to any claims for treaty relief. What this means is that Revenue may now consider that the Irish company who the foreign employee is working for is in fact the business traveller’s “Employer”, even though the Irish company is not the business traveller’s contractual employer. As such, relief from tax may not be available under the Double Tax Treaty.
Deloitte in conjunction with other representivies have been asked to participate in a consultation process with the Irish Revenue on this issue, which should lead to Revenue issuing guidance in this area for the first time. However, it can no longer be taken for granted that an automatic treaty exemption from tax will be available.
Due to this uncertainty, organisations may wish to proceed with caution in relation to any business travellers coming to Ireland. If tax relief is not available, an Irish withholding tax obligation may exist for the Irish based organisation who the individual is working for.
It’s also worth noting that Business Travellers may come to Ireland for personal reasons rather than work reasons, but that the same tax issues can arise. Consider an employee of a UK company whose family resides in Ireland. He commutes to the UK on a weekly basis but returns to Ireland for weekends and works from home in Ireland for one or two days a week. This individual is likely to create Irish PAYE/PRSI/USC obligations for his UK based employer.
In this article we’ve focused on International Business Travellers coming to Ireland. However, the same issues arise for employees of the Irish company conducting business trips overseas. As such, nothing can be taken for granted.
How Deloitte can help
If you would like information as to how Deloitte can assist your organisation with international mobility related issues, minimising tax risk, to identify cost control or process improvements, to resolve potential compliance issues or employee communications please contact:
|
Ian McCall |
 Colin SpenceTax Manager + 353 1 417 2243 cspence@deloitte.ie |
