Recent guidance issued by Revenue has clarified how the Universal Social Charge (USC) applies to foreign employees assigned temporarily to Ireland and to certain internationally mobile employees. It has also restated the income tax and USC treatment of directorships in Irish companies.

Employees assigned to work temporarily in Ireland from another EU or EEA country often remain subject to the social security system in their home country, entitling them to access to healthcare services by way of a full medical card in Ireland. A reduced rate of 4% USC applies to full medical card holders. Revenue will now accept certificates (Forms A1 and S1) issued by the employee’s home state as evidence of the entitlement to a medical card and therefore to the reduced USC rate.

Employees who are not resident in Ireland, but resident and exercising their employment duties wholly in countries with whom Ireland does not have a double tax treaty, were previously treated by Revenue as liable to the USC even if the employer held a PAYE exclusion order. The new Revenue guidance has extended the USC exemption to such employees.

Revenue also issued separate guidance in relation to Irish directorships, which is for the most part a restatement of accepted principles such as the following:

• A director, including a non-executive and/or non-resident director, of an Irish company may be liable to income tax and the USC (deducted at source) on remuneration (including share remuneration and benefits-in-kind) received for his directorship.
• The holding of a public office of director will be considered as separate from any employment that may be held by the person in the same company or other directorships held by that person.
• Director remuneration mandated/routed through a third party (e.g. a service company) is still within the scope of PAYE.

It may be possible to obtain prior Revenue approval to modify the tax treatment where partners of legal or accountancy firms act as directors.

Companies should review PAYE and USC obligations in relation to their employees and directors. Some employees may be entitled to a repayment of excess USC (or the previous Income Levy) deducted prior to the new guidance.

Contributed by Niamh Keogh.

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