itr nov 2008 cforbes

8/3/2019 ITR Nov 2008 Cforbes

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Introduction

In recent years, Ireland and other Old World

countries have seen their competitiveness

eroded by low labour cost economies such as

those in Central and Eastern European countries

(e.g., Poland, Slovakia, and the Czech Republic)

and the emerging Asian superpowers o China

and India.

It is the Old World multinational companiesthat are in the vanguard seeking to signicantly

reduce their operating costs by investing in these

countries. However, these companies know

that setting up shop and training local sta

requires relocating signicant sta numbers to

these countries. Irish companies need to assign

their highly-skilled and educated Irish talent to

these locations either on a short or long-term

basis, in order to make sure that their investment

in these countries starts well and that the local

workorce is adequately trained a reverse o the

trend in the latter part o the last century.

Budgetary planning is critical to the success term

o any international assignment, long or short.

There is some evidence to suggest that the costs

o more traditional long-term assignments

(e.g., 3-5 years duration) can be multiples o

an employees base salary. This is due to the

act that employers must pay or assignment

related benets, such as cost o living

allowances, housing allowances, dependent

tuition and cross-cultural training, not to mention

the potentially increased employment tax costs

which they may be asked to bear.

This article sets out the tax and social security

issues o which Irish employers must be aware

when planning the assignment o their Irish sta

to these overseas locations.

The article deals with:

How an employees tax residence position is

the key driver in ascertaining the ta x position

in Ireland and abroad.

What Irish PAYE and oreign wage withholding

tax obligations may all on Ir ish employers.

Relies available with regard to subsistence

expenses.

How the taxation o share options and

pension contributions in a cross-border

context can add complexity or Irish

employees and employers.

How tax equalisation policies aim to solve

some o the above issues.

The social security position or the assignees.

Trends in International AssignmentsOver the course o this article, I will deal with

the international assignment method o

moving Irish talent abroad within a multinational

organisation. This generally involves the

employee continuing to be employed and paid

by the Irish employer while physically working

abroad or the oreign sister company or a

period o time (irrespective o its length). This is

the most common method.

Many surveys on international assignmentshave shown that the number o international

assignments continues to increase. This is

mainly due to the growing use o short-term

assignments over the past ew years. Short-term

Outbound Assignments:Tax Considerations orIrish EmployersColin Forbes

Senior Manager, Deloitte

Outbound Assignments: Tax Considerations or Irish Employers 69July 2011


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assignments are becoming popular because they

are generally more cost-eective than long-

term assignments and they allow companies to

transer skill sets quickly and more easily.

There is also evidence to suggest that Irish

employees, many o whom are concerned about

the impact that a long-term assignment abroad

would have on their partners careers, and on

their amilies, are now less willing to accept

such assignments abroad. Indeed, due to the

availability o cheap fights to most o the Central

and Eastern European business hubs, Ir ish

employees can now work Monday to Friday in

these locations and travel

home to visit their amilies at

weekends.

The alternative localised

method, where the employee

becomes an employee o the

host entity, has historically

been the avoured approach.

However, employers do not

wish to lose the talent that

they have nurtured and

are keen to repatriate their

international assignees at the

end o assignments in order to

keep growing their domestic

businesses.

Irish Tax Residence

Considerations

Beore planning any type o

international assignment,

the rst step is to ascertain how the employees

tax residence position, both in Ireland and the

host country, will be impacted. The Irish tax

treatment o an employees income earned while

working abroad will dier, depending on whether

the employee continues Irish tax residence or

breaks it.

Continuing Irish tax residence

Short-term assignments where the employee

is not abroad long enough to break Irish tax

residence are becoming more common. This

category o assignee continues to meet the Irish

tax residence rules under section 819 o the

Taxes Consolidation Act (TCA) 1997 i.e. they

are present in Ireland or:

183 days or more in the current tax year; or

280 days or more in the current and preceding

tax years.

An assignment abroad which, or example, lasts

or between a year and 18 months may mean that

Irish tax residence is not broken, depending on

the date the assignment is expected to star t.

I Irish tax residence is not broken, the employee

must continue to pay Irish income tax on his/her

employment income.

Irish PAYE requirements

I the employee remains an Irish employee

and will not break Irish tax residency, then the

Irish employer is obliged

to continue deducting

Irish PAYE on his/her

employment income.

