International travel restrictions put in place due to the COVID-19 Coronavirus pandemic have caused uncertainty for non-domiciled tax residents. Thankfully the Irish Revenue Commissioners (Revenue) have published measures easing the concepts of tax residence and permanent establishments.
1. Tax Residency - Individual
In order to be considered an Irish tax resident, an individual must be present in the State for 183 days or more in the year, or 280 days over two years with at least 31 days presence in the State each year.
Revenue has provided guidance for individuals who may be concerned about not meeting their obligations;
“where an individual is prevented from leaving the State on his or her intended day of departure due to extraordinary natural occurrences…none of which could reasonably have been foreseen and avoided – the individual will not be regarded as being present in the State for tax residence purposes for the day after the intended day of departure provided the individual is unavoidably present in the State on that day due only to ‘force Majeure circumstances”.
2. Tax Residency - Company Residence
When determining the tax residency of a company, Revenue focusses on where the company is centrally controlled and managed. With travel restrictions in place, some senior executives have raised concerns about new filing requirements and tax obligations in the event of a change in the location of the central management of the company. In a situation where an individual is present in the State, or present in another jurisdiction, and would otherwise have been present in the State, Revenue will be prepared to disregard such presence in the State or outside the State for corporation tax purposes for a company in relation to which the individual is an employee, director, service provider or agent.
The measures published by Revenue are very welcome. However, some uncertainty still exists in the context of Ireland’s double tax treaties, as not every jurisdiction may be in agreement. Ireland’s double tax treaties generally give taxing rights to the jurisdiction of such place of effective management.
All companies and individuals will still need to be cognisant of double tax treaties, as quite often the views of one tax authority may not be sufficient. In most cases, the tie-breaker test in many double tax treaties regarding tax residence will need to be considered. No doubt, we can expect to see more countries make announcements in the coming weeks and months on the topic of residence and it is likely to cause more uncertainty.
3. Maintain records
Revenue recommends that the individual and the company maintain records of the circumstances of the COVID-related presence in the State, or outside the State. These records may be requested as evidence by Revenue.
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