As the COVID-19 crisis continues to challenge businesses everywhere, the Irish Revenue are adapting to the rapidly changing environment. As a result, concessionary measures in this area are regularly subject to review.
COVID-19 Temporary Wage Subsidy Scheme
A Temporary Wage Subsidy Scheme (TWSS), which came into effect on 26 March 2020, enabled employees, whose employers were affected by the pandemic, to receive significant supports directly from their employer through the payroll system. The 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 TWSS. 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 31 March 2021.
From 1 January 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 January to 30 June 2021 (the review period to determine eligibility) compared to the same period in 2019. The subsidy will be paid directly to the employer following notification to Irish 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 announced by the Minister for Finance in October 2020.
The subsidy amounts for pay dates from 20 October 2020 and 31 March 2021 are as follows:
- For employees whose gross weekly wages are between 151.50 and 202.99 euros (EUR), the subsidy payment is EUR 203.
- For employees whose gross weekly wages are between EUR 203 and EUR 299.99, the subsidy payment is EUR 250.
- For employees whose gross weekly wages are between EUR 300 and EUR 399.99, the subsidy payment is EUR 300.
- For employees whose gross weekly wages are between EUR 400 and EUR 1,462, the subsidy payment is EUR 350.
The subsidy amounts for pay dates before 20 October 2020 were as follows:
- For employees whose gross weekly wages were between EUR 151.50 and EUR 202.99, the subsidy payment is EUR 151.50.
- For employees whose gross weekly wages were between EUR 203 and EUR 1,462, the subsidy payment is EUR 203.
No subsidy is paid for employees paid less than EUR 151.50 or more than EUR 1,462 gross per week.
It has also been confirmed that the reduced rate of Pay Related Social Insurance (PRSI) of 0.5% will continue to apply for wages that are eligible for the subsidy.
Filing and tax rule changes
In addition, Irish Revenue relaxed their approach to certain filing deadlines and some tax rules as a result of the pandemic, including:
Irish residency rules
Under current guidance, only days related to an individual being unable to leave Ireland on an intended date due to unforeseen events can be disregarded for residence purposes. For example, where an individual was prevented from leaving Ireland on an 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, based on the latest Revenue guidelines (22 December 2020), any day spent in Ireland after 18 May 2020 will not be regarded as falling within this concession, and the concession will not apply for individuals who arrived in Ireland on or after 6 May. Due to the current and ongoing travel restrictions in Ireland and in many other countries, this raises the question of whether any further concessions regarding tax residency for individuals prevented from leaving Ireland will apply in 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 concessionally by an additional 60 days during 2020. However, this concessionary measure ceased 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).
Operation of pay-as-you-earn (PAYE)
A number of concessionary measures were introduced in 2020 in response to the pandemic, which relaxed some of the normal PAYE obligations arising for employers.
This measure impacts short-term business travellers to Ireland from countries with which Ireland has a double tax treaty (DTT) and who will spend in excess of 60 workdays in Ireland in a tax year. As a result of the restrictions on travel as a consequence of COVID-19, the 30-day notification requirement for PAYE dispensation applications was not strictly enforced during 2020.
PAYE Exclusion Orders
In 2020, where an Irish employee who held a PAYE Exclusion Order spent more than 30 days in Ireland due to COVID-19, the validity of that Order was not negatively impacted. Revenue confirmed that this concession ceases to be applicable from 31 December 2020, although in light of the new travel restrictions being imposed in many countries, including Ireland, it once again raises the question as to whether further concessions may be granted.
Foreign employments temporarily exercised in Ireland
In cases where an employee who was working abroad for a foreign entity prior to COVID-19, but returned to Ireland temporarily during the COVID-19 period and carried out the duties of one's foreign employment while in Ireland, no Irish payroll obligations were enforced for the foreign employer for the period to31 December 2020. To date, this concession has not been extended for 2021, notwithstanding the ongoing pandemic and the latest travel restrictions imposed in many countries.
A foreign employer could continue to operate the Irish payroll for 2020 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 are required to retain evidence of the circumstances of the employees presence in Ireland, to be provided to Irish Revenue should evidence be requested.
Irish Revenue confirmed that this concession ceases to be applicable from 31 December 2020. From 1 January 2021, employers are required to operate PAYE on such employments in the usual manner.
It is important to note that the various concessions did not remove any underlying income tax liability that an individual may have as a result of their time spent working in Ireland.
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 measure will continue to apply in 2021.
Real-time foreign tax credit for restricted stock units
Where a real-time foreign tax credit was claimed through payroll in 2020, the tax return filing deadline for employees will be 31 October 2021 and not 31 March as is normally the case.
Relaxation of taxable benefits-in-kind (BIK)
A number of employee-incurred expenses may be reimbursed by their employer tax free during the pandemic. Examples include reimbursement of taxi fares for travel to/from work due to health and safety concerns, 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.
Working from home costs
Irish 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 tax return.
By concession, an employee's annual company car benefit-in-kind may be calculated by reference to the January 2020 business mileage undertaken. This concession remains in force in 2021 for the duration of the current travel restrictions but will be kept under review and is expected to be withdrawn once those travel restrictions are relaxed.
Provision of COVID-19 testing/flu vaccinations
Irish Revenue confirmed that the provision of a COVID-19 test by an employer for an employee will not be considered a taxable BIK. Additionally, Irish Revenue has relaxed the BIK 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, Irish Revenue allows for one non-cash incentive per year (up to the value of EUR 500) to be given by an employer to an employee tax free, provided certain conditions are satisfied. The most common qualifying incentive would be the provision of gift vouchers that are not redeemable for cash. Where an employer wishes to recognise efforts of key staff working during the COVID-19 crisis, the requirement that only one incentive (subject to the overall limit of EUR 500) is issued by the employer was concessionally waived for 2020, where the additional award is related to an employee's exceptional efforts during the COVID-19 crisis. This concession has been extended at the time of writing, but the duration is unclear.
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 EUR 20,484 to EUR 20,687). This change is due to the increase in the Irish national minimum wage from 1 January 2021.
- There is an increase in the Earned Income Tax Credit from EUR 1,500 to EUR 1,650 for 2020 and subsequent years.
- The Dependent Relative Tax 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 up to EUR 394 to weekly earnings up to 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 Deposit Interest Retention Tax (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
- The Help to Buy Scheme has been extended to the end of 2021. Under the provisions, the current expiry date on the availability of the enhanced relief of 5% of purchase price or EUR 20,000 to 10% of purchase price or EUR 30,000 has been extended from 31 December 2020 to 31 December 2021.