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Tax Insights Archives - EisnerAmper Ireland

12.8.2019

Tips and Gratuities – Payroll Considerations and Legislation Changes

Tips and Gratuities Payroll Considerations and Legislation Changes Image

What Are Tips And Gratuities?

Tips and gratuities have been defined as ‘money exchanged from customer to service provider which is not legally required by the agreement for purchase of the service’ (Casey, 1998, as cited in LPC NO. 10, 2018). Generally speaking, they are relatively low value payments given by customers to workers in the service and hospitality industries in excess of the fee due for the transaction which has taken place.  The frequency and value of such payments is entirely up to the customer.

Current Practices In Relation To Tips And Gratuities

Tips and gratuities are not specifically covered under the Payment of Wages Act 1991, however the Revenue Tax & Duty Manual Part 42-04-35A states that tips ‘paid to the employer and subsequently paid out to an employee should be included in pay for the income tax week or month in which they are paid out.’  This means that tips and gratuities paid to the employer and subsequently paid to the employee should be considered as pay for PAYE purposes and taxed accordingly, although the National Minimum Wage Act 2000 prevents employers from including these payments in the calculation of the National Minimum Wage.  A service charge included as part of the bill should also be taxed as pay if it is paid out to an employee, but unlike tips, these payments can be included in the calculation of minimum wage.

From a wider taxation point of view, it’s worth pointing out that a service charge which is shown on the bill is subject to VAT at the reduced rate of 13.5%, however, tips and gratuities offered voluntarily by the customer are outside of the scope of VAT.

Tips And GratuitiesCurrent Issues

Currently there is no legislation which obliges employers to pass on any tips received by them to their staff, therefore a customer has no way of knowing if the tip they left was actually given to the intended recipient(s) and the worker has no protection if their employer chooses to keep some or all of the tips left by customers.

Tips and Gratuity Payroll Image | Payroll Services Insights

Proposed New Measures In Relation To Tips And Gratuities

Proposed new measures announced by the Minister for Employment Affairs and Social Protection, Regina Doherty TD, aimed at ensuring employees receive the tips due to them and providing protections for low paid workers, are expected to include the following:

  • The Payment of Wages Act 1991 will be amended to ensure that tips and gratuities cannot be used to make up contractual rates of pay; and
  • Employers will be obliged to clearly display their policy on how tips, gratuities and service charges are distributed.

Source: welfare.ie.

When Will The New Tips And Gratuities Measures Be Implemented?

It is currently unclear as to how soon the proposed measures will be introduced, however there was an announcement on 8 July 2019 which stated that the Government has given approval on a draft Heads of a Bill to amend the Payment of Wages Act 1991, which allows the Minister’s Department to draft the required legislation.

How EisnerAmper Ireland Can Help

At EisnerAmper Ireland, our dedicated team of Tax professionals possess the knowledge and experience required to provide guidance and the intelligent solutions you need when either setting up, or running a business, in Ireland.  We tailor our offering to your needs, ensuring you receive the best advice at the appropriate time.

Request a Quote

Request a payroll quote or request a callback from our specialists now.

Authors

The content above is provided for general information purposes only and is not intended to provide, nor does it constitute, professional advice on any particular matter. If you would like more information or would like to discuss any of the topics raised above, please contact the author(s).

Latest News
24.6.2019

Benefit in Kind (BIK) – Employer Overview

BIK Benefit In Kind Employer Overview Image | Payroll Services Insights | Financial Services | EisnerAmper Ireland

What Is BIK?

As a general rule, any benefit or perquisite, other than cash, which an employer provides for an employee would be considered a BIK once it has monetary value.  It is the responsibility of the employer to calculate the value of the BIK and deduct the appropriate employment taxes via the PAYE system.  Benefits given to an employee’s spouse or family members would also be considered BIK.

Taxation Of BIK

Tax must be deducted on the actual value of the benefits provided, unless the actual value is not known.  In this case, tax must be deducted on the estimated value of the benefit.

