Reply to: UK/ Irish Ltd companies

[SueEllen]

What if you have two directors (e.g. a spouse), with the latter still residing in the UK at the company registered address?

In Eire you use to be able to get away with it if the majority of the management were outside Eire e.g. 2 out of 3 directors but they changed that around 2010.

Now if you contract in Eire you need to pay both company and personal taxes there, and there are no loop holes.

[Sue B]

What if you have two directors (e.g. a spouse), with the latter still residing in the UK at the company registered address?

You still have a place of management in Ireland.

[TheCyclingProgrammer]

And Permanent Establishment of the company is normally day 1, due to the company have a placement of management (i.e. the director) in Ireland.

What if you have two directors (e.g. a spouse), with the latter still residing in the UK at the company registered address?

[Sue B]

Indeed there is Moniker, and its important for contractors to remember that these will always be treated differently within the DTA. Business profits may be taxed in Ireland (as much as is attributable to the Permanent Establishment).

And Permanent Establishment of the company is normally day 1, due to the company have a placement of management (i.e. the director) in Ireland.

[m0n1k3r]

Me too. Lots of UK contractors in Ireland seem to get away with it and are even advised that it's OK, but I am fairly sure that you must pay full Income Tax, PRSI and USC on all income arising from work undertaken in Ireland.

Yes, but unless there are elements of control involved, there is a difference between company revenue and personal income.

[m0n1k3r]

TCP and NLDUK - absolutely this.

Technically, there is no 183 day "rule", its is part of the DTA article relating to income from employment and comprises 3 tests, all of which have to be satisfied in order for it to apply.

Most contracting personnel who pass part a (days in country) go on to fail parts b and c, which relates to where and from whom was income derived.

There is an 183 day rule, but it is not generally applicable to contractors. It is applicable, for example, to ordinary employees being sent by their employer to do certain project or installation work for a customer. If you are a director, you will effectively create a fixed establishment of the company in that other country.

As a director working abroad, always use an umbrella, or set up a proper company in that other country (but it's not worth doing it if your only objective is to transfer all of the money into your own pocket in the most tax efficient way possible).

The rule is also contingent upon the worker sent being purely managed by his/her employer abroad. If there is any element of temporary staffing/contingent labour/staff augmentation/labour leasing (which, frankly, most contractor contracts have) then it doesn't apply and PAYE should be operated locally.

[m0n1k3r]

If it's only for six months don't forget that there is no personal Irish tax liability if you are not physically present in Ireland for more than 183 days.

Or for 280 days over two years (which is still better than UK's rules).

[Sue B]

Well, its not really written from the point of few of removing a tax liability. Its a Statement of Practice, relating to the scope for applying PAYE, it doesn't change the OECD model of Double taxation, but it does make concessions on when the employer is or is not obliged to run PAYE on certain income.


Under section 4

4.2 Temporary Assignees
4.2.1 Short term business visits to the State – not more than 60 working
days
Under the terms of the Employments Article of Double Taxation
Agreements (DTAs) between Ireland and other countries, the income
attributable to the performance in the State of the duties of an
employment may be relieved from the charge to Irish tax and where this
is the case the tax deducted under PAYE is refundable to the individual
from whose income the tax was deducted.
In certain circumstances, Revenue will not require an employer to operate
PAYE where, under the terms of a DTA, a taxing right on remuneration
paid by the employer is not allocated to this State. Revenue are prepared
to accept that employers need not operate PAYE on remuneration paid to
an individual where -
(a) the individual is resident in a country with which the State has a
Double Taxation Agreement and is not resident in the State for tax
purposes for the relevant tax year; and,
(b) there is a genuine foreign office or employment; and
(c) the remuneration is paid by, or on behalf of, an employer who is not a
resident of the State, and
(d) the remuneration is not borne by a *permanent establishment* which
the employer has in the State and,
(e) the duties of that office or employment are performed in the State for
not more than 60 working days in total in a year of assessment and, in
any event, for a continuous period of not more than 60 working days.

Here, it is still referring to the DTA to decide the taxation order, and part 4.2.1 makes reference to the requirement that the remuneration is not borne by an entity with a Permanent Establishment in Ireland.

