Some of the most frequently asked questions we get from UK contractors who are interested in taking up a contract in Ireland and invoicing through their UK Limited Company are:
"What taxes do I pay if contracting in Ireland with a UK Limited Company?"
“When am I required to start paying Irish tax?”
Most people have an awareness of the 183 day rule, but this rule is also commonly misunderstood and leads contractors to incorrectly assume that if they are in Ireland for less than 183 days, they don't have to think about the Irish tax system or pay Irish taxes.
Here’s our overview guide of how Irish taxes are applied for different contract lengths:
Less than 30 Days
If the contract is for less than 30 days, there is generally no requirement for the UK Limited Company or the contractor to pay Irish taxes. The long standing rule was that you also didn’t even need to inform Revenue of your presence in Ireland. In December 2016, they changed the wording of rule to rather unhelpfully state that you have to inform them if the work is "integral" or if you are replacing an employee - this put uncertainty over this rule as no definition or guidance provided for meaning of "integral". However, if you feel that your work may fall under this criteria, you should register with Irish Revenue.
More than 30 Days but Less than 60 Days
The rules for contracts which are between 30 and 60 days, are almost identical to the rules for contracts of less than 30 days. There are some additional conditions to be met but the vast majority of contractors from EEA states would satisfy these conditions.
It’s worthwhile noting however the 60 day rule relates to multiple years, not just one! If you are in Ireland for more than 60 days over a number of years you will breach this rule and must register for payroll taxes from the start of the contract. As a result, it is our advice to avoid using the 60 day rule as it is difficult to forecast the future and easy to exceed 60 days over several years.
Our advice is therefore to make decisions on whether you will be in Ireland for more or less than 30 days.
More than 30 Days
If you contracting in Ireland for more than 30 days, your company must operate Irish payroll tax on your salary. You will need to:
- Obtain an Irish PPS number (the Irish equivalent of a National Insurance number)
- Register your company for Irish payroll taxes
- Process monthly/weekly payroll on your earnings and pay payroll taxes to the Irish Revenue. It may be helpful to be aware that you are only required to pay Irish payroll tax on salary which relates to the work which you physically carry out whilst on on Irish soil. For example if you are working in Ireland 3 days a week and 2 days in the UK, only 3/5ths of your salary is subject to Irish payroll taxes.
- Submit monthly and year end payroll tax returns
- Deregister the company for Irish payroll taxes at the end of the contract
I don't want to pay Irish taxes!
If you are intending to contract in Ireland for more than 30 days, you should register your company for Irish payroll taxes operate Irish payroll tax on your salary.
An exemption for Irish payroll taxes procedure exists where individuals will not exceed 183 days in Ireland in a year. Unfortunately, the conditions however are so difficult to satisfy very few companies will be eligible for the exemption. For example, if your company invoices an Irish company for the services you provide, the exemption will not be granted.
In general, if the contract is for more than 30 days, then you must operate Irish payroll tax from the start of the contract. However, Irish payroll tax is only chargeable on income which you take out as salary - it is not payable on the full value which is invoiced to your clients. Contractors can decide upon a reasonable salary level which is sufficient to cover your living costs in Ireland. The remainder of the income can be treated as profits in the UK company, allowing the contractor to take the remaining profit out as dividends in the UK. In this way, any Irish payroll taxes can often be quite nominal.
However, you must declare some Irish salary! You cannot work in Ireland for more than 30 days and not declare a reasonable level of salary which reflects your spending and outgoings whilst in Ireland. Also any Irish income tax paid should be available to be offset against UK income tax liabilities. This is due to the Double Taxation Agreement between Ireland and the UK.
Retaining the benefit of the UK dividend tax regime and offsetting Irish income taxes against UK income taxes assumes that you retain your UK tax residency status throughout. If you think you will be in Ireland long enough to lose your UK tax residency, there's a number of issues you need to be aware of. Essentially, the loss of your UK tax residency status will have a serious impact in terms of where your dividends will be taxed and therefore you can lose the benefit of the structure you have set up.
What about corporation tax?
Can your company be liable to pay Irish corporation tax? In some cases, yes. Your company becomes liable to Irish corporation tax if it creates something known as a “Permanent Establishment”, known for short as a “PE”.
A “PE” is an action or activity, the result of which means the company is deemed to have a taxable presence in Ireland. There are a range of different things which could lead a company to create a PE. For contractors, the most common two are:
The habitual concluding of contracts in Ireland (i.e. if you are consistently/regularly renewing your contracts whilst present in Ireland),
The contract length exceeds 6 months in length.
Typically for initial contracts which are less than 6 months in length, a PE is not created and it’s quite easy to avoid. This becomes more difficult on each additional contract or contract renewal.
If you do create a PE, the company must register for Irish corporation tax and pay corporation tax on it’s Irish profits. Irish corporation tax payable is available to be offset against your UK corporation tax liability. Because of this and the fact that Irish corporation tax rates are lower than UK corporation tax rates, Irish corporation tax is not ultimately a cost.
Umbrella Company & Irish Limited Company Alternatives
There are of course alternatives to using your UK Limited Company. One is to use an Irish umbrella company solution. In Ireland you can avail of a Director Umbrella or PAYE Umbrella solution. You can also set up an Irish limited company - this can be a good option for UK contractors who have not previously operated with their own UK limited company.