Small Benefit Exemption

The small benefit exemption allows an employer to provide a single non-cash award (e.g. voucher/other tangible item) to an employee tax free. The single award cannot exceed €500 per annum and it is not cumulative. Therefore, normally only one award was deemed to utilise the exemption and any other awards were considered taxable notional pay.

In 2020, Revenue first announced a concession which allowed employers to issue more than one award to an employee in order to recognise exceptional efforts of frontline or key staff during COVID-19. The €500 limit continued to apply. In a welcome measure, Revenue have now extended this concession to 2022.

When the concession was first introduced in 2020, we understood the guidance allowed for a number of awards to be issued throughout the year subject to the overall €500 limit. Guidance on the Revenue website in 2021 indicates a more restrictive concession which allows only two awards to employees in the year. The most recent guidance from Revenue refers to “more than one” award in one part of the guidance and in another part refers to “the additional award” suggesting a maximum of two awards are allowed. While there is inconsistency in the various published Revenue guidance on the small benefit exemption, it is our view that the concession is only available for two awards to employees during the 2021 and 2022 tax years.

Trans-Border Workers Relief Concession Update

Revenue previously announced that if foreign company employees are required to work from home in Ireland due to COVID-19, such days spent working at home in Ireland will not preclude an individual from being entitled to claim this relief, provided all other conditions of the relief are met. Revenue have now confirmed that this concession will continue to apply for 2022 during a period when the public health measures require employees to work from home.

As mentioned in our previous newsflash here, many employees may not be able to claim this relief as they may not be able to meet the other conditions of the relief. In our experience, the main condition that they may not be able to meet is that their employment income must be fully subject to non-refundable foreign tax. In most cases, the foreign tax will be refundable as the employee is not performing duties in the foreign location. Also, since 1 January 2021, these employments will fall within the Irish PAYE net as the exemption in place in 2020 was not extended.

Share scheme concessions update

In a welcome move, we have received direct confirmation from Revenue that the 31 March filing deadline for tax returns where real-time foreign tax credits on restricted stock units were provided through payroll continues to be suspended. The return date for such employees 2021 returns will be the standard filing date (31 October 2022).

Deloitte's view

The continuation of the benefit-in-kind concessions is welcome for many employers. The concessions have proved to be very useful to employers given the ongoing impact of COVID-19 and the resulting changes in public health guidance for employees working in the office. The suspension of the 31 March tax return filing deadline for employees with restricted stock units that had a foreign tax credit applied via Irish payroll is also very welcome.

With the reintroduction of a number of Government restrictions both in Ireland and globally, it is disappointing that Revenue have not reinstated the expatriate concessions which were in place in 2020 (For a summary of the prior guidance, please see our newsflash here). The expatriate tax concessions were very helpful to multinational employers in 2020 and their reinstatement would greatly assist employers given the expected uncertainty over the next few months with the rise in Omicron variant cases globally.

The concession for trans-border relief is welcome but practically it is not available to employees, given the requirement that the foreign tax must be non-refundable. Many of the foreign employers impacted by this requirement are situated in Northern Ireland/the UK. If an employee is employed by a NI employer and is working from home in Ireland, the UK tax will be refundable as the employee is not performing any duties in the UK. As the individual is performing duties of their foreign employment in Ireland, Irish PAYE/USC will apply. In this scenario, the concession is unworkable.

In planning for an uncertain 2022, employers should continue to assess the impact that the continued withdrawal of these 2020 expatriate tax concessions/exemptions will have on their mobile employee population, particularly employees that continue to work remotely in Ireland and have not yet returned to work in their normal place of work outside of Ireland.

