Companies may not be aware of tax liabilities and other responsibilities linked to staff working in Ireland and abroad, according to new research by Mazars in Ireland.
COVID-19 has resulted in a significant increase in remote working in Ireland and other countries. As the pandemic and broader ramifications for business become longer-term considerations, Mazars say foreign businesses need to be aware of the potential Irish tax implications of having employees working remotely in Ireland. Irish companies also need to be aware of potential tax risks of their employees working remotely abroad.
Added to this, companies are also now required to track where their employees are working from remotely for longer periods than expected. This means they need to be across different tax requirements and regimes – a laborious exercise that many companies have not had to undertake before.
OECD guidance in April stated that temporary relocation would not lead to tax liabilities for employers. However, this guidance does not define what ‘temporary’ is. As reported, some well-known corporates have stated that they will not return to the office until mid-2021 in some cases and some are introducing hybrid working arrangements, further raising questions in this regard. Tax authorities across Europe now issuing guidance and essentially placing responsibility on employers and employees to return to their original country for tax purposes.
The overall issue of location and movement has further implications with regard to transfer pricing and value creation from a corporate tax perspective. Mazars say it is therefore imperative that business know where their employees are located, understand their role in terms of value creation, and does their location constitute a permanent establishment.
Commenting on the issue, Partner - Employment Tax & Global Mobility Tax Services with Mazars in Ireland, Ken Killoran said, "We are seeing international employers focusing more on the payroll tax risks associated with having employees working remotely from another country as a result of the pandemic. The remote working may trigger a payroll tax withholding obligation in that country. The tax risk can apply to employees working remotely from Ireland for a foreign employer or indeed an employee working remotely abroad for an Irish employer."
He added, "It is more important than ever for international employers to track and monitor the whereabouts of their employees who are working remotely from other countries in order to mitigate the corporate and employment tax risks. Employers should have a clear policy in place covering remote working in order to help keep the company compliant for tax purposes."