The value of the benefit must be added to the employee’s pay as a notional pay element in the pay period in which the benefit was provided.  PAYE, PRSI and USC are then deducted from the total value of the employee’s pay plus the BIK.  This should then be reported to Revenue in a payroll submission either on or before the date the employee receives their net salary payment.

How Do You Calculate BIK?

Some BIKs have specific rules which must be followed in order to calculate the taxable value.

– Example 1: How To Calculate BIK On A Company Car

The taxable value (known as the cash equivalent) is based on a percentage of the Original Market Value (OMV) of the car, less any discount received when the car was purchased*.  The percentage is dependent upon the number of business kilometres driven by the employee each year, as shown in the following table:

Kilometres Driven(% of OMV)
24,000 and below30%
24,001 to 32,00024%
32,001 to 40,00018%
40,001 to 48,00012%
48,001 and over6%

(Source: revenue.ie)

Journeys to and from an employee’s normal place of work are not considered business travel.

Employees who work, on average, at least 20 hours per week, whose business kilometres are between 8,000 and 20,000 km per year and who spend at least 70% of their time away from their normal place of work can avail of a 20% reduction on their cash equivalent value.

– Example 2: How To Calculate BIK On Health Insurance

If you purchase health insurance on behalf of an employee this would be considered a taxable BIK.  Although the amount paid by the employer to the insurer is the net cost of the policy, the value of the BIK for the employee is based on the gross cost. The employee gets tax relief by submitting a claim for a Medical Insurance Relief tax credit via their Revenue account at the end of the tax year.

BIK Benefit in Kind Employer Overview Article Image | Financial Services | EisnerAmper Ireland

Recent BIK Updates

Before PAYE modernisation, corrections to estimated BIK values could be made at any point in the tax year up to the filing of the annual P35 return.  Since 1 January 2019, when the actual value of a benefit becomes known after BIK has been calculated on an estimated amount, the correction must be made in the next available pay period.

BIK vs Non-Taxable Benefits

Although in general all benefits are taxable, there are some exceptions to this rule.  The following non-exhaustive list showcases some of the items which can be provided tax-free, provided certain conditions are met:

  • Expenses – Expenses must be incurred wholly, exclusively, and necessarily in the performance of the employee’s duties and must be vouched with receipts.
  • Long Service Awards – The award must be a ‘Tangible Article’, i.e. not cash. The cost to the employer must be less than €50 per year of service and the period of service must be over 20 years. The employee must not have received a similar award within the previous 5 years.
  • Relocation Expenses – Only expenses which are a direct result of the change of residence can be repaid tax-free. More information on Relocation Expenses can be found here.
  • Travel Passes – The travel pass must be issued by a public or private operator who holds a valid licence.
  • Bicycles & Equipment – The cost cannot exceed €1,000 and goods must be purchased from a registered supplier.
  • Phones & Computers – Mobile phones, landlines, internet connections and computer equipment can be provided when primarily for business use.

The information above is for guidance purposes only.  Tax advice should always be sought before providing benefits and reimbursements to employees without deducting employment taxes.

How EisnerAmper Ireland Can Help

The taxation of employee benefits can be challenging, particularly for non-resident employers and new businesses, although with continuously evolving legislation all employers should review their practices regularly.

At EisnerAmper Ireland, our dedicated team of payroll professionals and tax advisors are on hand to offer accurate guidance and advice on the taxation of benefits, as well as providing support and payroll processing services to both new startups and established businesses.

Learn more about our Outsourced Payroll Services here.

Request a Quote

Request a payroll quote or request a callback from our specialists now.

*Discounts of more than 10% must be approved by Revenue.

Authors

The content above is provided for general information purposes only and is not intended to provide, nor does it constitute, professional advice on any particular matter. If you would like more information or would like to discuss any of the topics raised above, please contact the author(s).

Latest News
11.6.2019

Distance Sales – Key EU VAT Rules and Regulation Update

What Are Distance Sales?

