What should all Irish Taxpayers know about PAYE and PAYE Modernisation?

On salary or wage or pension received by job doers, the Revenue levies income tax on behalf of the Irish Government. Instead of overburdening the taxpayers with a one-time payment of tax, Revenue allows them to pay tax as they earn.

PAYE stands for “Pay as You Earn”. Whenever the employers pay salary or pensions to employees or directors, they calculate and deduct income tax amount on employee’s income and pays to the Revenue. Wages includes sick pay, maternity or paternity pay and adoption pay. You pay tax over the whole year, each time you are paid, rather than paying tax in one lump sum.

Following taxes are deducted from the income of the employee –

  1. Income Tax
  2. Pay Related Social Insurance (PRSI)
  3. Universal Social Charge (USC)

PAYE pulls off the burden from employees’ shoulders, enabling them to evenly pay the tax amount on each payday in a tax year.

When should employers register for PAYE?

An employer must register for PAYE if he or she pays the employee more than –

  1. €8 per week (or €36 per month), if the employee is working full time,
  2. €2 per week (or €9 per month), if the employee is working part-time.

If an employer has recruited only one employee, who is domestic and is being paid less than €40 per week, then he doesn’t have to register himself for PAYE.

When is the concept of PAYE Modernisation?

Revenue is introducing PAYE modernisation from Jan 1, 2019, to ensure hassle-free communication with businesses and ensuring the deduction of correct PAYE amount.

Under the new system, companies will have to submit details related to the employees’ pay, tax, and other deductions, as well as details of joining and relieving to the Revenue. They have to provide the details on each payday, and the Revenue will ensure that the tax is correctly deducted at the right time for every employee.

The employer will provide the Revenue with payroll information for every employee he or she is paying, including –

  1. Directors
  2. Family Members
  3. New Employees
  4. Departing Employees
  5. PAYE Exclusion Order Employees

The employer also has to report PPSN of every employee. If the PPSN isn’t available, employee’s name, address, date of birth, and employer reference must be stated.

What are the amounts to be reported?

An employer has to report the following amounts about an employee –

  1. Gross Pay – All the income before any deductions are made,
  2. Pay for Income Tax – Gross Pay minus regular payments made by the employee into a pension fund (superannuation contributions)
  3. Pay for USC purpose – Gross Pay minus payments from Department of Employment Affairs and Social Protection
  4. Pay for Employee Pay Related Social Insurance (PRSI) purpose – Gross Pay plus notional pay plus Benefits in Kind (BIK) plus payments made to Approved Superannuation Schemes, Personal Retirement Saving Accounts (PRSA), Approved Revenue Funds (ARFs) and approved permanent health insurance schemes.
  5. Income tax Paid
  6. PRSI Class and Subclass
  7. Employee & Employer PRSI Paid
  8. USC Paid

PAYE modernisation will make the PAY reporting obligation simple and quick, besides improving the business processes also. What are your thoughts about PAYE modernisation? Let us know in the comment section below.

Are you ready for PAYE Modernisation? The new real-time reporting regime will be operational for all employee payments being made from 1st January 2019.

Book your free consultation here. 

Budget 2019 Ireland – How is it going to impact your financials in the New Year!

The objective of Budget 2019 Ireland, as mentioned by Minister of Finance Paschal Donohoe in his speech on 9th October 2018, is to sustain the recent progress of the economy and enable careful management of the public finances. He focused more on government spending and their effect on lower and middle-class earners, rather than reducing the tax rates.

Highlights of the Budget 2019

“Anti-Tax Avoidance Directive” will be implemented rigorously – Irish Government has made it loud and clear. At least, it was clearly seen in the Irish Government Budget for Fiscal Year 2019.

Exit Tax Regime on Deemed Capital Gains

Because of EU’s Anti-Tax Avoidance Directive (ATAD), new “exit tax” has been brought in to leave the scope for tax escaping by companies leaving Ireland. Exit tax rate is 12.5%, and it will be applicable from the Budget Night itself.

When a company leaves Ireland, it will be assumed that the company has disposed and then reacquired all its remaining assets. Actual disposal does not occur, but the company has to pay the tax deeming the disposal. Corporate companies will be taxed under the Exit Tax Regime if –

1. It is resident in another EU country and transfers assets from its Permanent Establishment in Ireland to its head office or Permanent Establishment in another country.

2. It is resident in another EU country and transfers the business carried on by PE in Ireland to another country, or

3. It transfers its tax residence from Ireland to another country. The standard capital gains tax rate is 33%, but the exit tax rate has been kept at 12.5%. However, if a transfer is carried out specifically to avoid a 33% tax rate and intentionally kept at 12.5%, then the capital gains will be taxed at 33%.

The increment in Income Tax standard rate band

The income tax standard rate band for all earners has been increased by €750.

40% income tax rate will kick in for-
– Single Earners at € 35,300 instead of € 34,550,
– Married One-Earner Couples at € 44,300 instead of € 43,550

Home carer tax credit has been increased from € 1,200 to € 1,500.

Increment in VAT for the tourism sector

The government has increased VAT for tourism and hospitality sector from 9% to 13.5%. Suppliers of goods and services related to this sector will either have to bear the increment by themselves suffering loss or will have to transfer the incidence to customers, making the purchases expensive.

VAT charged on the hotel, restaurant, and other entertainment is generally nondeductible. Hence it will also increase the purchase cost for the businesses.

Other Tax Related Changes

  • Startups are relieved from corporate tax for another 3 years i.e. till 2021.
  • Film corporation tax credit scheme has been extended to 2024.
  • Time- limited additional 5% credit will be available in certain regions which will be tapered out over 4 years.
  • Current Group A threshold, which applies to gifts and property etc inherited by children from their parents has been increased from € 310,000 to € 320,000.
  • Young Trained Farmers Stamp Duty Relief has been extended for an additional 3 years to 31 December 2021.
  • VAT rate on electronic publications (e-books and electronically supplied newspapers) has been reduced from 23% to 9%.
  • On a pack of 20 cigarettes, excise duty is increased by 50 cents.
  • Minimum excise duty is applicable on tobacco products, which means excise duty will be levied on cigarettes sold below € 11 also.
  • 100% tax deductibility on interest paid by landlords for acquiring a loan to purchase or repair the household rented property.
  • Vehicle registration tax belief for hybrid vehicles has been extended till the end of 2019.

For more information on how the new budget will affect your tax calculation, contact ADW Accountants by filling the form here or simply call on +353 1 843 5776. You can also drop us an email to info@adwaccountants.ie