Paying PAYE here, but living abroad

[Happy_Harry]

Friend of mine works for an Irish company, but as he is not office based he doesn't live here anymore and doesn't visit enough to be officially called resident. (although for 2008/9 I think he could call himself still resident as he spent most of 2008 here and at least 30 days in 2009)

He has 2 addresses in 2 different EU countries ( spends his time 60/40 between them). He pays PAYE/PRSI in Ireland.

Maybe an obvious question, but is there a tax problem here , and if there is I am pretty sure the problem is not with Irish revenue, or ? It is just that his new boss doesn't like the set up and is asking all sorts of questions, I am just trying to understand the implications of what may happen and what my friend may need to do to be compliant ( whatever compliant means here)

 

[Domo]

Usually when companies post people abroad they "tax equalise" them - the individual continue to pay over to the company the usual Irish tax and PRSI, and even if there is no Irish tax liability, the company holds onto these deductions and pays the tax liabilities in the other countries.

It is likely that he should choose to remain in the Irish PRSI system, get excluded from Irish tax system and be paying tax in the other countries.

The company needs to take professional advice, as they are probably liable to operate the PAYE equivalent in the other countries.

If the company is not doing this your friend should take advice to ensure he is compliant himself.

www.taxingtimes.ie

 

[techman]

From the information supplied, there are three issues to look at here.

1. Domicile

Is your friend domiciled in Ireland?

If he was in the past, then he is domiciled here unless he has chosen another country as his new domicile i.e. a domicile of choice. To choose a new domicile, he must have severed all ties with Ireland and intends to reside permanently in the country he has chosen as his new domicile.

You must have a domicile and you can only have one domicile at any one time. Unless your friend has chosen a new domicile, he is still Irish domiciled.

2. Ordinary Residence

Your friend was resident in Ireland in the 2008 tax year and spent more than 30 days in Ireland in 2009. If he spent 270 days or more in Ireland in 2008 and 2009, then he is resident in Ireland for both 2008 and 2009.

3. Resident

Your friend is tax resident for 2008 and 2009.


Therefore, all your friend's worldwide income for both 2008 and 2009 is liable to Irish income tax regardless of where the income is earned and whether it is remitted to Ireland or not.

The only other option for your friend is to apply for split year residence relief in the tax year he left Ireland i.e. 2009. I am not sure if you can do this now, after the tax year is up.

Under split year residence relief, he would no longer be liable to Irish income tax on any income he earns abroad. So if he left Ireland in 2009 and does not intend to be resident in Ireland in 2010, he would not pay Irish income tax on income he earns abroad.

 

[John Conlon]

For 2008 qnd 2009 will be resident here. I assume ordinarily resident here i.e. resident also in 2007.
For 2010 to 2012 inclusive will be ordinarily resident.

Therefore for 2009 liable to Irish tax on worldwide income and capital gains

For 2010 to 2012 liable to Irish tax on worldwide income and capital gains
but excluding

Employment, trade or profession exercised wholly abroad. Some incidental Irish element is allowed e.g. attending at meetings.

Excluding also other income up to €3,810 per annum. If earned €3,811 then all €3,811 taxable.

The question then arises as to whether the employment is exercised in Ireland. Given modern teleworking as exemplified here, thiis can be a tricky decision
However, depending on the nature of the work there would be a number of significant questions

The contract would be made with the Irish company, under Irish law.

Does the work involve activities in the countries where the person lives e.g with customers or dealing with equipment. Then the employee should be taxed underthe PAYE system of the country where the employment is exercised.

If the residence countries operate the remittance system the employee would be non-domiciled and taxable only on salary remitted.

Lastly, a possible reason for boss's concern. If the employee concludes deals or agrees prices where he lives the company could be deemed to have a permanent establishment there. This could open up exposure to corporate taxes and VAT in these countries.

Not as starightforward as it looks.

[broken link removed]

 

[Happy_Harry]

Thanks for the replies.. My friend was on holidays, came back today and was summonsed for a (tele-)meeting with his boss.

Indeed he is teleworking for the Irish company (Irish contract), has no meetings or dealings with anybody in his new countries apart from meetings he would have with people in any other country as well.
in 2007 he was paying tax in a different country - outside EU- as the Irish company had him on assignment there.

Just wondering what "has chosen a new domicile" means . He had to register himself with the city hall in both cities he commutes between for various reasons, is that chosing a new domicile ?

Anyway I spoke to him this morning- his boss just wanted to be sure he raised the issue and told my friend he needs to be sure to be compliant .So that the company is covered (not sure it is that easy though to shrug off some of this responsibility).

My friend will be going to seek advice in both countries and when back in Ireland might want to get advice here too. Where does he get that ? Revenue office , tax adviser (how much will that set him back and will any tax adviser do ?)

 

[Domo]

You don't really "choose" your domicile. To "choose" your domicile you need to completely sever all ties with your original domicile, with the intention of never, ever returning, and take up a domicile in a new country with all that entails. It is difficult to do and prove this, so generally people keep oroginal domicile, although some people do this.

He needs to take professioanl advice on this and tax matters. You can PM me on this if you want.

www.taxingtimes.ie