Facebook’s decision to allow staff work from abroad won’t alter its tax status in Ireland, the social media company said after it opened remote work to people at all levels of the organisation.
The move comes despite concern in other companies that allowing staff to work outside the jurisdiction could lead to corporation tax issues by diminishing the substance of Irish operations that benefit from the State’s low 12.5 per cent tax on business profits.
Facebook has said staff whose work can be done remotely can request a move from next week, adding that they will be subject to local income tax and employment law and in their new country. The decision will make permanent ad hoc arrangements introduced in the first coronavirus lockdown last year.
Asked whether such moves would lead to corporation tax issues if a large portion of its workforce was no longer based in Ireland, Facebook said it still wanted to grow its Irish operation. There was no change to plans for a new campus at Ballsbridge, Dublin, which would accommodate up to 7,000 staff on the site of the former AIB bank centre, it said.
From later in the month, any employee will be able to move from the US to Canada or from Europe, the Middle East or Africa to anywhere in the UK, an option that was previously only open to technical or recruiting roles.
By January 2022, Facebook employees will be allowed to permanently move between seven more countries. The countries are Ireland, France, Germany, Italy, Netherlands, Poland, Spain and the UK.
There was already cross border remote work between Ireland and the UK prior to Thursday’s announcement.
Facebook is one of the largest business organisations in the State, with €34.3 billion revenues in 2019, €481.9 million in pretax profits and €173.2 million in corporation tax liabilities that year.
“Remote work will not have any impact on the substance of our operations here or employee numbers on balance,” Facebook said in reply to questions.
“Facebook Ireland will remain the [Europe, Middle East and Africa] headquarters, where senior decision-makers and functions including content operations, user support, data protection, privacy operations and the office of the data protection officer are and will continue to be based.
“Furthermore, we don’t expect employee numbers to decrease. If anything we expect them to grow as we continue to hire in Ireland.”
Multiple jurisdictions
The Revenue Commissioners said multinational business by its nature involved multiple jurisdictions. “Revenue administer corporation tax on a self-assessment basis, monitored by risk-focused compliance interventions,” the tax authority said.
“It is a matter for each company to take decisions and make determinations in respect of its corporation tax obligations having regard to all the facts and circumstances, the relevant governing legislation and the guidance issued.”
Behind the scenes, there is considerable alarm at the Department of Finance at the move by Facebook, with discussions understood to be ongoing between Merrion Street and Revenue.
Sources pointed to the possible loss of income tax from workers who are not resident here, and there is worry that the Facebook move would set a precedent for other companies. One source described the move as “hugely worrying” and said that if it turned into a trend, it would present “enormous challenges to the revenue base”.
As other companies make plans to reopen offices that have been largely shut since the pandemic struck, many have already called staff back to Ireland for tax reasons after allowing them to work abroad during lockdowns.
Fergal O’Brien, a director with business lobby group Ibec, acknowledged employer moves to return staff to Ireland. “From a corporate and personal tax perspective and in relation to employment law issues, it’s incredibly complex for companies to have staff based in multiple jurisdictions,” he said.
“We are aware of a number of companies who have issued guidance to their employees about the need to return to the Irish jurisdiction.”
One consideration
Mark Kennedy, managing partner at accounting firm Mazars, said there was no hard and fast rule on working outside the State and added that tax was but one consideration among many.
“I’m aware of situations where people have had individuals come back from abroad. I’m aware of situations where people have found arrangements that work well from other countries,” he said.
“One of the impacts of the pandemic and working from home has certainly been that more companies have people working from abroad and that has raised issues in terms of the income tax and potentially the corporation tax position of the companies and individuals.
“But it’s not just a tax thing. There are a lot of business issues inherent in those kind of arrangements, down to people’s work-life balance, productivity, co-ordination and cultural issues like teamwork and staff collaboration.”
Peter Vale, tax partner at accountants Grant Thornton, said: “Unquestionably, if you have employees in another jurisdiction, in most cases this would require the company to register for payroll taxes in that jurisdiction. Generally, an employee working from home in another jurisdiction wouldn’t create a presence for corporate tax purposes in that jurisdiction.”