Continuation of Company Car BIK Concession
This means that, for the time being:

1. Where an employer takes back possession of the vehicle and an employee has no access to the vehicle, no BIK shall apply for the period.
2. Where an employee retains possession of a vehicle, but the employer prohibits the use of the vehicle, no BIK shall apply if the vehicle is not used for private use.
3. Where an employee has a car provided by his or her employer and
   • the circumstances in the previous examples do not apply
   • limited or reduced business mileage (if any) is undertaken due to the COVID-19 crisis, and
   • personal use is limited

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. Thus, the percentage applied in the calculation of the cash equivalent, which is based on annualised business mileage, may have regard to the actual business mileage for January 2020, for the current period of the COVID-19 restrictions. Appropriate records should be kept, for example business mileage travelled in January, amount of private use, photographic evidence of odometer, etc.

For employees in the motor industry who have the use of company cars, the concession regarding the special rules for determining the cash equivalent will continue (until further notice) where due to current restrictions the employee is unable to change their vehicle within the normal one month limit.

Expatriate tax concessions withdrawn from 1 January 2021

SARP Relief Qualification Issues relating to COVID-19 pandemic

6 months condition

In order to qualify for SARP, an individual must have been a full time employee of a relevant employer and exercised the duties of their employment for that relevant employer outside of Ireland for the whole of 6 months prior to arrival in Ireland. The definition of a relevant employer is a company that is incorporated, and tax resident, in a country which Ireland has a double taxation agreement or a tax information exchange agreement. Many individuals will have moved/continue to move to an Irish contract of employment during the COVID-19 pandemic period but are unable to travel to Ireland and will not “arrive” in Ireland for the purposes of SARP until the COVID-19 restrictions lift. In the interim period, they will exercise their employment duties for the Irish company. Revenue have confirmed to Deloitte that employees falling into this scenario will not meet the 6 month condition for SARP as their employer during that 6 month period is not a “relevant employer”.

12 consecutive months condition

One of the conditions for SARP relief is that the employee must perform the duties of their employment in Ireland for a minimum period of 12 consecutive months. At the time the COVID-19 travel restrictions were announced, some employees, who would otherwise qualify for SARP, were outside of Ireland and have not been able to travel back to Ireland since then. Also, some individuals have been required to return to their home country during the emergency to care for family. Revenue have confirmed to Deloitte that the 12 consecutive months condition will not be relaxed even in the exceptional circumstances of the COVID-19 pandemic and therefore, these employees will not be eligible for the relief.

Trans-Border Workers Relief Concession Update

Revenue announced in March 2020 that if foreign company employees are required to work from home in Ireland due to COVID-19, such days spent working at home in Ireland will not preclude an individual from being entitled to claim this relief, provided all other conditions of the relief are met.

Revenue have announced that this concessionary measure will continue to apply for the tax year 2021.

However, many employees may not be able to claim this relief as they may not be able to meet the other conditions of the relief. In our experience, the main condition that they may not be able to meet is that their employment income must be fully subject to non-refundable foreign tax. If this is the case, Revenue have indicated to Deloitte that for the 2020 tax year, the employee must report their foreign employment income via the self-assessment system. With effect from 1 January 2021, such employments will fall within the Irish PAYE net. Many of the foreign employers impacted by this requirement are situated in Northern Ireland/the UK.

Statutory Residence Rules - Force Majeure

At the start of the pandemic in March 2020, Revenue indicated that where a departure from Ireland has been prevented due to the COVID-19 crisis that they would consider this “force majeure” for the purposes of establishing an individual’s Irish tax residence position. No further guidance was published by Revenue in the interim. Revenue have now issued detailed guidance on this concession which can be found here.

In summary, Revenue are now stating that if an individual was present in the State on or before 23 March 2020 and his or her intended departure from the State was prevented due to COVID-19, then the period from the day after the original planned departure date up until 18 May 2020, or the actual departure date if earlier, may be disregarded for the purpose of determining his or her residence.

Also, if an individual travelled to the State between the period 24 March 2020 to 5 May 2020 and his or her intended departure from the State is prevented due to COVID-19, then the period from the day after the original planned departure date up until 18 May 2020, or the actual departure date if earlier, may be disregarded for the purpose of determining his or her residence. This is subject to a maximum of 30 days permitted in all circumstances, except in the case of an individual whose departure is prevented due to him or her having a confirmed COVID-19 diagnosis.

