Taxation of Benefits
Taxation of Proprietary and Non-Proprietary Directors – Income Tax
Proprietary and Non-proprietary Directors. Limited Companies Ireland. Income Tax Return. Company Payroll. Form 11 Tax Returns
There are two main types of director: a proprietary director who owns more than 15% of the share capital of the company and a non-proprietary director who owns less than 15% of the share capital of the company. In general, a director is deemed to be a ‘chargeable person’ for Income Tax purposes. This means that they are obliged to file an Income Tax Return (Form 11) every year even in situations where their entire income has already been taxed at source through the PAYE system (i.e. the company payroll). Non-proprietary directors, however, as well as unpaid directors, are excluded from the obligation to file an annual income tax return.
A Proprietary Director must also comply with the self-assessment regime which means they have a requirement to make payments on account to meet their preliminary tax obligations. In situations where these payments are not made by the due date, the director is exposed to statutory interest at a rate of approximately 8% per annum.
A late surcharge applies in circumstances where the Director’s Income Tax Return is filed after the due date. The surcharge is either (a) 5% where the tax return is delivered within two months of the filing date or (b) 10% where the tax return is not delivered within two months of the filing date. It is important to keep in mind that the surcharge will be calculated on the director’s income tax liability for the year of assessment before taking into account any PAYE deducted from their salary at source. It should also be remembered that the Director can only claim a credit for the PAYE deducted if the company has in fact paid over this tax in full to Revenue.
Proprietary directors are not entitled to an Employee Tax Credit. In general, this rule, subject to some exceptions, also applies in relation to a spouse or family member of a proprietary director who is in receipt of a salary from the company. Proprietary Directors and their spouse and family members may, however, be entitled to the Earned Income Credit.
The director’s salary, just like any other employee’s salary, is an allowable deduction for the purposes of calculating Corporation Tax.
According to the Social Welfare and Pensions (Miscellaneous Provisions) Act 2013, a director with a 50% shareholding in the company will be insurable under Class S for PRSI purposes. For proprietary directors with a shareholding of less than 50% of the company the PRSI treatment will be established on a case by case basis.
Where the director has a ‘controlling interest’ in the company, they will not be treated as ‘an employed contributor’ for PRSI purposes on any income or salary they receive from the company. Therefore, all amounts paid by the company to the director will be insurable under Class ‘S’ meaning that they will be treated as a self-employed contributor and liable to PRSI at 4%. Employers’ PRSI will not be applicable to their salary.
Where a Director is insured under Class A, PRSI is payable on their earnings at 4% and up to 10.75% Employer’s PRSI by the employer/company.
Even if you are not considered to be Irish resident by virtue of the 183 day rule or the “Look Back” rule, if you are in receipt of a salary from an Irish limited company you will be required to pay Income Tax to the Revenue Commissioners. If, however, you are resident in a country with which Ireland has a Double Taxation Agreement and your income is liable to tax in both countries, you should be able to claim relief on the tax you paid in Ireland.
For further information, please click: https://www.revenue.ie/en/employing-people/becoming-an-employer-and-ongoing-obligations/payments-to-employees/directors.aspx
Please be aware that the information contained in this article is of a general nature. It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.
Income Tax – Maternity Benefit, Adoptive Benefit and Health & Safety Benefit
Income Tax. Personal Tax on benefits. PAYE Employees
Taxation of Maternity Benefit, Adoptive Benefit and Health & Safety Benefit
From 1st July 2013 the following payments by the Department of Social Protection will be liable in full Income Tax. Revenue published a guidance material leaflet on the Income Tax treatment of a range of benefits for PAYE taxpayers.
From 1st July 2013 the following payments by Department of Social Protection will be taxable in full:
- Maternity Benefit
- Adoptive Benefit
- Health & Safety Benefit
It is important to remember that USC and PRSI will not apply to these benefits.
How will this new system work?
The Department of Social Protection, as part of an ongoing exchange of information with Revenue, will provide Revenue with all payment details to update the tax payers’ records.
Individuals who pay their tax through the PAYE system will, where possible, have their annual tax credits and cut-off point reduced by the amount of these payments so as to avoid any underpayment of taxes at the year end.
Employers and pension providers will be advised of the adjusted tax credits and cut-off points on employer tax credit certificates.
It is important to keep in mind that DSP payments for periods up to 1st July 2013 remain exempt from Income Tax, USC and PRSI.
For further information, please click: https://www.revenue.ie/en/jobs-and-pensions/taxation-of-social-welfare-payments/maternity-adoptive-health-safety-benefits.aspx
Please be aware that the information contained in this article is of a general nature. It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.