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Update on COVID-19 related employment tax concessions and exemptions

GES Newsflash | 20 December 2021

Revenue issued updated guidance on employment tax matters on 14 December 2021 considering the recent updated public health guidance advising employees to work from home unless it is necessary to attend the workplace in person. Revenue first introduced concessions for employment and expatriate tax issues related to the COVID-19 pandemic in March 2020. Many of the employment tax measures were extended in 2021 and the updated guidance further extends the concessions to 2022. Most of the expatriate tax concessions ceased in December 2020. For a summary of the prior guidance, please see our newsflash here.

The following tables summarise the current position on these benefit-in-kind and expatriate tax concessions/exemptions for 2021 and 2022.

Benefit-in-Kind Position in 2021 Position in 2022
Reimbursement of holiday/flight cancellation costs for employees returning to Ireland
Taxable Taxable
Reimbursement of taxi fares for transporting employees to/from work due to health and safety concerns Tax
exempt until 30 June 2022 (further review then)
Costs of COVID-19 testing at a workplace/Employer provided COVID-19 test kits
Costs of Flu vaccination at workplace/reimbursement to employee/direct payment to registered practitioner Tax
Temporary employer provided accommodation to mitigate potential COVID-19 transmission risks
Tax exempt (applies for a continuous period of no more than 3 weeks)
Small Benefit Exemption Maximum of two vouchers/other tangible items (e.g. hampers) allowed in order to recognise exceptional efforts of frontline or other key staff up to a total of €500 per annum – see below for further detail Maximum of two vouchers/other tangible items (e.g. hampers) allowed in order to recognise exceptional efforts of frontline or other key staff up to a total of €500 per annum – see below for further detail
Employer Provided Vehicles Concessions apply – see details in our previous newsflash here Continuation of concessions (see details in our previous newsflash here) until public health

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.

We will continue to engage with Revenue on these issues affecting employers during the pandemic and will update you if there are any further announcements. If you would like to discuss this matter in more detail, please feel free to contact your usual Deloitte contact.

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