Ireland payroll and tax overview.

Your guide to doing business in Ireland

Doing Business in Ireland

The Republic of Ireland lies at the westernmost edge of Europe, bordered to the north by Northern Ireland and separated from the United Kingdom to the east by the Irish Sea. Since 2010, Ireland’s economy has been growing at a faster than expected rate, reaching a GDP of $384.94 billion in 2019 with a growth rate of around 5.5%. Ireland is a parliamentary republic with a modern, sophisticated economy and strong trade connections to the UK, Europe, and the rest of the world. High technology industries play a significant role in Ireland’s economic profile, which includes pharmaceutical, software, information technology, communications, and medical products and services. The agricultural industry is also historically important: Irish food exports, including beef and dairy, were valued at a record €13 billion in 2019, while Irish whiskey exports were valued at around €1.45 billion. Ireland is home to thousands of international businesses including industry-leading ICT, pharmaceutical, and financial services companies. Ireland is a member of the UN, the WTO, the OECD and the EU, which allows businesses within the country tariff-free trade with the Eurozone. In 2019, Ireland was ranked 24 on the World Bank’s Ease of Doing Business Survey.

Why Invest in Ireland?

Government economic initiatives have stimulated Irish investment opportunities. Reasons to invest in Ireland include:

  • Doing Business: In 2016, Ireland was ranked 15th on the World Bank’s Ease of Doing Business Survey and, in 2015, Forbes named it the 4th best country in the world for business. The Index of Economic Freedom ranked Ireland 8th out of 186 countries for economic freedom.
  • Tax Incentives: At 12.5%, Ireland’s corporate tax rate is one of the lowest in the developed world. Government tax incentives are available for businesses in Ireland - these include numerous international tax treaties, and a 25% research and development tax credit.
  • Skilled Workforce: Ireland’s workforce is highly-educated - it has the highest proportion of mathematics, science and computing graduates in the OECD, while around 43% of the population has completed tertiary education. Over 500,000 Irish residents are fluent in a second language.
  • European Access: As a member of the European Union, Ireland offers its businesses access to the wider continent, both geographically, and commercially. With excellent sea and air links to Europe, businesses in Ireland gain access to a market of over 500 million consumers.
  • Innovation and Research: Attractive investment targets in Ireland take advantage of a culture of innovation and research, including big data, nanotechnology, renewable energy, telecommunications, software, and more. The government’s Science Technology and Innovation strategy is backed by investment of €8.2 billion.

Foreign Direct Investment in Ireland

The Irish Government welcomes inward investment with a variety of investment incentives to attract foreign multinational corporations to Ireland. Foreign and local investors are treated equally, and are both eligible for investment incentives.

Registering a Company and Establishing an Entity in Ireland

The company is required to have a legal entity established in order to process a payroll.

An employer needs a company reference number to register for PAYE. A TR2 form should be sent to the local revenue office and it takes 3 to 4 weeks to be set up.

Business Banking in Ireland

It is not mandatory to make payments to employees from an in-country bank account.

Working Days and Working Hours in Ireland

The working week in Ireland is typically Monday to Friday. The working day for commercial offices is usually 8 hours, typically from 8:30am to 5pm.

Basic Facts about Ireland

Ireland lies in northwest Europe, at the eastern edge of the Atlantic Ocean. It is the second-largest island in the British Isles - separated from its larger counterpart by the Irish Sea. Early civilisation in Ireland dates back to prehistory, but indigenous Gaelic society emerged in the 1st century CE. Modern Ireland stands as a sovereign state: its shares its north-eastern land border with Northern Ireland, and has been a part of the European Union since 1973. Ireland has a temperate climate: Irish weather is mild and changeable but tends towards rainy periods throughout the year. Ireland’s interior regions are characterised by low mountain ranges, forests and rivers, which along with famous towns, cities and historic attractions, attract millions of tourists every year.

Population: 4.83 million (Eurostat, 2018)

Capital: Dublin

Main language: English

Major Religion: Christianity

Monetary unit: Euro

Main exports: Machinery and equipment, chemicals, foodstuffs

GNI per capita: US $59,770 (World Bank, 2018)

Internet domain: .ie

International dialling code: +353

 

Dates are usually written in the day, month and year sequence, for example, 1 July 2012 or 01/07/12.

Numbers are written with a comma to denote thousands and a full stop to denote fractions, for example, €3,000.50 (three thousand Euros and fifty cents).

Income Tax & Social Security in Ireland

The Tax Year runs from 1st January to 31st December in Ireland.

Income Levy was replaced in 2011 by Universal Social Charge (USC).

