Income Tax

Taxation of crypto-assets transactions – Remittance Basis

 

On 27th April 2022 Revenue updated its guidance material to provide clarity on the tax treatment of transactions involving crypto-assets.  This latest publication also provides worked examples.

 

The terms “cryptocurrency” and “cryptocurrencies” are not defined.

 

The Irish Central Bank places cryptocurrencies, digital currencies, and virtual currencies into the same category of digital money. It is important to bear in mind, however, that although defined in this manner, these “currencies” are unregulated and decentralised which means that no central bank either guarantees them or controls their supply.

 

Throughout Revenue’s updated document the term “crypto-asset” is used, which includes cryptocurrencies, crypto-assets, virtual currencies, digital money or any variations of these terms.  Revenue state that the information contained in their most updated guidance is for tax purposes only.

 

Under Section TCA97 Ch4 s71–5, an individual who is resident in Ireland but not Irish domiciled is liable to Irish income tax in full on his/her/their income arising in Ireland, and on “non-Irish income” only to the extent that it is remitted to Ireland.

 

This is known as the remittance basis of taxation.

 

It’s important to keep in mind that the remittance basis of taxation does not apply to income from an office or employment where that income relates to the performance of the duties of that office or employment which are carried out in Ireland.

 

Section 29 TCA 1997 is the charging section for Capital Gains Tax.

 

s29(2) TCA 1997 states that a person who is Irish resident or ordinarily resident and is Irish domiciled is chargeable to Irish CGT on gains on all disposals (on his/her/their worldwide assets) arising in the year of assessment regardless of whether the gains are remitted to Ireland or not.

 

s29(4) TCA 1997 states that an individual who is Irish resident, or ordinarily resident,  but not Irish domiciled is chargeable on gains arising on disposals of Irish assets in the year of assessment as well as on remittances to Ireland in the year of assessment in respect of gains on the disposals of foreign assets.  In other words, an Irish resident/ordinarily resident but non domiciled individual is liable to Irish CGT on remittances in respect of gains arising on the disposal of assets situated outside the state.

 

From professional experience, the location of the crypto asset is often difficult to prove.

 

According to Revenue’s most recent publication:

“… where a crypto-asset exists ‘on the cloud’, it will not actually be situated anywhere and therefore, cannot be
viewed as ‘situated outside the State’.”

 

If the crypto-asset isn’t located anywhere and isn’t, therefore, considered to be a “disposal of an asset outside the state” then the remittance basis of taxation does not apply and the gain arising will be liable to Irish Capital Gains Tax based on the residency rules of the individual.

 

As you can see, it is very much the responsibility of the taxpayer to be able to prove the location where the gain arose on the disposal of the crypto-assets.

 

Revenue have outlined their record keeping provisions in relation to all taxes as follows: https://www.revenue.ie/en/starting-a-business/starting-a-business/keeping-records.aspx

 

In situations where the records are stored in a wallet or vault on any device including a personal computer, mobile phone, tablet or similar device, please be aware that these records must be made available to Revenue, if requested.

 

As with all taxes, full and complete records must be retained for six years in accordance with legislation. It is important to keep in mind that these provisions apply to all taxpayers, including PAYE only taxpayers.

 

 

For further information, please follow the link: https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-02/02-01-03.pdf

 

 

 

Revenue concession for Ukrainian citizens working remotely for Ukrainian employers

 

 

Today, 14th April 2022. the Irish Revenue published guidance (Revenue eBrief No. 090/22) on the tax treatments of Ukrainians, who continue to be employed by their Ukrainian employer while they perform the duties of their employment, remotely, in Ireland.

 

The Guidance material outlines a number of concessions which will apply for the 2022 tax year.

 

 

PAYE

As you’re aware, income earned from a non-Irish employment, where the performance of those duties is carried out in Ireland, is liable to Irish payroll taxes irrespective of the employee’s or employer’s tax residence status. However, by concession, the Irish Revenue are prepared to treat Irish-based employees of Ukrainian employers as not being liable to Irish Income Tax and USC in respect of Ukrainian employment income that is attributable to the performance of duties in Ireland.

