Ireland’s PAYE Tax Reform Causes Significant Payroll Changes

Effective January 1, 2019, The Revenue Commissioners, often referred to simply as Revenue, enacted the most significant reforms of Ireland’s Pay As You Earn (PAYE) system since its introduction in 1960. The changes – though intended to make it easier to deduct and pay the correct amounts of income tax, related social insurance, the universal social charge and local property taxes – will also require significant process changes for employers with operations in Ireland, or for those whose employees conduct extended travel to the nation.  

PAYE Process Changes

During previous years, employers were required to report their employees’ earnings on an annual basis. Current reforms now require that filing be completed monthly. While this isn’t expected to increase department workloads, the way the work will be implemented will require a period of adjustment. Under the new reform, previously required annual documentation will be replaced with a one-time registration, allowing employers to continue under the new, monthly process.  

Specifically: 

• Employee documents P45 & P60 are now abolished, as Revenue will now be receiving this information in real time.
• The employer monthly P30 (tax payment) and annual P35 statutory (reporting of all pay and tax details) will no longer be required.
• Employees will no longer be required to register their new employer details as the employer submission will include this information. (Note: First time employees to Ireland will still be expected to register with Revenue.)

Shadow Payroll

The reform will also impact any inbound shadow processes for employers with employees who will be remaining on their home country’s payroll system while an assignment in Ireland. Going forward, companies will need to estimate income on a monthly basis and implement a speedy reconciliation within a tight window following each quarter – determining whether or not they’ve over or underreported and filing an adjustment with Revenue within that tight timeline. A year-end “cleanup” will no longer be an option.

For clients utilizing SIRVA’s compensation services, calls will be scheduled to discuss the timeframe in which we can provide payroll with necessary data on a monthly basis, and how quickly this data can be utilized. Several of our clients have reported sharing their concerns about the newly enacted, tight quarterly turnaround time with Revenue and are currently waiting for feedback from the agency. One possible solution we suggest is to supply estimates for a given quarter and then to reconcile that timeframe during the following quarter to make adjustments. 

Extended Business Travelers

Companies with employees that conduct extended travel to Ireland will also need to be mindful of the PAYE tax reform if these employees trigger a taxability threshold. Companies not currently utilizing a shadow payroll system are advised to implement one immediately.

Compliance Issues

It is important to note that compliance with this new methodology will be crucial in light of Ireland’s recent tax changes. SIRVA encourages company stakeholders to visit the Revenue site to learn more, and to file reports monthly with the agency to ensure compliance and preparedness, should the company ever be audited. If you have any questions about this topic or any other global compensation issue, please also feel free to contact Sean Raney, Senior Vice President, or Wendy Badlan, Senior Manager, Global Compensation and Payroll Services, at Sean.Raney@SIRVA.com  or Wendy.Badlan@SIRVA.com, respectively.

SIRVA provides information and guidance based upon its industry experience.  However, SIRVA does not provide tax or legal advice or provide tax or legal opinions on which you can rely.  You must contact your own counsel or tax advisor for tax or legal advice and opinions for your particular circumstance.