USC is a tax on an employee income and Benefit in Kind (BIK). It is charged on an employee’s gross income from all sources before any tax reliefs, capital allowances, losses, pension contributions or PRSI. An employee cannot use deductions or RPNs to reduce the amount of USC they must pay.

Medical cardholders and those aged 70 and over whose aggregate income does not exceed €60,000 will pay the reduced rates as follows;

  • The first €12,012.00 at 0.5%
  • Over €12,012.01 at 2%

The TR2 form is used to register a company for all taxes. Depending on the requirement, different sections will require to be completed. The same reference number is used for PAYE, VAT, etc.

A license is not required to make any tax and/or social security filing, but to act on the employers behalf and to make returns, etc. to the revenue, the company performing the filings must be registered as an agent.

Penalties for the late submission and payment of tax and social security depend on the amount outstanding and how overdue the payments are.

Income Tax in Ireland

Nearly all income and Benefit in Kind is liable for tax. Tax on income that an employee earns from employment is deducted from their wages by their employer on behalf of the Irish Government. This is known as Pay As You Earn (PAYE). The amount of tax that the employee contributes depends on the amount of the income that they earn and on their personal circumstances.

Tax is charged as a percentage of a person’s income. The percentage that is paid depends on the level of income. The first part of an employee’s income, up to a certain amount is taxed at 20%. This is known as the standard rate of tax and the amount that it applies to is known as the standard rate tax band.

The remainder of an employee’s income is taxed at the higher rate of tax of 40%.

Social Security in Ireland

Most employers and employees (over 16 years of age) pay social insurance contributions into the National Social Insurance Fund. In general, the payment of social insurance is compulsory.

For people in employment in Ireland, social insurance contributions are divided into different categories, known as ‘classes’ or ‘rates of contribution’. The type of class and rate of contribution an employee pays is determined by the nature of their work.

The majority of employees in Ireland pay Class A PRSI. This class of contribution can entitle them to the full range of social insurance payments that are available from the Department of Social and Family Affairs, if they meet the qualifying criteria.

Employee PRSI - Class A

Employees that earn €352 or less per week (before tax deductions), do not pay any social insurance, however they are still covered by class A social insurance, the employers are paying on the employees’ behalf.

Employees that earn over €352 per week, pay 4% PRSI on all earnings. In 2016, a PRSI credit was introduced and reduces the amount of PRSI payable for people earning between €352.01 and €424 per week.

If an employee earns between €352.01 and €424 per week, the maximum credit of €12 is reduced by one-sixth of the amount of your weekly earnings over €352.01.

Employer PRSI

Employers pay 8.8% class A employer PRSI on weekly earnings up to €386 (€395 from 1 February 2020). The employer will pay 11.05% class A employer PRSI on weekly earnings over €386 (€395 from 1 February 2020).

Monthly contributions must be made to the authorities for social security by the 14th of the following month that contributions were generated on.

Reporting in Ireland

As of 1 January 2019, forms P45, P46, P30, P35 and P60 were abolished with the introduction of real time reporting.

New Starts in Ireland

New employees require a Personal Public Service (PPS) number to be able to get RPNs. If a PPS number is required, it is obtained from the local PPS Registration Centre with upon supplying the supporting documentation. The required supporting documentation is listed on the Department of Social Protection web site (www.welfare.ie).

Until a tax credit is received, the new employee shall be on emergency tax. If the new employee has no PPS number it will be 40% on all earnings.

The following information is required for setting up a new start:

  1. Staff number
  2. Name
  3. Address
  4. Title
  5. Sex
  6. Date of birth
  7. Start date
  8. PPS number
  9. Method of payment and bank details
  10. Contracted hours
  11. Salary/rate of pay
  12. Other payments
  13. Deductions
  14. Pension
  15. Cost codes

Leavers In Ireland

When an employee leaves, the employer will enter the leavers’ leaving date and details of final pay and deductions into Revenue’s online system. The leaver will then be able to log in and view their pay and tax details.

Payroll in Ireland

Payroll administration in Ireland involves a variety of employer obligations, including tax and social security payments, which come with their own variety of detailed rules and regulations. Employers must withhold tax from employees’ paychecks each pay period, and must report those deductions to the Office of the Revenue Commissioners. Income tax is charged at a progressive rate, from 20-40%.

The payroll process must also account for social security contributions from both employer and employee - collectively known in Ireland as Pay Related Social Insurance (PRSI). PRSI payments cover a range of social welfare benefits, and are determined by income level. The Universal Social Charge (USC), implemented in 2011, represents a further payroll consideration and is charged at a progressive rate of 2-8% on employee income.

Employees must be issued with a payslip (these can be provided online), and payroll records must be kept for at least 6 years.