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March 31, 2020
Ireland relaxes tax residence rules in relation to COVID-19
This Alert addresses clarification provided by the Irish Revenue Commissioners in respect of the application of the Irish tax residency rules during the current COVID-19 pandemic. All references to Ireland or the State refer to the Republic of Ireland only.
Guidance issued by the Irish Revenue Commissioners
Where an individual is present in Ireland at any part of the day, this presence is, under normal circumstances, counted as a day for determining Irish tax residence.
In the absence of the “Force Majeure” principle (which has now been enacted), there is no distinction between workdays, holidays, days of illness, etc. when counting an individual’s days of presence in Ireland for tax residency purposes.
The Irish Revenue Commissioners have confirmed that where an individual’s departure from the State is prevented due to COVID-19, they will apply the ”Force Majeure” principle for the purpose of establishing an individual’s Irish tax residence position.
Where the individual is prevented from leaving Ireland on their intended day of departure because of COVID-19 this will be deemed to fall under the Force Majeure principle. The Revenue Commissioners’ guidelines setting out the principle states that, where an individual is prohibited from leaving the State due to extraordinary natural occurrences (e.g., sudden and severe adverse weather conditions) or exceptional third party failure/action (e.g., breakdown of an aircraft or a labor strike), none of which could reasonably have been foreseen and avoided, Force Majeure shall apply. They have confirmed COVID-19 falls within these conditions.
The day of intended departure will be treated as a day of presence in the State under normal rules. Force Majeure will become effective on the day after the day of planned departure, and planned days of absence thereafter will be disregarded when looking at the individual’s presence in the State. Where an individual has regular and demonstrable absence from the State, for example, for the purposes of their employment it is unclear how Revenue will apply the Force Majeure principle, and this is likely to be addressed on a case-by-case basis.
Irish tax residence rules
Under normal circumstances an individual will be treated as being Irish tax resident if they meet one or both of the following tests:
In the absence of the Force Majeure principle these two tests apply.
Next steps for employers
Outlined below are some of the key questions that employers should be asking to ensure that they can mitigate any potential tax or social security exposures for the business and employees.
Many other jurisdictions have introduced similar temporary measures. Employers should address the tax residence provisions in jurisdictions where they operate.
For additional information with respect to this Alert, please contact the following:
Ernst & Young (Ireland), Dublin
Ernst & Young (Ireland), Cork
Ernst & Young (Ireland), Waterford
Ernst & Young LLP (United States), Ireland Tax Desk, New York
Ernst & Young LLP (United States), Ireland Tax Desk, San Jose
Ernst & Young LLP (United States), FSO Tax Desk, New York
Ernst & Young LLP (United States), FSO Tax Desk, San Jose