 

Ukrainian Employers will not be required to register as employers in Ireland and operate Irish payroll taxes in respect of such income.

 

Please be aware that this concession only relates to employment income which is (a) paid to an Irish-based employee (b) by their Ukrainian employer.

 

 

In order for the above concessions to apply, two conditions must be met:

  1. The employee would have performed his/her/their employment duties in Ukraine but for the war there and
  2. the employee remains subject to Ukrainian income tax on his/her/their employment income for the year.

 

 

 

Corporation Tax

The Irish Revenue will disregard for Corporation Tax purposes any employee, director, service provider or agent who has come to Ireland because of the war in Ukraine and whose presence here has unavoidably been extended as a result of the war in Ukraine.

 

Again, such concessionary treatment only applies in circumstances where the relevant person would have been present in Ukraine but for the war there.

 

For any individual or relevant entity availing of the concessional tax treatment, it is essential that he/she/they retain any documents or other evidence, including records with the individual’s arrival date in Ireland, which clearly shows that the individual’s presence in Ireland and the reason the duties of employment are carried out in the state is due to the war in Ukraine.  These records must be retained by the relevant individual or entity as Revenue may request such evidence.

 

 

For further information, please follow link: https://www.revenue.ie/en/tax-professionals/ebrief/2022/no-0902022.aspx

 

 

Update of COVID Restrictions Support Scheme – Expansion of supports for businesses impacted by COVID-19 restrictions

 

On 21st December 2021, the Government announced the expansion of supports for businesses impacted by public health restrictions that came into effect from 20th December 2021 to 31st January 2022 including changes to:

  1. the Employment Wage Subsidy Scheme (EWSS)
  2. the Covid Restrictions Support Scheme (CRSS) and
  3. the Debt Warehousing Scheme

 

A summary of the developments to the schemes is outlined below.

 

 

1. The Employment Wage Subsidy Scheme (EWSS)

On 9th December 2021 it was announced that the enhanced subsidy rates under the EWSS will continue until 31st January 2022.  In other words these enhanced rates will be paid in respect of payroll submissions which have pay dates in December 2021 and January 2022.

 

Today, Minister Donohoe confirmed that the EWSS will also be reopened for certain businesses who would not otherwise be eligible for the scheme.

 

Employers can re-join the scheme from January 2022 if they meet the following conditions:

  1. they previously claimed support under EWSS which they were correctly entitled to
  2. they anticipate that their combined turnover for December 2021 and January 2022 will be down by at least 30% as compared with their combined turnover for December 2019 and January 2020.
  3. for businesses established between 1st May 2019 and 31st December 2021 their average monthly turnover for December 2021 and January 2022 must be down by at least 30% when compared with the average monthly turnover across the period August 2021 to November 2021 or on a pro-rata basis in circumstances where the business was established during this period.
  4. The business must have tax clearance.

 

Employers who qualify for re-entry to the EWSS will receive support from 1st January 2022 onwards. These businesses can remain in the scheme until its expiry date of 30th April 2022.

 

Please bear in mind that the business must experience a 30% reduction in (a) turnover or (b) customer orders during a particular reference period to qualify.

 

Businesses that commence trading operations from 1st January 2022 onwards will not be eligible for the scheme.

 

For further information, please click: https://www.revenue.ie/en/corporate/press-office/budget-information/2021/crss-guidelines.pdf

 

 

 

2. The Covid Restriction Support Scheme (CRSS)

From 20th December 2021, the CRSS opens to businesses within the hospitality and indoor entertainment sector such as bars, restaurants and hotels as well as theatres and cinemas that are now required to close by 8pm each night until 31st January 2022.

 

The eligibility criteria regarding the reduction in turnover has also increased to no more than 40% of 2019 turnover.  Previously it was no more than 25% of the 2019 turnover.

 

Companies, self-employed individuals and partnerships that carry out a taxable trade can apply for the CRSS.

