It sounds idyllic. Decamping from Ireland to work in a low-cost, high-quality-of-life location with a warm climate without having to change job. Waking up in a cottage in the Languedoc and walking along the banks of the Canal du Midi to pick up some bread from the boulangerie before going home to percolate some coffee while reading the morning emails and starting the day’s work sounds like a pretty good option.
But it’s not quite as simple or straightforward as that. Tax, pension, healthcare, social welfare and a host of other considerations have to be taken into account and weighed up before the decision can be made to switch countries on a long-term or permanent basis.
The first question to be taken into account is income tax. It has been assumed, wrongly in most cases, that employees of Irish firms working remotely in France or Portugal or anywhere else for that matter will simply continue to pay tax and PRSI to the Irish Revenue. It has also been assumed that if employees spend less than 183 days working in the overseas location, they are not liable for income tax in that jurisdiction – not necessarily the case.
In the first instance, if the employee is living permanently in the overseas jurisdiction, they are almost certainly liable to pay income tax in that country. Secondly, even if they spend fewer than 183 days working there, a holiday visit can take them over the limit. Furthermore, that applies only where Ireland has a double taxation treaty with the country in question. Fortunately, that applies to the great majority of countries where Irish people would even consider working.
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In addition, their country of residence still has primary taxing rights on income they earn while working there. Things can get a little bit complex there and employers and employees should make sure to take good advice before finding themselves on the wrong side of more than one taxman.
Next up comes social welfare and health insurance payments. While Ireland and the UK have a reciprocal arrangement governing cross-border workers which allows people taxed in one country but living in the other to benefit from their home country’s health and social security systems, that is not the case for Ireland and other members of the European Union.
The rules are rather complex, but they boil down to a situation that if a worker is ‘posted’ to another country for less than 24 months they can continue to pay Irish PRSI and avail of the health and social care systems of the country where they work. Where that is not the case, they can be liable to paying social and health insurance in the country of residence. And the cost can eye-wateringly high in countries such as France.
And don’t think you can get away with paying Irish PRSI for the first 24 months and then switching – that’s inviting trouble. Countries with top-of-the-range health services tend not to appreciate people perceived to be attempting to get a free ride.
Again, professional advice is a necessity rather than an option.
The other issue for employees to consider is that they may inadvertently lock themselves out of a number of valuable workplace benefits by leaving the country. Many pension schemes and private health and other insurance policies exclude people who are not legally resident in Ireland. Definitely worth checking out before packing the bags.
Employers too need to be careful. In the first instance they run the risk of employees based in an overseas jurisdiction giving them permanent establishment in that country. Put simply, that means the company would be liable for corporation tax there. The rules around this are quite complex but, generally speaking, having any individual with authority to negotiate contracts on behalf of the company located in the country in question will probably lead to permanent establishment. Again, best checked out in advance of a costly mistake.
Finally, there is the not so small matter of local employment law. Employees are likely to gain rights under local employment law after a relatively short period. These can be much more far-reaching and valuable for the employee than those which they enjoy in Ireland. And employers can’t seek to come to an agreement with such employees that Irish law will apply – European law prevents that.
Decamping for sunnier climes may sound attractive but check out the potential pitfalls before setting off.