For international

assignments, care must be

taken by the Irish employer

with regard to the taxation

o cash/benets which

may be delivered in the

host country by the oreign

sister company. The Irish

employer must subject all

assignment-related cash/

benets (except qualiying

travel and subsistence

expenses see below),

no matter which company

delivers them, to Irish PAYE.

Thereore, it is crucial that

Irish employers have adequate internal systems

in place to ensure that host country delivered

items do not all outside the Irish PAYE net.

Foreign tax considerations

I the employee is assigned to a country with

which Ireland has agreed a Double Taxation

Agreement (DTA), either o the ollowing will

happen:

1) Exemption rom host country income tax:

I the conditions o the Employments

article o the relevant DTA are met, the

employee may be exempt rom income

tax in the host country (see below or

comments in relation to withholding tax);

or

2) The employee is liable to income tax in

the host country, but a oreign tax credit

can be claimed against the Irish tax on

the double-taxed income (see below or

comments in relation to potential double

withholding tax issues).

Employers need to be aware that i the employee

nds him/hersel in the situation at 1) above,

wage withholding tax may still be required to be

operated in the host country, even though an

exemption rom income tax is available under

the relevant DTA. A reund o the withholding

tax would need to be claimed in this instance.

Alternatively, other countries may require an

application to be made to the authorities beore

allowing an exemption rom wage withholding

tax.

I the employee nds him/hersel in the situation

at 2) above, but happens to be working in a

country with which Ireland does not have a DTA,

the Irish Revenue will concessionally allow a

deduction o the income tax paid in the other

country against the oreign income (Revenue

Guide Res.1 Going to Work Abroad), which

clearly is more costly than the oreign tax credit

method.

Double withholding tax

As mentioned above, in certain circumstances,

an Irish employee on a short-term assignment

may remain Irish tax resident but may also trigger

tax residence in the other country (under its

domestic tax rules) e.g.:

John is an employee o ABC Ltd., an Irish

resident employer.

He is assigned to ABCs subsidiary in Poland

or a nine-month period rom 1 January 2008

to 30 September 2008.

John is resident in Ireland and Poland in 2008.

Irish PAYE must continue to be paid.

Polish withholding tax must also be paid by

the employee (not employer) under Polish

domestic provisions.

As mentioned above, a double taxation event

is avoided through the application o the

Elimination o Double Taxation article o the

Ireland/Poland Double Taxation Agreement

(Article 24). John would be regarded as a

resident o Ireland under Ar ticle 4 o the DTAand, according to Article 24, could claim a oreign

tax credit on his Irish tax return or the Polish

income tax suered on the same income.

Budgetary planning is

critical to the successo any international

assignment, long or

short-term. There

is some evidence to

suggest that the costs

o more traditional

long-term assignments

can be multiples o

an employees base

salary.

70 Outbound Assignments: Tax Considerations or Irish Employers IrishTax Review


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However, under Irish and Polish domestic

withholding taxrules, withholding tax must be

operated simultaneously in both jurisdictions.

Clearly, this is an inequitable

situation or the employee,

who would then be let to wait

several months until the tax year

nished in order to claim the

oreign tax credit on his/her Irish

tax return.

There is no current Irish tax

legislation/practice in place

to counteract this cash-fow

nightmare. However, an Irish

employer could consider making

an application to Revenue

to oset the host country

withholding tax against the Irish

PAYE each pay period.

The above raises dicult

questions or the Irish employer,

such as:

1) Who will pay the income

tax liability in the oreign

country (i there is any)?

2) I tax is paid on behal o

the employee in the oreign location by

his/her employer, and a oreign tax credit

is claimed in Ireland by the employee, will

the employer be reunded the credit or

the oreign tax?

3) I an exemption rom income tax in the

oreign jurisdiction is available, does this

need to be applied or?

The use o internal relocation policies such as

a tax equalisation policy (see below) can

assist companies in dealing with these dicult

questions.

Breaking Irish tax residence

Although long-term assignments (i.e., when

an employee breaks Irish tax residence) are

becoming less common, they are still used by

Irish employers or assignments to countries

such as China or the US.

I an employee moves abroad to work on an

international assignment and he/she breaksthe Irish tax residence rules mentioned above

during his/her time abroad, then the employee

will be able to avail o split year residence

treatment under s822(1)(a)(ii) and (2)(b) TCA

1997. This treatment has the eect that his/her

employment income will not be taxable in Ireland

rom his/her date o departure rom Ireland.

