Where an employee is sent on assignment outside the state but will remain a tax resident in Ireland, employed by an Irish employer, and under an Irish contract of employment, the company may suffer dual withholding on the same income in both the home (Ireland) and host country.
To minimize the cashflow burden, the employer can claim a real time foreign tax credit on behalf of the employee through the Irish payroll system for the amount of the non-refundable foreign tax arising on the same income.
The criteria to avail of the real time foreign tax credit (RTFTC) are as follows:
- The individual is a tax resident in Ireland;
- They are employed by an Irish employer;
- They are employed under an Irish contract of employment;
- They exercise some of the duties of the employment abroad;
- And are subject to a simultaneous deduction of both Irish and foreign tax; and
- The foreign tax suffered must be non-refundable.
All criteria must be met to avail of the credit.
Revenue will assess each case on an individual basis. One of the areas that they will look at is whether there is a double tax agreement (DTA) with the host country.
Readers can find more information on RTFTC and how employers can apply to Revenue for the same here.
Also, please note that there may be an additional credit due for Universal Social Charge (USC) via an Income Tax Return at the year end.
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