Employers Guide to Income Tax in IrelandThe Irish income tax year runs from January to December with the obligation on employers to identify, calculate and deduct the relevant taxes from their employees each time a payment of wages or salary is made.

Payment periods are usually weekly, fortnightly or monthly. Employers are required to deduct Income Tax (PAYE), Pay Related Social Insurance (PRSI), Universal Social Charge (USC) and Local Property Tax (LPT). The employer is also liable for Employers PRSI which is generally chargeable at a rate of 10.95% or 8.7% depending on the employee's income amount.

Registering for PAYE

In most cases, employees pay tax on their income through the PAYE (Pay As You Earn) system operated by you (the employer) under the guidance of the Irish Revenue Commissioners. The PAYE system enables you to calculate and deduct tax, Pay Related Social Insurance (PRSI) and Universal Social Charge (USC) from your employees. You make these deductions each time you pay your employee, reporting them to Revenue on or before the pay date.

Businesses employing one or more persons are obliged to register as employers with the Revenue Commissioners either at the time of registering their other tax head (e.g. VAT, Corporation Tax, etc.) or at a later time before employees commence work.

The amount of PAYE, PRSI and USC to be deducted depends on many factors including the earnings amount, nature of employment, age of employee and other personal circumstances. The information required by your payroll operator to calculate the rates of each deduction are issued in an RPN (Revenue Payroll Notification).

Beginning of the year

You will need a Revenue Payroll Notification (RPN) for each of your employees. Each year, an RPN will be made available to you (usually in December) for the coming year.

There will be no RPN available for employees where:

• they are not registered for Pay As You Earn (PAYE)
• they have not provided a Personal Public Service Number (PPSN).

If there is no RPN available for an employee in the new tax year, you must apply an Emergency Tax basis on the employee’s pay. This must be applied from the date the employment commenced until the RPN is available.

Years End

Since the introduction of PAYE Modernisation in January 2019, the end of year return has been abolished. You no longer have to complete form P35 or issue P60's. Each month now stands on its own merits reducing tax overpayments.

Revenue will issue a monthly statement based on your submissions. This will be on the 5th of the following month and will show a summary of the total liability for PAYE, PRSI and USC & LPT. You can view, accept and amend this statement before the 14th of the month. If take no action Revenue will deem it as the monthly statutory return on that day.
An end of year statement will be made available to employees after December 31st 2019 through MyAccount on ROS. This will contain details of the employees pay and deductions from all employments for that tax year.

Paying Tax to Revenue

Monthly Remittances
Once you receive your statement from Revenue showing your total liability for that month based on your payroll submissions you must pay this within:

Quarterly Remittances
If your total PAYE, PRSI and USC payments for the year are €28,800 or less, you can apply to make your payments quarterly.
You can apply to the Collector-General's Division for this option but you must have been an employer for at least 12 months and filed all your returns and payments.
If you make your payments quarterly you still need to:

  • file a payroll submission each time you pay your employees
  • accept the statement issued each month, so to file the statutory monthly return.

How PAYE is Calculated

PAYE is currently payable at 20% and 40% on all taxable income and operated on a Temporary, Emergency, Cumulative or Week1/Month1 basis.

Revenue will issue an RPN for each employee stating the period for which the certificate applies, the manner in which it should be operated and the Standard Rate Cut-Off Point (SRCOP) and Tax Credits to enable the employer calculate the PAYE. The certification will also include details to determine the rate of USC applicable.

An individual will be granted Personal Tax Credits, issued in a Tax Credit Certification, depending on their circumstances to reduce their tax liability. Employee tax credits vary according to their marital status, age and family circumstances. While the main tax credits are automatically issued by Revenue there are a number of additional Tax Credits available on application to Revenue e.g. Relief on Health Expenses, tuition fees, having an incapacitated child.

Pay Related Social Insurance

PRSI is administered by the Department of Employment Affairs and Social Protection (DEASP) but collected through Revenue’s PAYE system. Both you and your employees pay PRSI, the amount depends on the earrings, occupation and personal circumstances. The most common PRSI is Class A, further divided in to subclasses depending on earnings in a given pay period. PRSI Class A comprises of an employee contribution of 4% and employer contribution of 8.7% or 10.95% with different rules, rates and exemptions applying to employee and employer contributions.

Universal Social Charge

USC came into effect in 2011 and is a charge payable on gross income including notional pay but before pension contributions. The rate of USC payable depends on earnings and is applied at 0.5%, 2%, 4.5% and 8%. The band for each rate will be issued on your employees Tax Certificate.

Local Property Tax (LPT)

LPT may be deducted at source from your employees’ wages where it is shown on the employee's Revenue Payroll Notification (RPN). An RPN is issued to you for each employee. This means that the LPT payments are spread equally over the year.

Employer’s Pension Obligations

Where an employee is not eligible to join a company pension scheme within 6 months of commencing employment, you must provide access to a standard Personal Retirement Saving’s Account (PRSA). This applies to all employers regardless of the size of your workforce and it also applies to all employees regardless of the nature of their contract i.e. fixed term, casual, full time, part time etc. If you do not provide any occupational pension scheme for employees or where certain restrictions apply to join the occupational pension scheme, you’re obliged to enter in to a contract with a PRSA provider so that your employees can gain access to at least one standard PRSA.

Keeping Records

You must retain all books, records and documents relevant to your business for a period of six years. You must keep anything that is used to calculate your Income Tax, Corporation Tax or Capital Gains Tax. They can include:

  • receipts for expenses
  • receipts for purchases
  • sales invoices
  • nominal ledgers
  • accounting books

Revenue Online Service (ROS) receipts tracker should be used to store a digital copy of your receipts.

There are many aspect to the computation of payroll and professional help will ensure that employers meet their regulatroy requirements.

By Sarah Browne of Paycheck Plus.