Irish PAYE

requirements

I an employee remains

on the Irish payroll andis able to avail o this

split-year residence

treatment, then the Irish

employer can apply or

a PAYE Exclusion Order

(under s984 TCA 1997)

to Revenue. This will

allow the Irish payroll

to discontinue PAYE

withholding.

Foreign considerations

In this scenario, even

though the employee

will not be liable to Irish

income tax, he/she is very

likely to be tax resident

and liable to income tax in

the oreign country. The

liability to oreign country

income tax and the non-

applicability o Irish income tax poses several

challenging questions or Irish employers wishing

to encourage Irish sta to relocate abroad, such

as:

Is the incidence o income tax higher/lower in

the oreign country?

Will the employee accept paying higher

taxation in the oreign country?

I not, will the employer cover the higher tax

costs in the oreign country and leave theemployee in the same tax situation as i he/

she never let Ireland?

I so, how will the employer achieve this goal?

The use o a tax equalisation policy (see

below) can assist companies in dealing with

these dicult questions.

Irish Tax Treatment o

Subsistence Expenses or

Absences Outside the StateIt is common or Irish employers to provide

employees with accommodation and per diem

payments while working abroad. Irish employers

can achieve tax savings in relation to the

provision o such subsistence payments to their

assignees while working abroad on a temporary

basis. Where an employee perorms the duties o

his/her Irish employment while working abroad

on an international assignment, allowable

subsistence expenses can be reimbursed tax-ree

on the basis o either:

Acceptable fat-rate allowances; or

Actual expenses which have been vouched

with receipts.

The amount o fat-rate subsistence allowance

varies, depending on the length o the absence

outside the State and the Civil Service

subsistence rates or the various oreign

locations. Revenues guide IT54 (Employers

Subsistence Expenses) provides urther details

regarding the amount o fat-rate subsistence

which is allowable or:

1) Assignments o up to six months; and

2) Long-term assignments o over six months.

Although, Irish employers welcome such tax

relie, careul consideration must be given as

to whether the host country will allow similar

relie on subsistence expense payments. I

not, the costs o the assignment can increase

signicantly, particularly where the host country

tax on such subsistence expenses will be paid

by the employer and a tax on tax scenario may

arise.

Share Option Scheme

Considerations

While the ocus o the above has been on the

Irish and oreign income/wage withholding tax

obligations or employers on compensation

items such as salary, benets-in-kind and

subsistence payments, a ar more complex areais the taxation o share options in a cross-border

context.

A signicant number o the Irish employees being

assigned abroad are key executives with high

skill levels and management expertise. These

key executives are likely to have been rewarded

by their Irish employers with share incentives

such as share options (which are unapproved

by Irish Revenue) in their company during their

careers, and they are likely to continue to receivethese incentives while working abroad.

The Irish and international tax rules regarding

the taxation o share options in cross-border

Under Irish and Polish

domestic withholding

tax rules, withholding

tax must be operated

simultaneously in both

jurisdictions. This is an

inequitable situation

or the employee, who

would then be let to

wait several months

until the tax year

fnished in order to

claim the oreign tax

credit on his/her Irish

tax return.



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situations are highly complex and can prove

challenging or both the employer and the

employee. Prior to the release o the Revenue

Statement o Practice (IT/1/07), the rules with

regard to the taxation o Irish employees who

let Ireland, and who were granted share options

while resident here, were clear. The gain onthe exercise o the share option was subject to

income tax in ull in Ireland under s128 TCA 1997,

even i the employee was no longer resident in

Ireland at the date o exercise (Tax Briefng 31).

However, this practice was at variance with the

principles enunciated by the OECD Committee on

Fiscal Aairs in their June 2004 report on cross-

border issues related to employee share options.

The Revenue SOP (Statement o Practice) ollows

the recommendations set out by the OECD and

will apply these recommendations to cases

where Irish employees who hold share options

are assigned abroad to countries with which

Ireland has agreed a DTA. The change in rules in

relation to outbound assignees is best illustrated

by the ollowing example:

Example

Income tax treatment where an employee is

granted an unapproved share option while a

resident o Ireland, and exercises it while a

resident o a DTA country.

Facts

1 Jan 2004 Gerry, a resident o Ireland and

employee o an Irish subsidiary

o a multinational company, was

granted a share option to acquire

10,000 shares in the parent

company at a price o1 per

share.

Under the terms o the share

option plan, the right to exercise

the share option was conditional

upon Gerry remaining in the

employment o the group until

31 Dec 2006. At that date, Gerry

acquired a vested entitlement to

exercise the share option.

