Q: Mary
My son worked in Canada for two years. He is home now, working for the same company. He pays tax in Canada, and his wages are paid into a Canadian account. Should he pay tax to the Irish Government too?
A: Barry Flanagan, senior tax manager at taxback.com
Matters pertaining to international aspects of tax can be quite complex, and I would need more information to give an accurate answer to your query. However, I can give some general pointers on the usual position, based on what my understanding of the situation is.
From your query, I am assuming your son left Ireland mid-2015 and returned mid-2017, that he is an Irish citizen, and that he is continuing to work for a Canadian employer since his return. If so, it is likely that he was not resident in Ireland for tax purposes in 2016.
If all of the above is correct, then the following would usually be the position. However, if his employer is Irish and not Canadian, it would be much more straightforward.
The short answer is that if your son spends more than 60 days in Ireland in 2017, it is very likely that Irish tax will be due in real time on his employment income, and should be withheld by his employer.
Irish position, 2015:
Firstly, we should address his Irish position in the year of departure. Was he in employment prior to departure? If so, he was probably given only a portion of his annual tax credits via payroll. Therefore, a claim for “Split Year Relief” may be possible, allocating him the PAYE and personal tax credits that he would not have had the opportunity to use before he left, generating a refund. These can be claimed by submitting a Tax Return and accompanying cover letter, claiming relief under Section 822.
Alternatively, simply requesting a P21 Balancing Statement via Revenue Online “My Account” service could trigger a refund, if due, as Revenue should have a copy of the P45 on record.
If my understanding is correct and his employer in Canada in 2015 was a Canadian company and not Irish company, then the employment income earned post departure from Ireland is not taxable here (again using Section 822 “Split Year relief”).
Irish position, 2016:
On the understanding that your son had fewer than 183 days in Ireland in 2016 and fewer than 280 between 2015 and 2016 (with more than 30 in both years), then he would be considered non-resident for tax purposes. If so, while he would still be liable to tax on worldwide income, employment income earned wholly abroad can be excluded, along with foreign investment income if below €3,810.
Canadian position, 2016:
It is likely he will be considered to be tax resident in Canada and I would expect that he was subject to Canadian withholding on his employment income. If he had any other sources of income (such as bank interest, dividends, rental income), we would need to consult the Ireland/Canada Double Tax Treaty to determine which country would have the primary taxing right.
Ireland position, 2017:
If you exercise duties of employment in Ireland, even on behalf of a foreign (Canadian) employer, the salary associated is regarded as Irish source income and is therefore potentially subject to tax here.
If your son has fewer than 60 days here in 2017, he may be able to exclude this income from the charge to Irish tax. If he has between 60 and 183 days, it is possible to apply (within 21 days of arrival) for a dispensation from PAYE, though this option does not seem to be available in this instance, as I understand the move back is permanent.
Therefore, the most likely outcome is not only that this income is taxable here, but that PAYE should also be withheld and paid over by his employer via payroll. This may require a foreign resident employer to register for PAYE/PREM purposes in Ireland, and would require they file monthly P30s and an end of year P35 to declare this. It is unlikely that most foreign employers are aware of this requirement, though they should be aware that an employee spending significant periods of time in another country could have tax consequences.
Canadian position, 2017:
Given that your son’s employer is Canadian (we assume), it is likely they are continuing to deduct Canadian payroll taxes. As we have established above, it is also likely that Irish taxes are due on this. In order to avoid a situation where a “double deduction” could occur, leaving him with little take home pay, action will be required.
Relief could be available under the Ireland/Canada Double Tax Treaty. The most relevant mechanism for obtaining this relief is likely to be via obtaining a waiver letter from the Canadian authorities. Your son should contact his employer and request they apply for this waiver letter to the International Waivers Centre of Expertise that serves them. If the officials at the tax office agree he qualifies, they will send a waiver letter to the employer.
For further information on this topic, see cra.gc.ca/tx/nnrsdnts/cmmn/rndr/wvrspplctn-eng.html.
Barry Flanagan is a senior tax and payroll manager with taxback.com.
Have a query for our panel of experts about emigrating, life abroad or moving home? Email them to abroad@irishtimes.com. This column is a reader service and is not intended to replace professional advice.
