Non-Irish Employments Exercised in Ireland

Jackie Coughlan, Deloitte

The rules regarding non-Irish employments exercised in Ireland are complex and have evolved significantly over the last number of years. It is important to remember that the rules may apply not only to individuals on formal assignment to Ireland but also to

short-term business visitors and commuters.

Employers can often have misconceptions regarding their Irish payroll obligations, including:

  • There are no Irish payroll or tax obligations once they are in Ireland for less than 183 days
  • There is a double tax treaty with their home country so there are no issues
  • They are not paid in Ireland or on an Irish payroll, so Irish payroll taxes cannot arise

Unfortunately, none of these are correct.

We will look at the latest guidance issued by Revenue in detail, but the following is a brief summary of the historic position.

Up to December 2016

No Irish payroll obligation arose if the individual was:

  • From a DTA country with less than 60 workdays in Ireland
  • From a non-DTA country with less than 30 days in Ireland

Where an individual was from a DTA country and spent more 60 workdays but less than 183 days in Ireland in the tax year there was a release from the requirement to operate Irish payroll withholding subject to meeting certain treaty conditions.

One of the conditions was that the remuneration had to be paid by or on behalf of an employer who is not a resident of Ireland

Changes from 1 January 2017

In December 2016 Revenue issued guidance setting out their interpretation of the treaty conditions.

The guidance stated that the condition whereby the individual must be paid by a foreign employer would not be satisfied where:

  • The duties of the employee were integral to the Irish employer
  • The employee was replacing a member of staff at the Irish employer
  • The employee was gaining experience working for an Irish employer
  • The employee was supplied and paid by an agency outside the State to work for an Irish employer.

Revised Guidance April 2018

Revised guidance was issued by Revenue which is effective from 1 January 2018. The position for a non-resident employee who is resident in a country with which Ireland has a double tax treaty under the new guidance can be summarised as follows:

Presence in the State (beginning in 2018)

Number of workdays in Ireland

Payroll treatment

One tax year

Up to 60 workdays in the tax year

No payroll obligation, but consideration will need to be given to whether the employee will return to Ireland in a subsequent year

One tax year

61 workdays or more

No automatic release from payroll obligation, application to Revenue required

Two consecutive tax years

Up to 60 workdays across two consecutive tax years

No payroll obligation, but consideration will need to be given to where the employee will return to Ireland in a subsequent year

Two consecutive tax years

61 workdays or more across two consecutive tax years

No automatic release from payroll obligation, application to Revenue required

More than two tax years

No threshold applies

No automatic release from payroll obligation, application to Revenue required

The position for a non-resident employee who is resident in a country with which Ireland does not have a double tax treaty under the new guidance as follows:

Presence in the State (beginning in 2018)

Number of workdays in Ireland

Payroll treatment

One tax year

Up to 30 workdays in the tax year

No payroll obligation, but consideration will need to be given to whether the employee will return to Ireland in a subsequent year

One tax year

31 workdays or more

Irish PAYE must be operated on Irish workdays

Two consecutive tax years

Up to 30 workdays across two consecutive tax years

No payroll obligation, but consideration will need to be given to where the employee will return to Ireland in a subsequent year

Two consecutive tax years

31 workdays or more across two consecutive tax years

Irish PAYE must be operated on Irish workdays

More than two tax years

No threshold applies

Irish PAYE must be operated on Irish workdays

60 Workdays Exemption

The conditions for the 60 workdays exemption are as follows:

  • the assignee exercises the duties in Ireland for not more than 60 workdays (either consecutively or cumulatively) in a tax year or over two consecutive tax years, and
  • the assignee is not on the payroll of an Irish entity and,
  • the assignee is resident in a DTA country and is not resident in Ireland for the relevant tax year(s).

Where these conditions are met Irish Revenue will accept without enquiry that the assignee is taxable solely in their country of residence on the relevant employment income.

PAYE Dispensation

Where certain conditions are satisfied, an employer may apply to Revenue for a release from the obligation to operate Irish payroll i.e. for a PAYE dispensation. The conditions are as follows:

  • The assignee is resident in a country with which Ireland has a double tax treaty and is not resident in Ireland for tax purposes; and,
  • There is a genuine foreign office or employment; and
  • The remuneration is paid by, or on behalf of, an employer who is not a resident of Ireland (see below), and
  • The remuneration is not borne by a permanent establishment which the foreign employer has in Ireland.

