Tax Update w/c 6th March 2017

Tax Partners Crowe horwath Ireland

A brief summary of the recent tax updates from Revenue.

Paternity Benefit

Paternity benefit is payable in respect of births and adoptions that occur on or after 1 September 2016 where an individual is covered by PRSI. This income is chargeable to income tax but is exempt from PRSI and the USC.

Revenue recently issued guidance in relation to the taxing of this benefit. In PAYE cases, the employer will not be required to include the benefits as part of pay for PAYE purposes. Revenue will collect the tax due on this income by adjusting the tax credits and standard rate band and issue a revised certificate of tax credits and rate bands to the employer.

Self-employed individuals should return the benefit as taxable social welfare income.

PAYE Exclusion Order

Employers must deduct tax at source under the PAYE system from employment income unless Revenue has issued a PAYE Exclusion Order removing this obligation.

Revenue recently updated the Tax & Duty Manual for PAYE Exclusion Orders in relation to the following categories:

  • Private sector occupational pensions for residents of non-DTA countries
    • These are usually chargeable to tax in Ireland under Schedule E however where an individual is not resident in Ireland and is resident in a country with which Ireland has a DTA, then the pension will be taxable solely in the country in which the individual is tax resident.
  • Medical appointments
    • Salary from appointments to medical institutions by doctors in private practice partnerships no longer qualifies for Exclusion Orders.
  • Distributions ARF’s, AMRF’s, vested PRSA’s and taxable lump sum from retirement benefit schemes.
    • Distributions from the above do not qualify for Exclusion Orders as Revenue do not deem the payments as pension.

Foreign Earnings Deduction

The Foreign Earnings Deduction (FED) provides for relief from tax on certain emoluments of individuals who are resident in Ireland for tax purposes but who spend significant amounts of time working in another country.

The countries to which the relief applies are Brazil, Russia, India, China, South Africa, Egypt, Algeria, Senegal, Tanzania, Kenya, Nigeria, Ghana, the Democratic Republic of the Congo, Japan, Singapore, the Republic of Korea, Saudi Arabia, the United Arab Emirates, Qatar, Bahrain, Indonesia, Vietnam, Thailand, Chile, Oman, Kuwait, Mexico and Malaysia.

The relief is provided by way of an apportionment of an employee’s emoluments relating to the number of qualifying days worked in Ireland over the number of days of the employment held in that tax year.

The maximum amount of emoluments which can be relieved in any tax year is €35,000. The minimum number of qualifying days is 30. The charge to PRSI and USC is not relieved.

Revenue has updated the legislation to include the following changes:

  • FED has been extended to include the years 2018, 2019 and 2020
  • Columbia and Pakistan have been added to the list of qualifying states
  • The number of qualifying days has been reduced from 40 to 30

Tax Deduction Registration Fees

Registration fees paid by certain health and social care professional to the Health and Social Care Professionals Council may be tax deductible. Revenue have updated the list to include medical scientists, physiotherapists and social care workers. The full list of approved registration boards can be found on Revenue’s website

Irish Real Estate Funds – Withholding Tax

An IREF is an Irish regulated investment fund in which 25% or more of the market value of the fund’s assets derives, directly or indirectly, from what are referred to as IREF Assets. IREF Assets are defined as land in the State and any other assets used in carrying on an IREF Business.

Finance Act 2016 introduced a new tax regime for IREF where withholding tax (at a rate of 20%) applies to distributions and redemptions out of IREF profits.

Where unit holders have made an appropriate declaration there is no withholding tax applied.

Revenue have recognised that as the IREF regime is new, it will take time to get the appropriate declarations in place. Therefore, IREF withholding tax need not be applied in the following circumstances:

  • IREF taxable events which occur before 30 June 2017
  • A unit holder who would not be a specified person if the appropriate declaration was in place
  • Where the completed appropriate declaration is in place by 1 July 2017

If you have any questions or queries, please contact a member of our tax team.