1 Jan 2006 Gerry agreed to an international

assignment rom Ireland to an

aliate company in a DTA country.

Gerry continued to be an Irish

employee.

1 Jan 2008 Gerry exercised his share option at

which time the shares were worth

7 each.

Note: Gerry was a resident o Ireland rom 1 Jan

2004 to 31 Dec 2005 and was a resident o the

DTA country rom 1 Jan 2006.

Overview

The share option was granted or a period o

employment covering three years (780 working

days)1

o which:

Two years (520 working days) were spent in

Ireland;

One year (260 working days) was spent

outside o Ireland, but in a DTA country.

The charge to Irish income tax under Irish

domestic tax legislation (s128 TCA 1997) is as

ollows:

Market value o

share at date o

exercise

7 x 10,000 = 70,000

Option Price 1 x 10,000 = 10,000

Taxable Gain 60,000

However, where the terms o a DTA conne

the charge to income tax to the period(s) o

employment exercised in Ireland, the taxable

gain o60,000 is apportioned as ollows:

Taxable

amount60,000 x

520 days= 40,000

780 days

Under Article 15 o the OECD Model DTA, Ireland

may tax remuneration derived by Gerry rom

the exercise o his employment in Ireland. Such

remuneration includes benets received by

employees under share option plans.

Although the introduction o this double

taxation relie is a welcome development, the

above example poses a number o challenging

questions or Irish employers assigning key

employees abroad, such as:

What obligations does the employer have in

the host location, e.g., is withholding tax due?

Who will pay the oreign country tax?

Who pays the Irish income tax due?

How can the individuals presence in each

country be tracked in order to calculate

correctly the amount o income tax which is

due in Ireland and the other country?

Employers need to careully consider these

questions when designing their internal

tax policy (e.g., tax equalisation policy) or

international assignments.

Pension Considerations

In recent years, pension planning has jumped to

the oreront o many Irish employees minds as

they look orward to living long and active lives

during their retirement. Key to their planning is

the tax relie aorded to employee and employer

pension contributions in their Ir ish employers

pension scheme. Employees that are being

assigned abroad need to be aware o the Irish

and oreign tax implications on their pension

contributions.


I an Irish employee leaves Ireland on a

short-term basis and does not break Irish tax

residence, his/her pension contributions to the

company Revenue-approved pension scheme will

be unaected rom an Irish tax viewpoint, i.e. the

employer pension contributions will continue to

be non-taxable and the employee contributions

will continue to be tax deductible (subject to

Revenue limits).

However, the Irish employer must consider the

treatment o these pension contributions in

the host location. Clearly, i the assignment is

o a short enough duration, an exemption rom

income tax under the Employments article o

the DTA (i one is in place) may render the tax

treatment o the pension contributions a moot

point.

However, i income tax is due in the host country,

two issues may arise. These are:

1) The employee contributions may not be

tax deductible according to local rules.

2) The employer contribution may be taxed

as a benet.

Most o Irelands Double Taxation Agreements

do not deal with this issue (see Article 17A o the

Ireland/UK Double Taxation Agreement, which

sets out the conditions or relie in the UK in such

1. Assume there are 260 working days in a year.



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a case), and oten issues arise as to who will bear

the increased tax cost in the host country.

Clearly, Irish employees will not want to su er

an extra tax burden, and employers will cover

the costs under the company tax equalisation

policy (see below). What is oten orgotten by

employers is the additional tax-on-tax scenario

which can arise in the host country, and which

may not have been budgeted or.


The employee/employer contributions made

during more long-term assignments when

employees break Irish tax residence (but

continue to be Irish company employees) must

also be considered. As already mentioned, as

the employee will not be paying actual Irish

income tax in these circumstances (as split

year residence treatment applies and a PAYE

Exclusion Order will be in place), he/she will not

be able to claim tax relie in Ireland on his /her

own pension contributions. The question then

arises as to whether the employee contributions

will be tax deductible in the oreign jurisdiction

and whether the employer contributions will be

treated as taxable income.

Again, the use o a tax equalisation policy

(see below or urther comments in relation to

pension contributions) can assist companies in

dealing with this issue.

Tax Equalisation Policies

The solution to some o the dicult questions

posed above can generally be ound in the

implementation o tax equalisation policies,

which are used by many Irish and multinational

employers.

