As the COVID-19 crisis continues to challenge businesses everywhere, the Irish Revenue are adapting to the rapidly changing environment.
COVID-19 Temporary Wage Subsidy Scheme
The Wage Subsidy Scheme, which was introduced by Revenue on 24 March 2020, enabled employees, whose employers are affected by the pandemic, to receive significant supports directly from their employer through the payroll system. The Wage Subsidy Scheme was available to employers who retained employees on their payroll throughout the COVID-19 period.
To qualify for the scheme, employers had to meet the following conditions:
- be experiencing significant negative economic disruption due to COVID-19
- be able to demonstrate a minimum of 25% decline in turnover
- be unable to pay normal wages and normal outgoings fully, and
- retain their employees on the payroll.
COVID-19 Employment Wage Subsidy Scheme
On 23 July 2020 the Irish Government announced the Employment Wage Subsidy Scheme (EWSS). This scheme was introduced to replace the Temporary Wage Subsidy Scheme. Both schemes (TWSS and EWSS) ran in parallel until the end of 31 August 2020, allowing new hires and employees not previously eligible for TWSS to qualify for EWSS where they meet the new criteria. The EWSS is expected to continue until April 2021.
To qualify for the scheme employers must be able to demonstrate a 30% reduction in turnover or customer orders in the period from 1 July 2020 - 31 December 2020 compared to the same period in 2019. The subsidy will be paid directly to the employer following notification to Revenue of the payment of wages by the employer.
The amount of the subsidy is based on the level of wages paid to the employee, and changes were recently announced by the Minister for Finance in October 2020.
The subsidy amounts (for pay dates between 20 October 2020 and 31 January 2021) are as follows:
- For employees whose gross weekly wages are between €151.50 - €202.99 the subsidy payment is €203.
- For employees whose gross weekly wages are between €203 - €299.99 the subsidy payment is €250.
- For employees whose gross weekly wages are between €300 - €399.99 the subsidy payment is €300.
- For employees whose gross weekly wages are between €400 - €1,462 the subsidy payment is €350.
The subsidy amounts (for pay dates before 20 October 2020 and after 31 January 2021) are as follows:
- For employees whose gross weekly wages are between €151.50 - €202.99 the subsidy payment is €151.50.
- For employees whose gross weekly wages are between €203 - €1,462 the subsidy payment is €203.
No subsidy is paid for employees paid less than €151.50 or more than €1,462 gross per week.
It has also been confirmed by the Irish Government that the reduced rate of PRSI (Pay Related Social Insurance) of 0.5% will continue to apply for wages that are eligible for the subsidy.
Filing and tax rule changes
Separately, Revenue have relaxed their approach to filing deadlines and some tax rules. The key changes are:
- Irish Residency Rules: Under current guidance, only days related to an individual being stuck unexpectedly in Ireland can be disregarded for residence purposes. For example, where an individual is prevented from leaving Ireland on one's intended day of departure due to COVID-19, this will be considered a 'force majeure' and the individual will not be regarded as being present in Ireland for the day after the intended day of departure. However, given the current and likely future protracted period of COVID travel restrictions, further clarification has been requested from the Irish Revenue Authorities, and updated guidance is expected to issue in early 2021.
- Special Assignee Relief Programme (SARP): Where an employee meets all of the conditions to qualify for the SARP, the employer must file a declaration confirming this eligibility within 90 days of the employee arriving in Ireland. This period was extended by an additional 60 days. However, Revenue announced that this concessionary measure will cease to apply from 31 December 2020 onwards (i.e. from 1 January 2021 all SARP 1A forms must be submitted within the usual 90-days of an employee arriving in Ireland).
- Pay-As-You-Earn (PAYE) dispensations: As a result of the restrictions on travel as a consequence of COVID-19, the 30 days notification requirement will not be strictly enforced for PAYE dispensation applications applicable to short term business travellers from countries with which Ireland has a double tax treaty, who are going to spend in excess of 60 workdays in Ireland in a tax year. Revenue have confirmed that this concession ceases to be applicable from 31 December 2020 onwards.
- PAYE Exclusion Orders: The validity of a PAYE Exclusion Order will not be negatively impacted in the circumstances where the employee (holder of the PAYE Exclusion Order) spends more than 30 days in Ireland due to COVID-19. Revenue have confirmed that this concession ceases to be applicable from 31 December 2020 onwards.
- Foreign employments temporarily exercised in Ireland: In genuine cases where an employee who was working abroad for a foreign entity prior to COVID-19, but returns to Ireland temporarily during the COVID-19 period and carries out the duties of his/her foreign employment while in Ireland, no Irish payroll obligations will be enforced on the foreign employer. Revenue have confirmed that this concession ceases to be applicable from 31 December 2020 onwards.
