Irish legislation and High Court tax case law (Tipping v Jeancard) confirm that remuneration paid to individuals for carrying out their director duties are subject to income tax under Schedule E. Such income is within the scope of deduction at source of income tax under the Pay As You Earn (PAYE) system and deduction at source of the USC under the USC system.
Non-resident directors
Where an individual is not tax resident in Ireland, the remuneration paid to any individual for the performance of their directorship duties apply irrespective of where the individual is tax resident or where the individual performs their duties.
There are cases where this income can be relieved under the terms of a double taxation agreement. However, it is a matter for the relevant director to satisfy the Revenue Commissioners that relief under a relevant double taxation agreement is appropriate.
Non-resident individuals and division of duties
Where a non-resident individual may perform duties of an employee in addition to their directorship duties it may be necessary to issue the individual with two contracts to ensure only the portion of the remuneration that relates to the performance of their directorship duties are subjected to Schedule E deductions in Ireland.
Non-Executive Directors and Employers PRSI
Normally when an individual is not a proprietary director of an Irish incorporated company, their directors fees are subject to PRSI Class A and therefore liable to Employers PRSI. However, where the individual is employed in the capacity of a Non-Executive director Employers PRSI does not apply.
Should you wish to discuss any of the above or require assistance with incorporating your Irish incorporated company or implementing a payroll system, please do not hesitate to contact us on info@registeredoffice.ie