825A Reduction in income tax for certain income earned outside the State

Summary

The section provides income tax relief for individuals who are resident in the State but who work outside the State. It applies to those who commute on a daily or weekly basis to their place of work outside the State and who pay tax in the other country on the income from their employment. In particular, the relief applies to cross-border workers who commute daily to work in Northern Ireland as well as others who travel to the UK and elsewhere to work, returning at weekends.

The relief effectively removes the earnings from a foreign employment from liability to Irish tax where foreign tax has been paid. In simple terms, the effect of the measure is to ensure that Irish tax only arises in such cases where the person has other income as well as income from a foreign employment.

Details

Definitions

(1) “qualifying employment” is defined as an office or employment held outside the State in a country with which Ireland has a double taxation treaty and which is held for at least 13 weeks in a tax year. Excluded are all State employments, as are employments with any statutory bodies established in the State.

“the specified amount” provides the formula for the relief. Basically, the income tax payable for a tax year before credit is given for any foreign tax paid is reduced in the proportion that the total income excluding foreign employment income bears to the total income for the year.

Exclusions

(2) & (5) The relief is not to apply in any case where the income is subject to the “remittance basis” of taxation. It is also not to apply to income which is subject to the “split year” treatment. This applies where a taxpayer in the year of arrival in, or departure from, the State is deemed resident for part of the year only and is thus already entitled to favourable tax treatment. The relief is not to apply to income payable by a company to one of its proprietary directors or to the spouse of one of its proprietary directors. Finally, relief is not available where an individual claims either the foreign earnings deduction or the seafarer’s allowance in respect of income from a qualifying employment.

The relief

(3) Subject to meeting certain conditions, a taxpayer may have his or her income tax liability for a particular tax year reduced to the specified amount where liability would otherwise exceed that amount.

One of the conditions is that the individual must have earnings from a qualifying employment. Another requires that the duties of the qualifying employment must be exercised wholly outside the State in a country with which Ireland has a double taxation agreement. Also, the income from that employment must be subject to tax in that country. It must not be exempt or relieved in any way and the tax must have actually been paid to the authorities. A final condition requires that for every week during which an individual works outside the State on a qualifying employment, he or she must return to the State for at least one day in that week.

(4) 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.

No credit for foreign tax

(6) Where a taxpayer is given relief under the section no credit is to be given for the foreign tax paid on the income of the qualifying employment.

Presence in State for a day

(7) For years up to and including 2009 an individual is regarded as being present in the State for a day if he or she is present in the State at the end of the day i.e. midnight.

For 2010 and subsequent years an individual is regarded as being present in the State for a day if he or she is present in the State at any time during the day.

(8) Income from the qualifying employment shall be deemed not to include any amount paid in respect of expenses incurred wholly, exclusively and necessarily in the performance of the duties of the qualifying employment.

The following examples illustrate generally how the relief works —

Relevant Date: Finance Act 2019