Although employees are liable for taxes and universal social charge on wage subsidy payments, they are not taxable in real time through Pay As You Earn during the subsidy scheme period, the Irish Revenue Commissioners said.
The Revenue Commissioners published an updated FAQ April 16 on the recently announced changes to the temporary wage subsidy scheme (TWSS), clarifying that the subsidy payments are not considered pensionable pay and that an employer may not deduct the TWSS payments made to its employee when computing its income or corporation tax liability.
Leeann O’Kelly, press manager for the Revenue Commissioners, told Tax Notes that the TWSS is not taxable until the end of the year and will be taxed in “manageable amounts” when the agency evaluates the employee’s tax position. She said employees may use available tax credits or claim health expenses to reduce any taxpayer hardships. The Department of Finance did not provide comments before press time.
Finance Minister Paschal Donohoe announced April 15 an update to the TWSS to provide additional income support to eligible employees to mitigate the effects of the COVID-19 pandemic. The changes affect employees who earn less than €500 per week or €31,000 annually and those earning above €586 per week or €38,000 annually. According to the updated FAQ, the TWSS has also been expanded to employees residing overseas who are exercising an employment contract in Ireland.
In an April 16 letter to Revenue Commissioners Chair Niall Cody, Donohoe said an 85 percent subsidy will be payable to employees whose average net weekly pay does not exceed €412, and that employees who earn between €412 and €500 per week will receive a subsidy of up to €350 per week. The subsidy percentage was originally capped at 70 percent of an employee's net weekly pay.
As originally announced March 24, the maximum subsidy for employees with earnings of over €586 per week will be €350 a week. However, a tiered approach will apply, with payments based on the gross amount paid by the employer. The TWSS is in effect from March 26 and is expected to last approximately 12 weeks.
In its statistical update April 9, the Revenue Commissioners said over 41,000 employers are registered for the TWSS and over 219,400 employees have received at least one payment under the scheme. According to the agency, the value of the payments under the scheme amount to approximately €155 million, including €14.8 million in tax and universal social charge made by employers through payroll.