Distance sales relate to goods sold from a business to a customer without a face to face interaction. For example, goods purchased by an individual either online, over the telephone or via mail order would be considered a distance sale.

"However digitised goods, that is goods for downloading by the customer via the internet are considered to be services within the meaning of Section 33(5)(k) of the VAT Consolidation Act 2010 for VAT purposes.” 
- Source: revenue.ie.

When a distance sales transaction occurs between a business in one EU Member State and a private individual customer in another EU Member State, specific VAT rules apply.

Distance Sales Of Goods – VAT Rules

For the distance sales of goods between Member States, VAT must be accounted for in the Member State of the supplier, unless the distance sales threshold in the Member State of the customer has been exceeded.  If the annual value of a supplier’s sales to customers in any Member State is in excess of that State’s threshold, the supplier must register for VAT in the customer’s Member State.  However, the supplier has the option of registering for VAT in the customer’s Member State regardless of whether the threshold in that State has been exceeded.

Distance Sales of Goods Thresholds

Distance sales of goods thresholds vary from State to State.  While there are a number of exceptions, the majority of EU Member States have a distance sales threshold of either €35,000 or €100,000.

The latest list of distance sales thresholds for each Member State can be found here.

Distance Sales Shopping Image | Tax Services Insights | EisnerAmper Ireland

Distance Sales Of Services

Prior to 2019, the distance sales of services, such as digital downloads, telecommunications and broadcasting services, were always subject to VAT in the Member State of the customer.

To prevent suppliers from having to register for VAT in multiple Member States, the EU introduced the MOSS (Mini One Stop Shop) scheme, which allows suppliers to report the VAT due in any Member State via a quarterly online declaration in their home State.  Additionally, the VAT invoicing rules for the supplier’s Member State apply when the supplier uses the MOSS system.

Since 1 January 2019, distance sales of services between a supplier and customers in different EU Member States that do not exceed €10,000 in a calendar year are now subject to VAT in the supplier’s Member State. However, the supplier has the option of registering for VAT in the customer’s Member State regardless of whether the €10,000 limit has been exceeded.

Distance Sales Reporting Obligations

Suppliers should report the value of their distance sales to and from Ireland using the relevant Intrastat box on their Irish VAT return.

VAT which is not reported under the MOSS system must be calculated, reported and paid to the tax authorities in the relevant Member States according to each State’s VAT regulations.

Distance Sales Regulation Update

From 1 January 2021, the MOSS system for reporting VAT due in a customer’s Member State will be extended (and renamed OSS) to include the distance sales of goods as well as services.  The €10,000 threshold for reporting VAT to a supplier’s Member State will apply, as will the supplier’s Member State invoicing rules.  This will significantly reduce the administrative burden associated with the distance sales of goods which should translate into real savings in terms of costs and time.

How EisnerAmper Ireland Can Help

At EisnerAmper Ireland our team of dedicated tax specialists are on hand to help you negotiate the evolving landscape of cross-border tax legislation.  Contact our Tax team for expert advice on these and other changes to the distance sales tax rules which may be of benefit to your organisation.

Contact Our Tax Team

Authors

The content above is provided for general information purposes only and is not intended to provide, nor does it constitute, legal advice on any particular matter. If you would like more information or would like to discuss any of the topics raised above, please contact the author(s).

Latest News
15.3.2019

What Is Permanent Establishment?

The Irish Revenue* defines permanent establishment as “a fixed place of business through which the business of an enterprise is wholly or partly carried on” and includes it as an article in double taxation treaties which follow the Organisation for Economic Co-operation and Development (OECD) model tax treaty.

As the text of individual double taxation treaties can vary, the relevant article of the appropriate treaty should always be consulted when making a permanent establishment determination.

What Are The Consequences Of Permanent Establishment?

If an enterprise from outside of Ireland is deemed to have permanent establishment in the state, then Irish Revenue has the right to tax the profits of that enterprise.

