Irish-based tech giants whose non-Irish employees returned home to work remotely when the Covid-19 pandemic hit are now exposed, along with their employees, to significant tax, immigration and social security implications, it has emerged.
A key tax adviser with global audit firm EY told the Sunday Independent it was dealing with increasing numbers of multinational and other clients facing complications because staff had left Ireland to base themselves back home in overseas jurisdictions.
Some firms were already looking at the implications of this for how they use their Irish offices and others were struggling to pinpoint where their employees are now located.
Social security costs alone could be "significant" and were a cause for concern for Irish-based firms, including big tech employers, because remote workers may now be liable to tax authorities in their home countries if new remote working arrangements were allowed to continue, said EY tax partner Michael Rooney.
"In continental Europe, in France and Belgium for example, employer social security can be 40pc or 45pc as opposed to 11pc employer PRSI here," he said. This would mean a tech worker on a €100,000 salary, who was now working remotely in one of those countries, could cost their Irish-based employer €30,000 more to employ, not including potentially substantial administrative costs, said Rooney.
"That's an added cost that these companies need to really look at and factor in if they're thinking about allowing their employees to stay longer-term in an overseas location," he said.
More than 500,000 people from other countries lived in Ireland in 2019, with more than 35,000 of them working in the IT sector alone, according to CSO figures. The ability of Irish-based US multinational tech companies to attract talent from around Europe and beyond has been a key part of Ireland's highly successful push to win foreign direct investment in recent years. Companies such as Google, for example, have as many as 70 different nationalities working for their Irish operation.
"I've seen more and more companies who are dealing with this issue," said Rooney. "I think companies are just really discovering that their people are overseas in the last few weeks. I'd urge companies to really look at that and find out exactly where their employees are, how long they are intending to stay there and work out whether that is creating a tax implication for them. We don't know how many are gone yet but I do foresee that a lot more people will request permission to stay overseas.
"It can be hard to work out where people are but it is important because, as an employer, they have an obligation to pay the correct amount of taxes."
Remote working can also cause immigration issues because workers must have the right to work in whatever country they are located. Employees may also face income tax issues. "If they are overseas, that country will have the right to tax them for any duties they perform there. At the moment there are force majeure principles in place because of Covid restrictions but a lot of countries will be looking at the implications.
“It doesn’t depend on who your employer is. It depends on where you perform your duties,” said Rooney. “So a country like Italy would have the right to tax their employment income and that raises the question is there a payroll requirement for the company in that location?”
Firms would need to examine how to make payments to local tax authorities, he said.
“If you have a number of people in these overseas locations, it just adds a lot more to the administrative burden of the company in terms of reporting and paying over the taxes.”
Irish-based companies are “now also thinking about transforming their business and thinking more long-term about whether or not they actually need their people physically back in the office. Companies are looking at the use of buildings going forward and may be thinking will they use them as a space for collaboration, for networking, for entertainment. How they actually use properties could be looked at quite differently in the future,” he said.
Any scaling back of office use could have major implications for Dublin’s commercial property market but Rooney insisted multinationals were still committed to their Irish presence and location.
Sunday Indo Business