In both scenarios above, the days disregarded must be consecutive days.

In addition, it is mandatory that the individual must have left the State as soon as he or she reasonably could, which must have occurred on or by 1 June 2020. Where a departure has not occurred on or by 1 June 2020 force majeure will not apply to any of the days. The only exception to this is where the individual contracted COVID-19 and was not in a position to leave the State on or by 1 June 2020 on health grounds. With regard to such confirmed COVID-19 cases, notwithstanding the fact a departure has not occurred on or by 1 June 2020, force majeure may still apply in respect of the period to 18 May 2020.

Share scheme concessions update

Employer Share Scheme Reporting

The filing deadline for all 2020 share scheme returns will revert to the normal 31 March 2021.

Suspension of 31 March Tax return Deadline for 2020 Returns

In a welcome move, the 31 March filing deadline for 2020 cases where real-time foreign tax credits were provided through payroll is suspended. The return date for such employees will revert to the standard filing date (31 October 2021).

Deloitte's view

While the continuation of the benefit-in-kind concessions/exemptions is welcome for many employers, the withdrawal of the expatriate tax related concessions/exemptions is a very disappointing move by Revenue, which in the context of the latest Government restrictions, will add to the multitude of issues facing multinational employers resulting from the continuing COVID-19 pandemic.

The announcement was made close to the start of the recent holiday period, giving multinational employers little time to assess the impact that the withdrawal of the expatriate tax concessions/exemptions would have on payrolls for January 2021. Also, the announcement was made at a time when it was well signposted by the Irish Government that Ireland was very likely to have to return to some form of lockdown in early 2021. Given, the new Level 5 measures recently, which closely resemble the first lockdown in Ireland in March 2020, it is very unhelpful that multinational employers can no longer rely on these expatriate tax concessions/exemptions which were originally designed to alleviate the stress on such employers.

As an example, the withdrawal of the 60 day extension to the 90 day SARP application period, is very challenging. In our experience, it is taking far longer than the 90 day period from arriving in Ireland to receive a Personal Public Service Number (PPSN) due to the impact that the Irish Government restrictions are having on the processing of such applications by the Irish social welfare authorities. Not having a PPSN means that employees cannot register for payroll taxes in Ireland and both a PPSN and payroll tax registration is required for the SARP application.

With regard to the confirmation we have received from Revenue on the lack of concessionary treatment regarding the two conditions for SARP relief mentioned above, this has a very negative impact for multinational employers and the affected employees. One of the key incentives for moving skilled talent to Ireland from abroad is SARP relief which facilitates the creation of jobs and the development/expansion of businesses in Ireland. If these employees are not eligible for the relief, it is likely that employers will retain such employees/roles outside Ireland indefinitely. In addition, employees who can no longer avail of SARP relief may not return to Ireland as the relief is no longer available to them. It is important to note that there is no additional cost to the Irish exchequer in allowing a relaxation of these SARP conditions as the employees would have been in Ireland and claiming SARP had the pandemic not began.

Employers should assess the impact that the withdrawal of these concessions/exemptions will have on their mobile employee population, particularly employees that were allowed to work remotely in Ireland and have not yet returned to work in their normal place of work outside of Ireland.

Likewise, publishing the force-majeure guidance on 21 December 2020 that has a retrospective effect back to dates in May and June 2020 is very unfair on employees who were prevented from leaving the State during the pandemic. As an example, many foreign countries where such employees normally reside and work closed their borders in March 2020 and did not open them until late 2020. These employees had a legitimate expectation, based on the limited guidance available up until the detailed announcement on 21 December 2020, that their days spent in Ireland, where they could prove that they were restricted from leaving the State, would be disregarded for Irish tax residence purposes. These employees adhered to Irish Government advice to avoid non-essential travel during the pandemic and were restricted in travelling to their country of normal residence by a foreign government. Any individual who was prevented from leaving the State due to the COVID-19 related restrictions should re-assess their tax residence position based on this new guidance and many may now unexpectedly fall within the Irish income tax net for the 2020 tax year.