The Irish Revenue Commissioners are calling the COVID-19 pandemic a case of force majeure, saying that a taxpayer will not suffer negative tax repercussions for being present in Ireland because of travel restrictions.
Under Ireland's residency rules, individuals are resident for tax purposes if they are in the country for 183 days or more in a tax year; or for a total of 280 days or more in a tax year and the previous tax year, with a minimum of 30 days in each year.
Updated guidance, published by the Revenue Commissioners April 6, says that the tax authorities will now consider restricting circumstances caused by COVID-19 when determining a taxpayer's residency. The guidance says that COVID-19 is an “extraordinary natural occurrence or an exceptional third party failure or action — none of which could reasonably have been foreseen and avoided,” which triggers tax leniency under the force majeure exception. The tax authorities emphasized that taxpayers should keep records describing the circumstances surrounding COVID-19 restrictions that can be provided to the tax authorities upon request.
Social Democrats co-leader Catherine Murphy expressed concern that the guidance will allow tax exiles to circumvent residency rules and avoid paying taxes.
“The kind of social solidarity needed to not only get us through this crisis but also to help us rebuild our society and economy is one reliant on taxes being fairly collected and used to secure a health system and an income floor below which we will not allow our people to fall. It is a system where the social contract will be more important than ever, and we should not tolerate a system whereby some wealthy individuals can effectively ignore that contract,” Murphy said in an April 5 statement.
In March the Revenue Commissioners published guidance that said the tax authorities will disregard for corporation tax purposes an individual's presence in Ireland because of COVID–19 travel restrictions, as well as the number of days an individual who would have otherwise been present in Ireland is outside the country because of COVID-19 travel restrictions, for a company for which the individual is an employee, director, service provider, or agent.
The updated guidance also includes information on the tax treatment of reimbursements from an employer to an employee for holiday or flight cancellations, which will provide aid to employees returning to Ireland. A benefit in kind will not arise if the employee under this scenario is “integral to the business,” was required to return to Ireland to deal with the COVID-19 crisis, and the costs incurred are reasonable, the guidance says. A benefit in kind is any noncash benefit that has monetary value provided for an employers' employee.
A benefit in kind will also not arise if employers provide equipment to employees to set up a remote workspace, including laptops, printers, scanners, and office furniture.Also, if employees are required to work from home in Ireland as a result of COVID-19, the employees will still be able to claim the trans-border workers' relief, if the other conditions are met. The trans-border workers' relief applies to tax residents in Ireland. To qualify, the taxpayer must work in a country with which Ireland has a tax treaty, pay tax in the other country, and be present in Ireland for at least one day for each week they are working.
The Revenue Commissioners also said they will not enforce Irish payroll obligations for foreign employers if an employee who was working abroad before the pandemic must relocate to Ireland because of it and perform work for the foreign employer.
On April 3 the OECD published guidance analyzing the international tax treaty rules to consider their implications for extraordinary measures that governments have had to take in response to the COVID-19 crisis. The OECD has advised that the coronavirus pandemic may have temporarily changed the way cross-border employees work, but it is unlikely to lead to permanent establishment and tax residency changes under existing tax treaties.
HM Revenue & Customs issued a statement April 6 that says existing legislation and guidance for PEs already allow for flexibility for businesses activities. "We do not consider that a non-resident company will automatically have a taxable presence by way of permanent establishment after a short period of time," HMRC said.