This statement on the whole feels very similar in lots of ways to the UK Agency Legislation, which again does not remove a workers liability to income tax and national insurance in the UK but does detail who is responsible for operating PAYE.

[rover and out]

Why, oh why ?

Did you read the whole document Rover and Out? Because i have just skimmed it and a few things jump out.

There is nothing here which makes me think that any work done in Ireland, whereby the cost is borne ultimately by an Irish resident client, would not be considered taxable in Ireland.

I am prepared to accept that there will always be exceptions however, the only authority who can discharge a liability to Irish Tax is the Irish Revenue. Full disclosure should be made to them, and give them the opportunity to confirm whether tax is due or not.

Why then, in your opinion, was this quite extensive procedure on temporary assignments added to the guidance . For what purpose does it exist if not to grant a tax free situation for temporary assignees.

[Sue B]

Did you read the whole document Rover and Out? Because i have just skimmed it and a few things jump out.


taken directly from this document

"4.1.2 The Irish PAYE System
It should be clearly understood that the Irish PAYE system is a system under which payroll deductions, including tax, are made at source and:
• where an employer is released from the obligation to operate the PAYE system under the terms of this Chapter, it does not necessarily follow that the temporary assignee has no tax liability in this State in respect of his or her employment income, and
• where an employer is not released from the obligation to operate the PAYE system under the terms of this Chapter, it does not necessarily follow that the temporary assignee has a tax liability in
this State in respect of his or her employment income.

However, the terms of this Chapter are focussed on ensuring that, as far as is practicable, the release from the obligation to operate the PAYE system is granted to employers in circumstances where the employee will not have a tax liability in the State in respect of his or her employment
income. "

4.2 Temporary Assignees
4.2.1 Short term business visits to the State – not more than 60 working
days
Under the terms of the Employments Article of Double Taxation
Agreements (DTAs) between Ireland and other countries, the income
attributable to the performance in the State of the duties of an
employment may be relieved from the charge to Irish tax and where this
is the case the tax deducted under PAYE is refundable to the individual
from whose income the tax was deducted.
In certain circumstances, Revenue will not require an employer to operate
PAYE where, under the terms of a DTA, a taxing right on remuneration
paid by the employer is not allocated to this State. Revenue are prepared
to accept that employers need not operate PAYE on remuneration paid to
an individual where -
(a) the individual is resident in a country with which the State has a
Double Taxation Agreement and is not resident in the State for tax
purposes for the relevant tax year; and,
(b) there is a genuine foreign office or employment; and
(c) the remuneration is paid by, or on behalf of, an employer who is not a
resident of the State, and
(d) the remuneration is not borne by a *permanent establishment* which
the employer has in the State and,
(e) the duties of that office or employment are performed in the State for
not more than 60 working days in total in a year of assessment and, in
any event, for a continuous period of not more than 60 working days.

*Permanent Establishment* See appendix E
Note (1) As regards (c) above, Revenue, in line with OECD guidance
(commentary on Article 15 of the OECD Model Tax Convention on Income and on
Capital), is not prepared to accept, for the purposes of granting a release from
the obligation to operate the PAYE system, that the remuneration is paid by, or
on behalf of, an employer who is not a resident of the other State where the
individual is;
• working for an Irish employer where the duties performed by the
individual are an integral part of the business activities of the Irish
employer, or
• replacing a member of staff of an Irish employer, or
• gaining experience working for an Irish employer, or
• supplied and paid by an agency (or other entity) outside the State to work
for an Irish employer
Also, the release from the obligation to operate the PAYE system will not be
granted (i) simply because the remuneration is paid by a foreign employer and
charged in the accounts of a foreign employer or (ii) where the remuneration is
paid by a foreign employer and the cost is then re-charged to an Irish employer. "


There is nothing here which makes me think that any work done in Ireland, whereby the cost is borne ultimately by an Irish resident client, would not be considered taxable in Ireland.

I am prepared to accept that there will always be exceptions however, the only authority who can discharge a liability to Irish Tax is the Irish Revenue. Full disclosure should be made to them, and give them the opportunity to confirm whether tax is due or not.

