CCAB-I submission requesting an extension of the scope of the tax residency rule concession and foreign employer PAYE concession in recognition of the impact of international public health advice on the movement of individuals.

Introduction

Public health advice has consistently stated that travel increases an individual’s risk of contracting and spreading COVID-19. The Irish Government has taken action to restrict international travel since January and a more contagious variant of COVID-19 is also more prevalent in Ireland since the start of 2021. However, several concessions to tax rules originally put in place in March 2020 to mirror the Government’s public health advice have been withdrawn with effect from 1 January 2021. The withdrawal of these concessions will mean that many foreign employers may have Irish PAYE obligations for accommodating employees’ requests to work remotely in Ireland while COVID-19 poses a danger to those undertaking international travel.

The evolving nature of COVID-19 experienced in Ireland over 2020 continues in 2021. It is fair to say that the Government did not foresee increased infection rates over a short four-week period between December and January, which resulted in the third national lockdown. The constantly evolving manner of COVID-19 means that individuals cannot move freely between jurisdictions to suit their work, business or tax position as they would otherwise do in a normal year. The publication in late December of guidance to reflect Revenue’s position that individuals have, since 6 May 2020, all the information and foresight on COVID-19 to make travel arrangements to manage his/her tax residency position is not reflective of the genuine health risks associated with travel for most of the year in 2020 and to date in 2021. It seems unreasonable to impose guidance potentially compelling individuals to risk their health and break Government health advice, and we ask Revenue to reconsider the narrow scope of its concession to recognise force majeure in establishing the tax residency positions of individuals in 2020 and in 2021.

Travel restrictions in 2020 and 2021

On 27 March 2020, Ireland was placed on full national lockdown. The phased lifting of restrictions commenced on 18 May 2020.

Localised lockdown measures were announced for Counties Kildare, Laois and Offaly in August 2020 and Donegal and Dublin during September 2020. In early October 2020 additional restrictions were imposed in counties Cavan and Monaghan, just before the Government imposed a national Level 5 lockdown on 21 October 2020, until 1 December 2020. Ireland entered a third national lockdown on 23 December 2020 and will continue to be in lockdown until April 2021, and possibly beyond this.

As currently stated on the Department of Foreign Affairs website, a Government Advisory is in operation against all non-essential international travel. While the Health Act 1947 (Section 31A – Temporary Restrictions) (Covid-19) (No. 10) (Amendment) (No. 2) Regulations 2021 says that essential work-related travel is permitted under Level 5, public health advice states that travel increases an individual’s risk of contracting and spreading COVID-19. Individuals can be exposed to COVID-19 in airports, bus stations and train stations, and it is very difficult to practice social distancing on airplanes. Many employers do not wish to put employees at risk of contracting COVID-19 by compelling them to undertake international flights and are accommodating employees where possible to work from Ireland when under normal circumstances, the employee’s place of work is in another jurisdiction.

The risks associated with travel are compounded by the emergence of the more contagious UK and South African variants first detected in Ireland on 25 December 2020 and on 8 January 2021, respectively. Individuals who travelled to Ireland for Christmas, in general, would not have been aware of these variants, and the prevalence of the UK and South African variants has increased the risks of contracting COVID-19 when undertaking international travel.

Measures to restrict international travel have escalated in Ireland since the start of the year. The Government announced international travel restrictions on 26 January to contain the spread of COVID-19. International travel restrictions in place are as follows:

1. An increase to the fixed penalty for breach of the rules relating to international travel.
2. Increased Garda checks and enforcement activity relating to people travelling internationally who are in breach of Level 5 rules.
3. Regulations requiring pre-departure PCR tests.
4. A range of mandatory quarantine measures apply to all international arrivals.

The Department of Justice has suspended the processing of new visa and pre-clearance applications effective from 29 January. The Irish authorities suspended the issuing of short-term visas for Ireland in March 2020 which remains in effect. The Minister for Justice signed regulations to suspend visa-free and short-term travel from South Africa, Brazil and other South American countries.

Other countires have suspended the processes of visas, such that an Irish citizen with a foreign employment may not be able to obtain the necessary visa required to return to the jurisdiction of their foreign employer. US embassy in Dublin had stopped processing visa applications, and there is a substantial wait-period for applications once the processing is recommenced.