For the purposes of (3) above, Revenue will not accept that this condition is met where the individual is:

  • working for an Irish employer where the duties performed by the assignee are an integral part of the business activities of the Irish employer; or
  • replacing a member of staff of an Irish employer; or
  • supplied and paid by an agency (or other entity) outside the State to work for an Irish employer.

In a welcome move, Revenue have removed the disqualification from a PAYE Dispensation on the grounds of ‘Gaining experience working for an Irish employer”.

The new guidance states that there are several factors that may indicate an assignee is performing duties for an Irish employer that are an integral part of that employer’s business. Factors to consider include:

  • who bears the responsibility or risk for the results produced by the assignee;
  • who authorises, instructs or controls where, how and, or when the work is performed;
  • who does the assignee report to or who is responsible for assessing performance; and
  • whether the role or duties performed by the assignee are more typical of the function(s) of the overseas employer or of the Irish entity.

Recharge of Costs

The guidance states that a dispensation will not be granted where the remuneration is paid by a foreign employer and the cost is then recharged to an Irish employer.

Ongoing Presence

Another new aspect of the revised guidance is the concept that individuals who have an ongoing requirement to return to Ireland over a number of years will not qualify for an automatic exemption from PAYE, regardless of the number of days spent in Ireland in a particular year.

Instead, the employer may apply for a PAYE dispensation as outlined above. The guidance notes indicate that such an exemption (if granted) would be valid for a single tax year only, so annual applications would be required.

Implications

This tightening of the Irish tax rules further underlines the need for international employers to have robust tracking systems and processes in place in order to identify short-term business travellers who may fall within the Irish PAYE net.

The guidance states that applications for an exemption from payroll withholding must be submitted to Revenue within 30 days of arrival to Ireland.

Irish Employments Exercised Abroad

Employers also need to be mindful of their payroll obligations both in Ireland and overseas in respect of their employees who spend periods of time working abroad either on formal assignment or as business travellers.

Breaking Irish Residence

Where an Irish employee is sent on assignment abroad and breaks Irish tax residence the employer can apply for a PAYE exclusion order which means that Irish PAYE and USC is not required to be withheld from the individual’s employment income for the duration of the assignment.

A PAYE exclusion order will issue where an employee:

  • is not resident in Ireland for tax purposes for the relevant tax year, and
  • exercises the duties of the employment wholly outside Ireland

Where an individual leaves Ireland during the tax year a PAYE Exclusion Order may be issued effective from the date of departure where the individual is leaving to work abroad such that he/she will not be Irish tax resident in the following year.

Remaining Irish Resident

Many employers are moving away from the more traditional long-term assignment and instead employees may be sent on assignment for a short period of time abroad or they are regular commuters to overseas jurisdictions.

If the individual will not break Irish tax residence, then the company is obliged to continue deducting payroll taxes from their employment income in the normal manner.

Foreign Payroll Considerations

Even if Irish residence is not broken a foreign payroll obligation may arise for the individual on the basis of the time they will spend working in the country.

Relief may be available under the Employment Article of the relevant double tax agreement. Generally, the Employment Article provides that remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if:

  • the recipient is present in the other State for a period or periods not exceeding 183 days in aggregate in the fiscal year concerned and
  • the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State and
  • the remuneration is not borne by a permanent establishment which the employer has in the other State

However, some jurisdictions operate an “economic employer” principle whereby they will consider who bears the risks and rewards in relation to the employee while they are working in the foreign jurisdictions. If this is deemed to be the foreign entity a payroll obligation may arise in that jurisdiction.

If a foreign withholding obligation arises there will be double withholding on the employee’s salary for the duration of the assignment, however a foreign tax credit can be claimed in Ireland which should result in a refund of Irish tax. The foreign tax credit can be claimed by filing an Irish tax return, but this would obviously present a cash flow issue for the individual as he/she would be required to pay payroll taxes in both countries during the year.

Particular care should be taken in relation to any payments made or benefits provided in the foreign jurisdiction to ensure that these are properly captured for Irish payroll purposes. There may also be mismatch between the tax treatment of benefits or expenses between Ireland and the foreign jurisdiction.

Real Time Foreign Tax Credit

 

Revenue is prepared to consider granting tax relief in ‘real time’ through the PAYE system in respect of non-refundable foreign tax deducted.

This treatment may apply to individuals who:

  • Are tax resident in Ireland
  • Are employed by an Irish employer under an Irish contract of employment
  • Exercise some of the duties of the employment abroad and
  • Are subject to a simultaneous deduction of both Irish and foreign tax

In addition, the foreign tax suffered must be non-refundable.