The taxes which can apply, depending on the circumstances, are:

  • Income Tax;
  • Corporation Tax; and
  • Capital Gains Tax.

Do I Have Permanent Establishment?

Determining permanent establishment is not always straightforward, although article 5 of the OECD model lists the following as indicators of permanent establishment:

  • A place of management;
  • A branch;
  • An office;
  • A factory;
  • A workshop; and
  • A mine, an oil or gas well, a quarry or any other place of extraction of natural resources.

This list is not exhaustive, and even without a physical presence such as those listed above, it is still possible for a business to have permanent establishment, particularly when the business has an agent in Ireland acting on its behalf to conclude contracts.

How EisnerAmper Ireland Can Help

To make a definitive determination we would recommend consulting EAI’s specialist Corporate Tax team for expert advice.

Contact our Tax Team

*Article 5 of Revenue’s Commentary on Irish tax treaties

Authors

Latest News
7.1.2019

Employee Relocation Tax Relief – Moving to Ireland

Employee Relocation Tax Relief - Moving to Ireland Image | EisnerAmper Ireland

Removal and Relocation Expenses Overview for Employers

Workforce Global Mobility is an increasingly common consideration for businesses that operate in multiple jurisdictions and can result in significant increases to staffing costs, over and above the standard payroll and employment tax considerations. Hiring staff from overseas is also increasingly common, which can create challenges for the employer. Covering the costs associated with relocation is standard practice when transferring employees to Ireland. However, there are various tax implications that must be taken into account at the planning stage to minimise potential liabilities.

Revenue’s Tax and Duty Manual Part 05-02-03, Removal and Relocation Expenses, notes:

"The taxation of certain removal and relocation expenses should be relaxed in genuine cases of employees having to incur expenses to move to a new employment location, where the payment made by the employer towards the expenses results in no net overall benefit to the employee." 
Source: revenue.ie.

Tax-Free Employee Subsistence Expenses

As is the case with all expense reimbursements, Revenue require payments to be matched with receipted expenditure, with the exception of temporary subsistence allowances. Employers are permitted to pay a temporary subsistence allowance to employees while they are looking for accommodation in their new location. The amount allowable is based on 10 nights at the Civil Service Rates (up to €147 per night).

It is important to note that the amount reimbursed cannot be greater than the cost borne by the employee.

Employee Relocation Tax Relief Conditions

According to Revenue, the following are the conditions that must be satisfied to allow removal and relocation expenses to be paid tax-free:

- there are actual removal and relocation expenses;
- the expenses are for a reasonable amount;
- the payment of the expenses is properly controlled; and
- moving house is necessary.
Source: revenue.ie.

What Relocation Expenses Can Be Claimed Back?

There is no definitive list of the expenses which can be claimed back tax-free, so it is the responsibility of the employer to ensure that any payments meet the prescribed conditions, however, some of the more common items include:

  • Costs associated with moving house, such as auctioneer’s fees, solicitor’s fees & stamp duty; and
  • Costs associated with movement of furniture, including storage, transportation, insurance & cleaning.

Travelling expenses may also be included, along with up to three months of vouched rent in temporary accommodation (both rent and temporary subsistence cannot be paid).

Moving to Ireland - Employee Relocation Tax Relief Image | Payroll Services Insights | Financial Services | EisnerAmper Ireland

What Relocation Expenses Cannot Be Claimed Back?

Payments towards the cost of purchasing or building a house cannot be paid tax-free, and similarly, amounts paid towards either loans or bridging loan interest would also be considered taxable pay.

Records Needed for Employee Relocation Tax Relief

As previously noted, all relocation payments (other than temporary subsistence) must be matched with receipted expenditure, so any relevant receipts, invoices, statements and proofs of purchase must be kept by the employer.  All such records must be retained for a period of six years from the tax year-end to which the records refer.

Related payroll insights article: SARP For Employers.