The concept o tax equalisation is that an

individual accepting an international a ssignment

should be neither better nor worse o rom a tax

point o view by accepting the assignment. He/

she will continue to be subject to the same tax

cost as i he/she had remained at home. The tax

impact o the assignment is thereore neutralised

or the employee.


I an Irish employee continues his/her Irish tax

residence, pays PAYE as normal, and is also

liable to oreign country tax (in a DTA country

or example) under a tax equalisation policy,

the employer would normally agree to pay the

oreign tax. The employee would then le an Irish

tax return, claiming a credit or the oreign tax

paid. As a result, he/she would be obliged by the

employer, under the terms o the equalisation

agreement, to return the resulting reund o Irish

PAYE to his/her employer.


The mechanism to ensure that the employee who

breaks Irish tax residence continues to bear the

same level o tax involves the deduction o so

called hypothetical home country tax. Applying

this methodology to Ireland, this hypothetical

Irish tax (which is retained by the company and

not required to be paid to Revenue) is used

by the Irish employer to settle the applicable

host country taxes. I the host country taxes

are less than the hypothetical Irish tax, then

the employer retains the benet. I greater, the

employer will pay any taxes due over and above

the hypothetical Irish tax.

In this case, the excess is unded by the

employer, which in turn creates ur ther taxable

income, i.e., the tax-on-tax scenario.

In general, some o the advantages o ta x

equalisation or Irish employers include the

ollowing:

Tax savings may be enjoyed by the Irish

employer, thus reducing overall assignment

costs;

The employee is not disadvantaged rom a tax

viewpoint by accepting the assignment;

Corporate image is protected as tax

equalisation acilitates and ensures assignee

tax compliance;

Employee mobility is enhanced.

A major disadvantage is that the administrationo operating a system o tax equalisation tends

to be time-consuming and, consequently,

expensive. Furthermore, additional tax costs can

arise or the employer, as is illustrated above in

the area o pension contributions.

With regard to the question o how an employee

in this situation could receive income tax relie

or his/her employee pension contributions

during the tax year generally speaking, i the

employer operates a policy o tax equalisation,employee pension contributions (including

Additional Voluntary Contributions or AVCs)

are allowed as deductions (subject to the Irish

Revenue limits which would apply normally)

in computing the employees hypothetical

Irish income tax liability. The employee would

thereore receive the normal Irish tax relie

during the tax year as i he/she had never

let Ireland and will be protected rom any

additional tax costs associated with the pension

contributions in the host country, as mentionedabove.

Employers also need to be clear in their tax

equalisation policies on how non-employment

income and capital gains are to be dealt with,

i.e., will employers protect their employees

rom any increased oreign tax costs in regard

to these sources o income/gains? Lack o clear

agreement on these issues can lead to bad

eeling between employees and employers,

should unexpected tax liabilities arise during

such assignments.

Social Security Considerations

Another area that is always important in planning

assignments is the social security impact both on

the employee and the company.

When an employee continues to be an employee

o the Irish company and is assigned abroad, the

social security rules applying to the assignment

will all into three dierent brackets:

EU regulations;

Bilateral agreements; or

Non-EU regulations/bilateral agreements.

EU regulations

EU Council Regulation 1408/71 governs intra-

EU (including EEA countries) assignments. In

general, an employee being assigned to another

EU (EEA) Member State will continue contributing

to the Irish PRSI system and will be e xempt rom

paying the host country equivalent o PRSI.

An E101 application is required to be made by

the employer in advance o the assignment,

and certicates are generally granted or

assignments up to a maximum o ve years.

As Irelands employee PRSI contribution rate

is low and the employee earnings ceiling is

still in place, this can result in savings or Irish

assignees, particularly compared with countries

such as Belgium (13.7% uncapped), France

(23%8.61% uncapped rate decreases as

earnings increase), or the UK (11% up to cap, 1%

above cap) where social security rates are higher.

Also, the Irish employer may benet rom not



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having to pay the higher employer social security

contributions such as in Belgium (3435%),

France (50%26.5% uncapped rate decreases

as earnings increase), or the

UK (12.8 % uncapped).

Even some o the low cost

economies o Eastern Europe

can have a high incidence

o social security or

employees when compared

to Irish contribution levels.

In Poland, or example, the

main employee contribution

rate (ZUS) is currently

13.71% up to an earnings cap

o PLN 85,290 (approximately

25,000 at the time o

writing). There is then a

2.45% charge above this cap. There is also a

health insurance charge o 9% on an employees

earnings (but a deduction or the employees

social security contributions can be taken in

computing this contribution).