Foreign employer payroll obligations

Revenue’s website states that several temporary measures which relaxed Irish PAYE obligations in response to COVID-19 ceased to apply on 31 December 2020. The suspension of Revenue’s concession on Irish PAYE obligations of a foreign employer with effect from 1 January 2021 is not aligned to national and international advice, which cautions against travel.

Employers are required to operate Irish PAYE in respect of employees working in the State, subject to limited exceptions. Many employees of foreign employers, who would not otherwise be present in Ireland, have found themselves “stuck” in Ireland due to COVID-19 public health restrictions. Many employers do not wish to compel their employees to travel in contravention of public health advice and are facilitating employees’ requests to work remotely from Ireland.

Registering as an employer in the State and operating Irish PAYE on a temporary basis represents a significant cost for foreign employers (in many cases, the foreign employer is registering as an employer in Ireland for only one employee). Some foreign employers will not be aware that they have an Irish PAYE obligation on foot of acting responsibly in response to their employees’ travel concerns and public health advice.

We ask that Revenue reinstate the concession with effect from 1 January 2021, whereby it will not seek to enforce Irish payroll obligations on foreign employers in genuine cases where an employee was working abroad for a foreign entity prior to COVID-19 but relocates temporarily to Ireland during the COVID-19 period and performs duties for his or her foreign employer while in Ireland. Likewise, COVID-19 concessions relating to the Special Assignee Relief Programme, PAYE dispensation applications, multi-state workers and PAYE exclusion orders on Irish contracts of employment should also be reinstated from 1 January 2021 while public health advice continues to caution against international travel.

Employees currently working remotely in Ireland for a foreign employer intend to return to the jurisdiction where he/she normally carries out the duties of their job. Remote working arrangements accommodated by foreign employers are not long-term, and the employer will require employees to return to the normal work location once COVID-19 restrictions have been lifted. A concession to not enforce PAYE obligations on foreign employers could be linked to evidence such as a contract of employment clause or a declaration by the foreign employer that the employee must return to their normal place of work when international travel is safe and that foreign tax continues to be operated while the employee is in Ireland due to COVID-19 restrictions.

Tax residency disruption due to COVID-19

Since 23^rd March 2020, Revenue’s website confirms that where an individual’s departure from the State is prevented due to COVID-19, Revenue will consider this as ‘force majeure’ for the purpose of establishing an individual’s tax residency position. However, the scope of this concession is significantly curtailed by additional guidance published on 22 December 2020 “The statutory residence test – force majeure in the context of COVID-19”. The guidance was published under the Revenue’s Covid-19 information and advice page as an embedded link. There is no publication date on the updated guidance. The manner of publication seems at odds with Revenue’s usual procedure for the publication of important guidance.

The guidance states that Revenue do not consider any days spent in Ireland after 18 May 2020 as falling within the concession and for individuals who arrived in Ireland on or after 6 May the concession will not apply. The force majeure concession cut-off dates are very limiting given ongoing public health restrictions and the extension of Covid-19 lockdowns in Ireland and internationally in 2020 and in 2021.

The guidance states that it is “mandatory that the individual must have left the State as soon as he or she reasonably could, which must have occurred on or by 1 June 2020”. Many taxpayers relied on the March 2020 guidance and legitimately considered that it was applicable for the full year. The retrospective application of the cut-off dates of May/June 2020 does not reflect the evolution of COVID-19 infection rates in Ireland and internationally over the course of 2020, which necessitated a national Level 5 lockdown between October to 1 December 2020, with a third national lockdown introduced on 23 December 2020. COVID-19 is as serious an international health crisis in 2021 as it was in 2020, and a Government Advisory is in operation against all non-essential international travel. Therefore, we ask Revenue to reconsider the scope of the force majeure concession for the duration of the public health restrictions and we also suggest that it is not appropriate to apply a cut-off date of May/June 2020 for access to this important concession.

We understand concerns that such a concession could lead to double non-taxation, but this could be safeguarded against by noting that the concession is only available where the individual continues to be recognised as tax resident in another jurisdiction. We understand that force majeure in general only refers to short term events which prevent an individual from leaving the State.

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