 

A qualifying person who meets the revised eligibility criteria can make a claim to Revenue in respect of each week that the eligible business/trading activity is affected by the imposed Covid restrictions.

 

A qualifying person who carries on such a business is eligible to make a payment claim under the Covid Restrictions Support Scheme if:

  • the weekly turnover from the relevant business activity in the claim period will be no more than an amount equal to 40% of the average weekly turnover in a reference period.
  • For most businesses the reference period will be 2019.
  • For businesses established between 26th December 2019 and 26th July 2021, the reference period will depend on the date on which the business was established.
  • the eligible business must have tax clearance for the relevant claim period and must intend to resume trading after the Covid-19 restrictions have been lifted.

 

For businesses established in the period between 13th October 2020 and 26th July 2021, they are eligible to apply for support under the scheme, however, they are first required to register for CRSS via ROS.  It will only be possible to make a claim once the business has an active CRSS registration.

 

If the eligible business meets the revised criteria to qualify for the scheme and has previously received CRSS payments in relation to a business premises carrying out a trading activity which was affected by the current public health restrictions, this business can make a CRSS claim using the ROS e-Repayments facility from 22nd December 2022.

 

Claims can be made in blocks of up to three weeks at a time.  The respective amounts due will be paid by Revenue in one single payment. The normal repayment period is three days from the date the claim was submitted.

 

In circumstances where a qualifying person carries on more than one eligible business activity from separate/different business premises, then it is possible to make a separate claim in relation to each trading /business activity.

 

If it’s possible for the business to reopen without having to prevent or significantly restrict access to it’s premises, then this business will not qualify for CRSS.  A business will not be eligible for the CRSS for periods where it chooses or decides not to open.

 

In situations where it is not feasible for a qualifying person to continue carrying on a relevant business activity during the period of restrictions, a claim for support under the CRSS can still be made.  This is on condition that the eligibility criteria have been met. In order to qualify, the person must have actively carried on the relevant business activity up to the date the latest public health restrictions were imposed and must intend to continue carrying on that same activity once those restrictions have been eased.

 

The weekly payment is calculated as follows

  • 10% of average weekly turnover up to €20,000 i.e. €2,000
  • 5% of average weekly turnover in excess of €20,000 up to a maximum of €60,000 i.e. €3,000
  • The maximum payment is €5,000 per week.

 

For the purposes of the CRSS, the “Average weekly turnover” is defined as:

  • the average weekly turnover in 2019 in the case of a business established before 26th December 2019,
  • the average weekly turnover between 26th December 2019 and 12th October 2020 in the case of a business established during that period, or
  • the average weekly turnover in the period 13th October 2020 to 26th July 2021 in the case of a business established during that period.

 

For further information, please click the link: https://www.revenue.ie/en/corporate/press-office/budget-information/2021/crss-guidelines.pdf

 

 

 

3. Debt Warehousing Scheme

The Revenue Commissioners have confirmed that November/December 2021 VAT liabilities and December 2021 PAYE (Employer) liabilities will be automatically warehoused for businesses which are already availing of the scheme.

 

The Government confirmed that the Covid restricted trading phase of the Debt Warehousing Scheme (Period 1) will be extended by three months to 31st March 2022 for taxpayers who are eligible for the COVID-19 support schemes. This effectively means that tax debts arising for such affected businesses in the first three months of 2022 can be warehoused.

 

The zero interest phase of the Debt Warehousing Scheme or Period 2 will begin on 1st April 2022 for those businesses and will run until 31st March 2023.

 

For further information, please click the link: https://www.revenue.ie/en/corporate/communications/documents/debt-warehousing-reduced-interest-measures.pdf

 

Revenue announces extension to ROS Pay and File deadline 2021

 

 

The Revenue Commissioners acknowledge the on-going efforts by taxpayers and agents and in light of the current Covid-19 developments, the Pay and File deadline for ROS customers has been extended to Friday, 19th November at 5.00pm.

 

 

For full information, please follow link: https://www.revenue.ie/en/tax-professionals/ebrief/2021/no-2112021.aspx

 

 

ROS Pay and File extended deadline to 17th November 2021

 

 

 

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Revenue has confirmed that the extended ROS Pay and File deadline is Wednesday, 17th November 2021.