- Trans-border Workers Relief: If an employee is required to work from home in Ireland due to COVID-19, these days spent working at home in Ireland will not remove the individual's entitlement to claiming Trans-border Workers Relief, provided each of the other conditions are met.
This concessionary measure will continue to apply for the 2021 tax year where:
- an employee is required to work from home in the State due to COVID-19, and
- provided all other conditions of the relief are met.
- Multi-state workers: A foreign employer may continue to operate Irish payroll on the basis of a non-resident employee’s established work pattern pre-COVID-19 where:
- the non-resident employee had been carrying out duties of a foreign employment partially in Ireland and partially in the foreign jurisdiction prior to COVID-19
- the foreign employer had applied payroll taxes in Ireland and the foreign jurisdiction based on the established work pattern prior to COVID-19
- the employee cannot return to the foreign jurisdiction as a result of the travel restrictions imposed by COVID-19, and
- the employee continues to carry out their duties of employment in Ireland.
Both the employee and the employer should retain evidence of the circumstances of the employees presence in Ireland, to be provided to Revenue should evidence be requested.Revenue have confirmed that this concession ceases to be applicable from 31 December 2020 onwards. From 1 January 2021 employers are required to operate PAYE on such employments in the usual manner.
- Relaxation of taxable benefits-in-kind (BIK): A number of employee-incurred expenses may be reimbursed by their employer tax free. Examples include reimbursement of taxi fares for travel to/from work due to health and safety concerns, reimbursement of flights to Ireland to deal with business-related COVID-19 issues, employer provided home office equipment (e.g. laptops, printers, scanners), and, in certain circumstances, employer provided accommodation as a result of health or safety concerns.
- Provision of COVID-19 Testing/Flu Vaccinations - Revenue confirmed that the provision of a COVID-19 test by an employer for an employee will not be considered a taxable BIK. Additionally, Revenue have relaxed the benefit in kind rules to allow an exemption where an employer arranges for the flu vaccination to be provided for their staff. An employee can claim a tax credit via their tax return for the flu vaccine in their health expenses, if they incur the cost themselves.
Small Benefit Exemption: Currently, Revenue allow for one incentive per year (up to the value of €500) to be given by an employer to an employee tax free, provided certain conditions are satisfied (e.g. the incentive can not be cash or redeemable for cash). The most common qualifying incentive would be the provision of gift vouchers. Where an employer wishes to recognise efforts of key staff working during the COVID-19 crisis, the requirement that only one incentive is issued by the employer has been concessionally waived for the 2020 tax year, where the additional award is related to an employee's exceptional efforts during the COVID-19 crisis.
- Seasonal Parties: The Revenue Commissioners who have confirmed that where an employer incurs reasonable costs in hosting a ‘virtual’ Christmas party for employees, a benefit in kind will not arise.
Irish Finance Act 2021
Following the most recent Irish Finance Act (effective from 1 January 2021):
- The only change to the income tax or Universal Social Charge (USC) bands and rates for 2021 from those in 2020 is an increase in the upper threshold for the 2% USC band (from 20,484 euros [EUR] to EUR 20,687 ). This change is due to the increase in the Irish national minimum wage on this date.
- The Dependent Carer Credit is being increased by EUR 175, to EUR 245 per year.
- The upper weekly earnings threshold for the reduced rate of employer PRSI (8.8%) has increased from weekly earnings of over EUR 394 to weekly earnings of over EUR 398, with effect from 1 January 2021.
- The Key Employee Engagement Programme (KEEP), providing for advantageous tax treatment on share options for employees of small and medium-sized enterprises (SMEs), continues. The scheme is aimed at ensuring that unquoted SMEs can attract and retain key employees and allows employees, which satisfy the necessary conditions, to defer taxation on the receipt of share options until such shares are disposed.
- The relief from DIRT on savings used by first-time house buyers towards the deposit on a home has been extended to 31 December 2021. Savings held over a four-year period prior to the purchase will qualify for this relief.
- Exemption from a charge to BIK tax for electric vehicles with a value of less than EUR 50,000 provided to employees remains in place until 31 December 2022.
- The SARP and Foreign Earnings Deduction (FED) schemes have been extended until 31 December 2022.
- Revenue announced that a deduction would be made available for employees, in an effort to acknowledge costs being incurred by employees as a result of working from home. The deductions allowed include 30% of broadband expenses and 10% of costs for electricity and heat incurred from 2020 onwards for the duration of the pandemic only. The deduction can only be claimed for days working from home, and are claimed via an employee's Irish tax return.
Notable Finance Act introductions from previous years:
- The Earned Income Tax Credit was increased by EUR 150 effective from 1 January 2020, from EUR 1,500 to EUR 1,650. This applies to self-employed individuals (including proprietary directors) with earned income who are not otherwise entitled to the PAYE Tax Credit.
- Employer pay-related social insurance (PRSI) was increased by 0.1% to 11.05%, effective from 1 January 2020.