For non-DTA countries, there is no double tax credit relief available. However, unilateral relief can be granted by giving a deduction in respect of the non-refundable foreign tax. This deduction will be reflected as a tax credit through the PAYE system.

Evidence of the amount of the foreign tax and that such foreign tax is non-refundable may be requested by Revenue.

Where these criteria are met, Revenue will, on a case-by-case basis, consider an application for tax relief in respect of the foreign tax through the PAYE system. This would require an estimate of the foreign taxes which would be due and if this is lower than the Irish effective rate of income tax full credit would be allowed on the individual’s tax credit certificate for the estimated foreign tax.

Tax Equalisation/Tax Protection

 

Employers often enter into either a tax equalisation or a tax protection arrangement with their employees when they sent on assignment abroad.

 

Under tax equalisation an employee will be no better or no worse off than if they had continued to work in Ireland and not gone on assignment.

 

Under tax protection an employee will be no worse off than if they had continued to work in Ireland. However, if they are working in a country with a more favourable tax regime they may benefit from the reduced taxes.

 

If an employee is equalised and a PAYE Exclusion Order is in place the employer will deduct hypothetical taxes via the Irish payroll. The purpose of a hypothetical tax calculation is to determine the employee’s payroll tax liability if they were not working abroad. Hypothetical tax is an estimate of the tax that the employee would have paid had they not gone on assignment.

 

A tax equalisation calculation is generally prepared at year end to reconcile the “stay at home” taxes that the employee would have paid during the year.

Social Security

Social security is payable in the country in which an individual exercises the duties of his employment regardless of the location of the employer.

Temporary Postings

Where an individual is temporarily assigned to another member of the European Economic Area or to a country with which Ireland has a bi-lateral social security agreement, the employer can apply for an A1 Certificate or a Certificate of Coverage. The A1/Certificate of Coverage operates to retains the individual within the home social security system and exempts the individual and the company from paying Social Insurance in the country to which the individual has been assigned.

As the individual continues paying Irish social security while working in Ireland, their social security record remains intact and they continue to be entitled to all social security benefits here in Ireland as if they had not been posted abroad.

Ireland has bi-lateral Social Security Agreements with a number of other countries including the United States, Canada, Australia and New Zealand.

If an employee is leaving Ireland and is assigned to a country that is not within the EEA and which is not a country with which Ireland has a bi-lateral Social Security Agreement, they remain compulsorily within the Irish social security system for the first 52 weeks. It may be possible to get a Certificate of Retention to retain the individual in the Irish system beyond this 52-week period.

Where an individual is assigned to Ireland from a country that is not within the EEA and which is not a country with which Ireland has a bi-lateral Social Security Agreement, it is possible to apply for a 52-week PRSI exemption. In order for this exemption to be issued the employee must be covered for Social Security under legislation of another State while posted to Ireland. On expiry of the 52-week exemption period, the employer and employee become liable for Irish social insurance.

Multi State Workers

Individuals working in two or more Member States of the EU pay social security where they are habitually resident provided that a substantial part of their activities are carried out in the state of habitual residence. An individual will be considered habitually resident in the place of normal residence or centre of vital / family interests). Substantial part of their activities is defined as 25% the working activity and/or remuneration. If this test is not satisfied, the individual will be insurable in the employer’s jurisdiction. The insuring state will issue a “multi state” A1 certificate so that social security will only arise in that jurisdiction.

PAYE Modernisation and Global Mobility

Real time payroll reporting was introduced with effect from 1 January 2019. The underlying premise of PAYE Modernisation is that Revenue are to be informed about pay and/or benefits being provided to employees “on or before the making of a payment”.

In the case of foreign employees working in Ireland for whom a shadow payroll is being operated this can pose challenges for employers for a number of reasons:

  • The employee continues to be paid in his/her home country. As such, local Irish payroll may only have relevant information regarding payments made to the employee after they are paid in their home country.
  • In some cases, the employee’s compensation may not fluctuate month to month. However, the income taxable in Ireland can fluctuate due to exchange rates.
  • Expat employees are generally taxable in Ireland by reference to Irish workdays during their assignment period.

Revenue have provided some guidance for PAYE modernisation in the context of globally mobile employees.

Payroll submissions relating to shadow payroll cases should be aligned to the Irish employer’s pay date. For example, an inbound assignee is paid in his home country on the 14th and 28th of the month. ABC Ltd pays the local employees on the 25th of the month. The inbound assignee’s pay details for the 28th of July and the 14th of August are to be included in ABC Ltd’s payroll submission on 25th August.