 

For self assessment Income Taxpayers who file their 2020 Form 11 Tax Return and make the appropriate payment through the Revenue Online System in relation to (i) Preliminary Tax for 2021 and/or (ii) the balance of Income Tax due for 2020, the filing date has been extended to Wednesday, 17th November 2021.

 

This extended deadline will also apply to CAT returns and appropriate payments made through ROS for beneficiaries who receive gifts and/or inheritances with valuation dates in the year ended 31st August 2021.

 

To qualify for the extension, taxpayers must pay and file through the ROS system. 

 

In situations where only one of these actions is completed through the Revenue Online System, the extension will not apply.  As a result,  both the submission of tax returns and relevant payments must be made on or before 31st October 2021.

 

 

Taxation of Proprietary Directors and Non-Proprietary Directors

 

There are two main types of director: a proprietary director who owns more than 15% of the share capital of the company and a non-proprietary director who owns less than 15% of the share capital of the company.

 

In general, a director is deemed to be a ‘chargeable person’ for Income Tax purposes.  This means that he/she is obliged to file an Income Tax Return every year even in situations where his/her entire income has already been taxed at source through the PAYE system.

 

Non-proprietary directors, however, as well as unpaid directors, are excluded from the obligation to file an annual income tax return.

 

A Proprietary Director must also comply with the self-assessment regime which means he/she has a requirement to make payments on account to meet his/her preliminary tax obligations. In situations where these payments are not made by the due date, the director is exposed to statutory interest at a rate of approximately 8% per annum.

 

A late surcharge applies in circumstances where the Director’s Income Tax Return is filed after the due date.  The surcharge is either (a) 5% where the tax return is delivered within two months of the filing date or (b) 10% where the tax return is not delivered within two months of the filing date. It is important to keep in mind that the surcharge will be calculated on the director’s income tax liability for the year of assessment before taking into account any PAYE deducted from his/her salary at source.  It should also be remembered that the Director can only claim a credit for the PAYE deducted if the company has in fact paid over this tax in full to Revenue.

 

Proprietary directors are not entitled to an Employee Tax Credit.  In general, this rule, subject to some exceptions, also applies in relation to a spouse or family member of a proprietary director who is in receipt of a salary from the company.  Proprietary Directors and their spouse and family members may, however, be entitled to the Earned Income Credit.

 

The director’s salary, just like any other employee’s salary, is an allowable deduction for the purposes of calculating Corporation Tax.

 

According to the Social Welfare and Pensions (Miscellaneous Provisions) Act 2013, a director with a 50% shareholding in the company will be insurable under Class S for PRSI purposes.  For proprietary directors with a shareholding of less than 50% of the company the PRSI treatment will be established on a case by case basis.

 

Where the director has a ‘controlling interest’ in the company, he/she will not be treated as ‘an employed contributor’ for PRSI purposes on any income or salary he/she receives from the company. Therefore, all amounts paid by the company to the director will be insurable under Class ‘S’ meaning that he/she will be treated as a self-employed contributor and liable to PRSI at 4%. Employers’ PRSI will not be applicable to his/her salary.

 

Where a Director is insured under Class A, PRSI is payable on his/her earnings at 4% and up to 10.75% Employer’s PRSI by the employer/company.

 

Even if you are not considered to be Irish resident by virtue of the 183 day rule or the “Look Back” rule, if you are in receipt of a salary from an Irish limited company you will be required to pay Income Tax to the Revenue Commissioners.  If, however, you are resident in a country with which Ireland has  a Double Taxation Agreement and your income is liable to tax in both countries, you should be able to claim relief on the tax you paid in Ireland.

 

 

 

Revenue’s updated guidance around working e-working

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In response to the Covid-19 outbreak in Ireland, the Government has asked people to take all necessary measures to reduce the spread of the virus and where possible individuals are being asked to work from home.