[rover and out]

Stand down

So 'Rover and out' can expect a visit from The Revenue Commissioners, An Garda Siochana, INIS and The Republic of Telly?

Inspector Kelly, you had better switch the engine off and come back into the office.

It's a false alarm, it is.

And can you see if you can get a refund on those air tickets as well.

[rover and out]

Every day is a learning day

Me too. Lots of UK contractors in Ireland seem to get away with it and are even advised that it's OK, but I am fairly sure that you must pay full Income Tax, PRSI and USC on all income arising from work undertaken in Ireland.

After the points made by a number of posters I have taken another deeper look at the guidance.

You are all correct in saying that:

In general, any employment in a country for a client in that country is taxable from day 1.

In general if you are not resident you only need to consider the income that is sourced in that country.

If you become resident you need to consider worldwide income.




However while residence is based on physical presence in the country.

Most countries allow you to work for 30 days in each year without needing to consider tax.

Also most countries allow foreign companies to temporarily post workers abroad and be considered outside of the local taxation regime.

Ireland allows workers who are temporarily posted to the State to carry out up to 60 working days free of tax in an assignment.

Ireland are also flexible in that any work carried out outside of the state e.g. teleworking, can be proportionally disregarded from taxation in the State.

So those of you on a 3 month contract working for a UK Ltd need just carry on. If you are carrying out significant levels of teleworking the length of contract can be longer.

I would suggest that this can be extended if you are lucky enough to work for a different Irish client on a new contract so long as their is a short gap between.

I believe that while you are working for this foreign company you can continue to pay your social security through it and submit (if requested) a form (AS1) which does not require PRSI payment to the State.

I believe the USC payments are only made through Irish entities.



Source for the info on temporary assignments is Irish Revenue document sp-it-3-07 (Statement of practice 3 / 2007 )

[Sue B]

Out of interest, is there any amount of work you can get away with in another country without tax implications?

For example, if I was to take on a client in another country, where I'm pretty much 100% working from home here in the UK, remaining resident here, but my client wanted me to come out to their office for a week as part of the project kick-off, or visit for meetings for a few days, would that expose me to tax liabilities in their country? Does it vary from country to country? Where does the line between working abroad (and it being taxable) and simply visiting your client for business purposes begin and end?

I only ask because I've had some interest from a potential client based in Denmark. I've never had to deal with this issue before.

There are times of course when you can work for a client and not incur taxation in the local country. It is important to understand the difference between a business trip and an assignment. A business trip is where work is done in the uk for a uk client, who asks you to attend a meeting or two in another country. Providing you are in the other country on behalf of the uk client, in furtherance of the uk work, and your services are not rebelled onto a foreign client, this would normally be a business trip. These are expected to be ad hoc, and for no more than 30 days, although there is no definite set time limit. For instance I work for a uk based company who pays my salary. Sometimes I have to travel for business, but I am performing my services for ipaye, not for the end client. My time is not rebilled and it is ipaye who benefits. This is a business trip.

However if the work done overseas is for the benefit of the foreign end client, and/or they pay for your time/services, this is an assignment, and taxable in country from day 1.

Obviously each set of circumstances is different and this is only guideline, before undertaking any international work the contract should be reviewed.

[TheCyclingProgrammer]

Out of interest, is there any amount of work you can get away with in another country without tax implications?

For example, if I was to take on a client in another country, where I'm pretty much 100% working from home here in the UK, remaining resident here, but my client wanted me to come out to their office for a week as part of the project kick-off, or visit for meetings for a few days, would that expose me to tax liabilities in their country? Does it vary from country to country? Where does the line between working abroad (and it being taxable) and simply visiting your client for business purposes begin and end?

I only ask because I've had some interest from a potential client based in Denmark. I've never had to deal with this issue before.

[northernladyuk]

So 'Rover and out' can expect a visit from The Revenue Commissioners, An Garda Siochana, INIS and The Republic of Telly?

And they'll make up a story and get Tusla in.

In reality, they'll just get HMRC to collect, when they do the next audit of his client's contractor resources.