How EisnerAmper Ireland Can Help

At EisnerAmper Ireland, our dedicated team of outsourced payroll professionals possess the knowledge and experience required to assist employers seeking the most beneficial solutions to their global mobility problems.  From planning to execution, we can provide expert advice and insight every step of the way.

Learn more about our outsourced payroll services here.

Request a Quote

Request a payroll quote or request a callback from our specialists now.

Authors

Latest News
12.10.2018

SARP for Employers

SARP for Employers Image | Payroll Services | EisnerAmper Ireland

What is SARP relief?

SARP (Special Assignee Relief Programme) is an Income Tax relief available to certain individuals who have been assigned by a relevant employer to work in Ireland, either for that employer or an associated company of that employer.  The relief can be claimed for five consecutive tax years and is currently available to qualifying employees arriving in the years up to, and including, 2020.  The aim of SARP relief is to encourage multinational employers to redeploy talented employees into key positions within Ireland.

SARP conditions of qualification – what employers need to know

SARP can be claimed by employees who meet the following criteria:

  • The employee must have worked for their relevant employer outside of Ireland for the six months immediately prior to being employed here;
  • They must be contracted to work in Ireland for a minimum period of 12 months from the date they are first assigned here;
  • They must not have been tax resident in Ireland for the five years immediately prior to being assigned here;
  • They must be tax resident in Ireland for all of the years in which they claim SARP relief; and
  • Their basic salary must be a minimum of €75,000 per year.

It is important to note that employees who avail of SARP cannot claim any of the following:

  • Foreign Earnings Deduction;
  • Cross Border Relief; and
  • Research & Development Relief.

SARP for employers – how to calculate SARP

Under SARP relief, 30% of all income* over a threshold of €75,000 is exempt from income tax. For example; an employee who is paid €175,000 will not pay income tax on €30,000 of that income (€175,000 – €75,000 x 30%).  The marginal rate of income tax is 40%, so the value of the relief in this instance would be €12,000.

  • The exemption can be spread proportionately across the year, so the threshold for a monthly paid employee is €6,250 per month.
  • Expense reimbursements and any amounts contributed into pension schemes cannot be included in the calculations for SARP.
  • The exemption is limited to income tax only, so USC and PRSI should be deducted as normal.

The cost of one return trip for the employee and his or her family to their home country can be claimed tax free from their employer, as well as up to €5,000 per child for Irish school fees.

SARP for Employers Payroll Services Insights Article Image | Financial Services | EisnerAmper Ireland

SARP application – how to claim SARP

The employer must apply for SARP relief by completing a Form SARP 1A and submitting it to Revenue within 90 days of the employee’s arrival in the country.  If more than one employee is claiming SARP, the employer must submit a separate Form SARP 1A for each employee.

Employer / employee SARP reporting

Employers are obliged to file a SARP Employer Return, containing the pay and tax details for each SARP employee, to Revenue by 23 February following the year end in which SARP was claimed.

SARP employees are considered ‘chargeable persons for self-assessment’ by Revenue, which means they must file a Form 11 (Income Tax Return) to Revenue by 31 October following the year in which SARP was claimed.

How EisnerAmper Ireland can help

At EisnerAmper Ireland, our dedicated team of outsourced payroll professionals possess the knowledge and experience required to assist employers claiming SARP relief for their staff.  From the initial application process and the monthly calculations, right through to the filing of the employer return, we can provide expert advice and insight every step of the way.

Our income tax specialists are also on hand should your employees require any advice and assistance with their income tax filing obligations. Learn more about our outsourced payroll services here.

Request a Quote

Request a payroll quote or request a callback from our specialists now.

* From 1 January 2019 the government plan to introduce a ceiling of €1 million on eligible income.

Latest News
11.10.2018

Tax Insights Series – Welcome

Tax Insights Series | Financial Services

Welcome to EisnerAmper Ireland’s Tax Insights Series. Here, our tax specialists will provide insights into upcoming industry developments along with tax tips and resources to help you ensure that your company is compliant with appropriate tax obligations.

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