Employers should include a best estimate of benefits and allowances provided to inbound assignees in the monthly payroll submission. At a minimum employers should be reviewing these items on a quarterly basis. Where an adjustment is required, the adjustment should be included in the following payroll submission.

For example, for benefits provided in the April to June period, a best estimate should be entered each month with a review on no less than on a quarterly basis (in this scenario in July) with any adjustments put through as part of the July submission.

Inbound assignees are generally taxable in Ireland by reference to Irish workdays during their assignment period. An employer should be regularly monitoring Irish workdays and again a best estimate should be used to prepare the calculation for each period. Where an adjustment is required, the adjustment should be included in the following payroll submission.

A “tick the box” field is available for shadow payrolls which is an indicator to Revenue that corrections are more likely.

Outbound assignees will be treated in a similar manner to inbound assignees, i.e. employers are to include a best estimate of non-locally delivered items in the monthly payroll submissions and undertake a regular review of benefits.

Equity & Global Mobility

Share Options

Revenue’s approach to the treatment of share options in cross-border situations is set out in Chapter 3 of the Share Schemes Manual and essentially follows OECD principles.

Article 15 of the OECD Model Tax Convention deals with the taxation of income from employments. Under Article 15 the State of residence may tax gains arising from stock options if at the date when gains arise, the employee is resident of that State.

The Article allows the other State to tax the share option gains if the employment in respect of which share options were granted was exercised in that State. Where both States tax the same element of the income or gain the elimination of double taxation article requires the State of residence to give relief from double taxation. In Ireland this is done by crediting the source State’s tax against the Irish liability.

In order to allocate taxation rights under Article 15 the period from date of grant to date of vesting is key. Any “blocking periods” after date of vesting are not relevant for this purpose.

The method of apportionment is based on:

Workdays spent in Ireland from date of grant to date of vest

Total workdays from date of grant to date of vest

The net effect is that a charge to Irish tax can arise:

  • when a stock option is exercised even though the option was granted prior to the individual taking up residence in Ireland
  • where the individual is no longer resident in Ireland for income tax purposes at the time the share option is exercised, assigned or released

The level of Irish workdays during the vesting period will determine the extent of the gain which may be liable to Irish tax.

Restricted Stock Units

Restricted Stock Units (RSUs) are a very common element of compensation in multi-national companies. They are in effect a promise at the start of a performance period (often 3 - 4 years) that if the performance conditions are satisfied and the employee remains employed with the company the RSU will vest and be exchanged for shares, or sometimes cash.

Revenue issued guidance on the taxation of RSUs in cross-border cases some years ago. The Revenue position is that the RSU is taxable at vest if the individual is resident in Ireland at the vesting date. The RSU is not taxable if the individual is not resident in Ireland at the vesting date.

In most other jurisdictions, RSU income is taxed on an earnings basis by reference to the grant to vest period i.e. the period from the date the RSU is granted to the date it vests which is when the employee will receive the shares or cash. For globally mobile employees who are resident in Ireland at date of vest a marginal Irish rate of up to 52% together with the foreign liability on the sourced RSU gain means an individual could end up paying tax on almost the full value of the shares received.

In recognition of this Revenue is prepared to allow relief on a real-time basis for any foreign tax once there is a valid entitlement to credit relief under the relevant Double Tax Agreement.

The procedure is:

  • Establish the Irish effective rate of tax on gross income
  • Establish the foreign effective rate of tax on the RSU subject to foreign tax
  • Allow credit for the amount of the RSU subject to foreign tax at the lower effective rate

The credit may be granted by manually increasing the tax credits specified on the employee’s tax credit certificate.

The employee will be required to file a tax return within three months of the end of the tax year instead of the usual filing deadline. Evidence of deduction of foreign tax at source must be provided if requested.

Special Assignee Relief Programme (SARP)

The Special Assignee Relief Programme (SARP) was first introduced in 2012. The aim of the relief was to reduce the cost to employers of assigning skilled individuals from abroad to take up positions in Ireland thereby creating more jobs and facilitating the development and expansion of businesses in Ireland. Individuals coming to Ireland on an assignment or as a local hire can potentially qualify for this relief

The relief originally applied for arrivals in the 2012 – 2014 tax years. It was then extended by Finance Act 2014 to apply to arrivals in 2015, 2016 and 2017 and further extended by Finance Act 2016 to include individuals assigned to work in Ireland up to the end of 2020.

