The European Commission has officially asked Ireland to amend its legislation on termination payments, as it discriminates against individuals who work in group companies in other Member States according to the Commission.

Tax relief is available on certain payments on retirement or removal from office or employment. A foreign service exemption for termination payments was in place under section 201 TCA 1997 but was removed by Finance Act 2013.

The Commission feels that a higher tax burden is placed on individuals who worked in group companies in other EU/EEA Member States because Ireland’s tax relief on termination payments does not take into account the years of service in group companies in other Member States and EEA countries. The Commission considers that such rules run contrary to the free movement of workers set out in the Treaties and the European Economic Area Agreement.

The Commission’s request takes the form of a Reasoned Opinion. If Ireland fails to comply within two months, the Commission may refer the matter to the European Court of Justice.

For full details see the Commission’s website.