New Revenue Commissioners Rules tighten Irish remote worker tax collection. Irish employers have to stick to new Income tax and USC collection rules from non-resident employees. New regulations came into force on July 1, 2023. For employees working outside Ireland, their country of residence will now determine the tax collection method.
You can collect income tax and USC from your non-resident employee only on the portion of the duties exercised in Ireland provided you obtain prior authorisation from the Revenue of Ireland through the MyEnquiries portal. Employers who do not obtain this approval will have to withhold these taxes for all of an employee’s pay.
Previously, employers could withhold taxes just for the number of workdays that non-resident employees spent in Ireland, and they did not need formal approval from Revenue to do so. The Revenue Commissioners have said that the new rules are necessary to ensure that Ireland receives its fair share of tax revenue from remote workers.
A person is only considered a tax resident of Ireland if they spend 183 days in Ireland every tax year or at least 280 days over two consecutive tax years.
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Income tax is a tax collected on the worldwide income of an individual who is resident and domiciled in Ireland. It is one of the main sources of revenue for the Irish government. In 2022, €30.7 billion of income tax was collected, representing around 37% of the total tax yield.
Irish Income tax is calculated on a progressive basis, which means that the higher your income, the higher the percentage of tax you will pay. There are two rates of income tax in Ireland:
Standard rate: 20%
Higher rate: 40%
Learn more about how to calculate and pay income tax in Ireland!
USC – Universal Social Charge
Universal Social Charge is a tax payable on all employees’ income including notional pay – all non-monetary taxable benefits you give to your employees e.g. company cars, company paid private health insurance, company paid accommodation. It was introduced to help fund a variety of social welfare and public services, including education, healthcare, and social welfare payments. The USC is paid by all individuals who have an income above a certain threshold, regardless of their employment status. The standard rate of USC for 2023 is as following:
- 0.5% on the first €12,012 of income;
- 2% on the next €10,908;
- 4.5% on the next €47,124.
There are also reduced rates of USC for certain individuals, such as those with disabilities and those who are over the age of 70.
The USC is calculated on a weekly or monthly basis and is deducted from your income before you receive it. Employers deduct the USC from employee pay and pay it to Revenue. Self-employed persons need to pay the USC themselves on an estimated basis.
To Sum Up on New Irish Remote Worker Tax Guidelines
In conclusion, the new rules are designed to address the increasing number of Irish residents who are working remotely from abroad. Employers must obtain prior authorisation in writing from Revenue before they can withhold income tax and USC from the pay of non-resident employees for time spent working in Ireland. If employers do not obtain this approval, they will have to withhold these taxes for all of an employee’s pay.
If you’re unsure about your tax obligations, don’t hesitate to ask Chern & Co experts. We are an authorised tax agent with Revenue and are always ready to assist you in remaining compliant with the latest Irish tax legislation.