A qualifying employee may make a claim for 30% of their total compensation (including bonuses, BIKs and share remuneration) over a threshold of €75,000 to be excluded from income tax. The exempt amount remains liable to USC and PRSI. The relief can be claimed for a maximum of 5 consecutive years. There is no requirement to be non-domiciled therefore the relief is available to Irish citizens where all other conditions are met.

Prior to Finance Act 2018 once an employee’s basic compensation was €75,000 or more, then all income (including benefits-in-kind, bonuses etc.) could be included when calculating the relief.

Finance Act 2018 introduced an upper threshold for the purposes of calculation the relief. There will now be a €1m ceiling on eligible income for SARP which will apply from:

  • 2019 for individuals who arrive into Ireland on or after 1 January 2019
  • 2020 for existing beneficiaries of the relief who arrived into Ireland on or before 31 December 2018.

Conditions

  • The individual claiming the relief must be tax resident in Ireland in the year of claim
  • The individual must not have been tax resident in Ireland for the 5 tax years immediately preceding the year of his/her arrival in Ireland to take up employment
  • The employee must have been working for their employer (or associated company of the employer) outside of Ireland for the 6 months immediately prior to arrival in Ireland
  • In order to qualify for the relief, the employee’s basic compensation must exceed €75,000.
  • The employee must work in Ireland for a minimum of 12 consecutive months from the date of first arrival in Ireland
  • The employee’s employer (or associated company) must be resident in a country with which Ireland has a Double Taxation Agreement or Information Exchange Agreement


For the purposes of determining the €75,000 level of basic compensation the following are excluded:

  • Benefits-in-kind e.g. company cars, medical insurance
  • Bonus and commission payments
  • Share options and other share-based remuneration

Where part of the employment income qualifies for a foreign tax credit this income must be excluded for the purposes of calculating SARP relief.

If in the year of arrival or year of departure, a relevant employee holds an employment for less than an entire tax year, the threshold will be reduced proportionately.

Example

Take the case of an employee who arrives on 1 July 2018 and earns employment income of €275,000 (for the period).

The threshold is adjusted to €37,500 (€75,000 x 6/12) therefore the amount excluded from tax is €71,250 (i.e. €275,000 - €37,500 = €237,500 @ 30%).

This would result in a tax saving of €28,500 (i.e. €71,250 at 40%)

Other benefits of SARP

In addition, employers will be able to provide one return trip for the employee and family to the overseas country they are connected with, as well as school fees of up to €5,000 per annum per child, without creating an additional tax cost.

Reporting Requirements

An employer Certification of Eligibility for the relief (SARP 1A) must be submitted to the Irish Revenue. Up until 31 December 2018 this form had to be submitted within 30 days of the claimant’s arrival in Ireland. With effect from 1 January 2019 the deadline for submission of the form has been extended to 90 days from date of arrival in Ireland.

Previously Revenue accepted a pragmatic approach in relation to late submission of the Form 1A once its wasn’t unreasonable late but in recent times Revenue are applying the legislation strictly and denying claims for SARP where the Form 1A was submitted outside of the required timeframe.

The employer company must also report all employees claiming SARP in the tax year on a SARP Employer Return and submit this before 23 February after the end of that tax year.

Individuals claiming SARP relief are deemed to be chargeable persons and must therefore register for Income Tax and submit a Form 11.

Foreign Earnings Deduction

The Foreign Earnings Deduction (FED) was reintroduced in 2012 and, subject to meeting certain conditions, provides tax relief to employees who are tax resident Ireland but who spend time working in specified countries. Initially the relief applied to the BRICS countries only - Brazil, Russia, India, China and South Africa. The list of qualifying companies was expanded in 2013 to include Egypt, Algeria, Senegal, Tanzania, Kenya, Nigeria, Ghana and the Democratic Republic of Congo. From 1 January 2015, the list also includes Japan, Singapore, South Korea, Saudi Arabia, the UAE, Qatar, Bahrain, Indonesia, Vietnam, Thailand, Chile, Oman, Kuwait, Mexico and Malaysia. From 1 January 2017 Pakistan and Columbia were added to the list. These countries are referred to as “relevant states” for the purposes of the FED.

A deduction will be available for employees working temporarily overseas in the relevant states. The deduction is capped at a maximum amount of €35,000 and applies for the tax years 2012 through to 2020. FED provides relief from income tax but not the Universal Social Charge (USC) or PRSI

How to qualify

The basic condition is that the employee must have worked a minimum of 30 days in any of the relevant states in a continuous 12-month period. The 12-month period does not need to fall within a single tax year. These qualifying days must form part of a period of at least three consecutive days spent working in any of the relevant states.