However, the availability o an earnings cap in

Poland on the main employer social security

contribution (16.81% up to the earning cap o

PLN 85,290 (approximately25,000 at the time

o writing) and then 2.55% above this cap) and a

low accident insurance contribution rate (0.67%

3.6% uncapped) means that Poland has a lower

incidence o employer social security than in

Ireland at certain income levels.

Apart rom the cost, the employees are also more

comortable paying into the Irish PRSI system

as they know that their stamps are not being

aected by being assigned abroad i.e., the

social security impact o the assignment has

been neutralised.

Bilateral agreements

Ireland currently has bilateral agreements

with the ollowing countries: USA, Australia,

New Zealand, Canada (including Quebec) and

Switzerland.

In general, these bilateral agreements aim to

achieve the same result as the EU regulation, i.e.,

assignees rom Ireland will continue to contribute

to the Irish PRSI system. Certicates o Coverageare granted under the bilateral agreements

and must be applied or by the employer. The

conditions o each bilateral agreement must be

considered in order to see how long certicates

can be applied or. For example, an employee can

be assigned rom Ireland to the US or up to a

maximum o ve years.

Non-EU (EEA) regulations/

bilateral agreements

Assignments rom Ireland to

countries such as China and

South Korea are becoming

increasingly common as Irish

companies seek to expand into

these emerging markets.

Unortunately, due to the

absence o bilateral agreements

or many o these countries

with Ireland, the social security

situation can be more complex.

Persons employed in Ireland

who are assigned outside the EU (EEA)/bilateral

agreement countries are normally compulsorily

subject to Irish PRSI or at least the rst 52

weeks o their assignment, and a Certicate o

Retention can be sought under SI 312/1996. A

urther 52 weeks extension can be granted with

the consent o the Minister, i the assignment

is to be extended. Thereater, the employee in

general will not be able to continue to contribute

to the Irish PRSI system in the normal way.

However, the employee may be able to contribute

to the Voluntary PRSI system, which is a method

whereby previously insured employees can

continue to contribute to the PRSI system even

when they are not obliged to do so. Benets

covered under the Voluntary PRSI system are:

State Pension (Transition and Contributory),

Widows/Widowers Contributory Pension,

Guardians Payment (Contributory),

Bereavement Grant.

It should be noted, however, that the voluntary

contributions do not cover short-term benets

such as those or illness, unemployment,

maternity, occupational injuries, and dental/

optical treatment.

Consideration must also be given to the social

security system in the host country, or instance:

Will social security also be due in the host

country rom day one o the assignment?

What is the cost to the employee/employer?

What benets will the employee receive rom

the contributions?

In some countries, such as China, social security

may not be payable by expatriates and may only

be levied on local employees.

Special collections system for PRSIWhen an Irish employee with an E101/Certicate

o Coverage/Certicate o Retention is assigned

abroad and his/her employment income alls

outside the Irish PAYE net (through a PAYE

exclusion order being in place), the Special

Collections System must be used to pay PRSI to

the Irish authorities. The assignees will generally

not be liable to the health contribution i their

employment income alls outside the Irish PAYE

net.

An annual return must be led with the Special

Collections Section o the Department o Social

and Family Aairs by 15 February in the year

ollowing the relevant income tax year. Monthly

payments or employee and employer PRSI

contributions must also be made to the Special

Collections Section. The Irish employer should be

aware o these special requirements and should

ensure that PRSI is not paid through the monthly

payroll/P30 ling method as this can c ause

diculties once the time or ling the annual

Special Collections returns comes around.

Summary

Irish employers have to contend with a number

o complex employment tax issues apart rom

the actual relocation logistics associated with

assigning Irish employees abroad within an

organisation. The Irish employees tax residence

position in Ireland and the oreign country is the

key driver behind the treatment o withholding

tax, subsistence expenses, share options andpension contributions.

In relation to international assignments in

particular, Irish employers need to consider

whether they have adequate internal policies

in place to deal with the oreign tax and social

security issues which the employee may trigger

in the oreign country. Tax equalisation policies

are oten used by companies to overcome

these issues. However, the costs o operating

such policies can be high, and careul planningis required, rom a tax viewpoint, prior to an

assignment being initiated to keep these costs to

a minimum.

The Irish employees

tax residence position

in Ireland and the

oreign country is

the key driver behind

the treatment o

withholding tax,

subsistence expenses,

share options and

pension contributions.


itr nov 2008 cforbes

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