 

Today Revenue updated their e-Working and Tax guidance manual (i.e. Revenue eBrief No. 045/20) in which it published Government’s recommendation as to how employers can allow employees to work from home.

 

The content of Tax and Duty Manual Part 05-02-13 has been updated to include:

  • An explanation of what constitutes an e-worker along with examples.
  • The conditions that apply to employer payments of home expenses of e-workers.
  • Clarification that current Government recommendations for employees to work from home as a result of COVID-19 meet the conditions for relief.
  • Guidance for employees claiming relief for allowable e-working expenses, who are not in receipt of e-working payments from their employers.

 

Revenue has defined e-working to be where an employee works:

  • at home on a full or part-time basis
  • part of the time at home and the remainder in the normal place of work
  • while on the move, with visits to the normal place of work

 

The guidance material goes on to state that e-working involves:

  • logging onto a work computer remotely
  • sending and receiving email, data or files remotely
  • developing ideas, products and services remotely

 

The revised Revenue guidance clarifies that the following conditions must also be met:

  • There is a formal agreement in place between the employer and the employee under which the employee is required to work from home
  • An employee is required to perform substantive duties of the employment at home; and
  • The employee is required to work for substantial periods at home

 

The guidance confirms that e-working arrangements do not apply to individuals who in the normal course of their employment bring work home outside standard working hours.

 

It would appear from the updated material, that where there is an occasional and ancillary element to work completed from home, the e-working provisions will not apply.

 

The revised guidance does not specify what a “formal agreement” between the employer and employee might contain therefore it would be advisable for businesses/employers going forward to consider putting in place a formal structure for employees looking to avail of the e-worker relief in the future.

 

The guidance material states in broad terms that employees forced to work from home due to the Covid crisis can claim a tax credit.

“Where the Government recommends that employers allow employees to work from home to support national public health objectives, as in the case of Covid-19, the employer may pay the employee up to €3.20 per day to cover the additional costs of working from home.  If the employer does not make this payment, the employee may be entitled to make a claim under section 114 TCA 1997 in respect of vouched expenses incurred wholly, exclusively and necessarily in the performance of the duties of the employment”.

 

The revised guidance advises that employers must retain records of all tax-free allowance payments to employees.

 

In situations where an employee is working from their home but undertakes business travel on a particular day and subsequently claims travel and subsistence expenses, please be aware that if the e-workers daily allowance is also claimed by that employee for the same day, then it will be disallowed and instead, treated as normal pay in the hands of the employee/e-worker i.e. it will be subject to payroll taxes.

 

Where an employee qualifies as an e-worker, an employer can provide the following equipment for use at home where a benefit-in-kind (BIK) charge will not arise provided any private use is incidental:

  • Computer, laptop, hand-held computer
  • printer
  • scanner
  • software to facilitate working from home

 

There is no additional USC liability imposed on the provision of this work-related equipment to an employee.

 

Please be aware, however, that laptops, computers, office equipment and office furniture purchased by an employee are not allowable deductions under s. 114 of the Taxes Consolidation Act (TCA) 1997.

 

e-Working expenses can be claimed by completing an Income Tax return.  An individual can complete this form on the Revenue website as follows:

  • sign into myAccount
  • click on ‘Review your tax’ link in PAYE Services
  • select the Income Tax return for the relevant tax year
  • click ‘Your Job’
  • in the ‘Claim for Tax Credits, allowances and Reliefs’ page select ‘Remote Working (e-Working) Expenses’ and insert the full amount of the expense in the “Amount” section.

As a claim may be selected for future examination, all documentation relating to a claim should be retained for a period of six years from the end of the tax year to which the claim relates.

 

Finally, for employees who meet the relevant conditions and are deemed qualify as e-workers:

  • Using part of his/her home for the purposes of e-working will not affect his/her entitlement to principal private residence (PPR) relief when selling his/her home in the future.
  • There is no reduction in the Local Property Tax (LPT) where part of the property is used for the purposes of e-working.

 

For further information, please follow the link: https://www.revenue.ie/en/tax-professionals/ebrief/2020/no-0452020.aspx