Time spent travelling to/from a relevant country can be included for any claims. This means that the day of arrival in the relevant state can be counted, provided the individual left Ireland the previous day and the day of departure from the relevant state can be counted, provided the individual does not arrive back in Ireland until the following day.

Example:

An individual leaves Ireland at 2pm on Monday and arrives in China at 8am on Tuesday and leaves to return to Ireland at 8pm on Thursday, arriving back in Ireland at 3am on Friday. Each of the days Tuesday to Thursday may be counted as days the whole of which are spent in China.

Saturdays, Sundays and public holidays throughout the whole of which the individual is present in a relevant state and which form an unavoidable part of a business trip to a relevant state, may be counted as qualifying days.

Calculating the relief

The amount of the deduction (i.e. the amount of income that can be relieved from tax) is the lesser of:

  • €35,000, or
  • The specified amount.

The specified amount is calculated using the following formula:

D x E

F

Where –

D = the number of “qualifying days” worked in a “relevant state” in the tax year;

E = the income from employment in the tax year (including share options derived from the employment less any qualifying pension premiums but excluding tax deductible expense payments, BIK’s, termination payments and payments payable under restrictive covenants);

F = the total number of days that the relevant employments is held in the tax year

The “specified amount” is reduced by any amount of income earned on “qualifying days” in respect of which double taxation relief is available in Ireland under a Tax Treaty i.e. an employee cannot get treaty relief and FED on the same income

Example:

An employee who is a tax resident in Ireland spends 120 qualifying days working in a relevant state. The employment income for the year amounts to €100,000. The FED is calculated as follows:

Specified amount:

€100,000 x 120 / 365 = €32,877

Total employment earnings €100,000

Less deduction (€32,877)

Taxable income €67,123

Tax savings at 40% €13,151

Claiming the relief

The deduction is claimed at the end of the tax year when making an annual return of income for that year.

Transborder Relief

An increasing number of Irish individuals commute daily or weekly to employments in Northern Ireland/UK or mainland Europe.  Irish resident and domiciled individuals are liable on to Irish tax on worldwide income however these individuals may be in a position to avail of transborder relief in respect of their employment income.  The practical effect of the relief is that no Irish will be due, and the individual will only pay tax in the country in which they are working on the income from that employment.

 

The relief is subject to a number of conditions which are outlined below:

  • The individual must have earnings from a qualifying employment (i.e. an employment held outside Ireland in a tax treaty country which is held for a continuous period of at least 13 weeks in a tax year).

  • The duties of the qualifying employment must be exercised wholly outside Ireland in a tax treaty country. In determining whether the duties of a qualifying employment are performed wholly outside the State, any duties performed in the State which are merely incidental to the performance of the duties outside the State, are regarded as performed outside the State.

  • The income from that employment must be subject to tax in the other country and must not be exempt or relieved from tax in that country.

  • The foreign tax due on the income must have actually been paid to the relevant authorities and must not be repaid or be eligible to be repaid.

  • For every week during which an individual works outside Ireland in a qualifying employment, he or she must be present in Ireland for at least one day in that week.

Where the conditions outlined above are met, an individual can have his/her income tax liability for a particular tax year reduced to what is known as the specified amount.

The specified amount is calculated as follows:

  • Calculate the income tax that would be payable for a tax year under normal rules, excluding credit for any foreign tax paid and
  • Reduce this amount by the proportion that the total income (excluding the income from the qualifying employment) bears to total income (including the income from the foreign employment).

Effectively a liability to Irish tax should only arise if the individual has non-qualifying employment income as the following example illustrates:

An individual, single and tax resident in Ireland, who qualifies for Transborder Workers, relief, has employment income of €50,000 and investment income of €10,000. His total tax liability under normal Irish rules is €13,940.


Transborder Relief is calculated as follows

€13,940 x €10,000/€60,000 = €2,323

Therefore, the individual’s income tax liability is reduced from €13,940 to €2,323 as a result of the relief.

An individual should make the claim for the relief on their annual income tax return. The relief can be claimed on either a Form 12 or Form 11, as appropriate.  Revenue may request evidence of foreign tax paid in support of the claim

The relief does not apply to employment income which qualifies for split-year treatment or the remittance basis of assessment. It also does not apply to income paid by a company to one of its proprietary directors or to the spouse of one of its proprietary directors.