Allowing Facebook staff to work overseas won’t change Ireland’s tax status, company says


Facebook’s decision to allow staff to work from abroad will not change their tax status in Ireland, the social media company said after opening up remote work to people at all levels of the organization.

The move comes as other companies fear that allowing staff to work outside the jurisdiction could lead to corporate tax issues by diminishing the substance of Irish operations which benefit from the low tax in the UK. 12.5% ​​state on corporate profits.

Facebook said staff whose work can be done remotely can request a move starting next week, adding that they will be subject to local income and employment tax law and in their new country. The decision will make permanent ad hoc arrangements introduced during the first coronavirus lockdown last year.

When asked if such measures would lead to corporate tax problems if a large part of its workforce was no longer based in Ireland, Facebook said it still wanted to expand its Irish business. . There has been no change in plans for a new campus in Ballsbridge, Dublin, which could accommodate up to 7,000 employees at the site of the former AIB banking center, he said.

From the end of the month, any employee will be able to move from the United States to Canada or from Europe, the Middle East or Africa to anywhere in the United Kingdom, an option that was previously unavailable. open only to technical or recruiting roles.

By January 2022, Facebook employees will be allowed to move permanently between seven other countries. The countries are Ireland, France, Germany, Italy, the Netherlands, Poland, Spain and the United Kingdom.

There was already cross-border remote working between Ireland and the UK ahead of Thursday’s announcement.

Facebook is one of the largest business organizations in the state, with € 34.3 billion in revenue in 2019, € 481.9 million in pre-tax profit and € 173.2 million corporate tax that year.

“Remote working will have no impact on the substance of our operations here or on the number of employees overall,” Facebook said in response to questions.

“Facebook Ireland will remain the [Europe, Middle East and Africa] headquarters, where decision-makers and high-level functions, including content operations, user support, data protection, privacy operations and the office of the Data Protection Officer, are and will continue to be be based.

“In addition, we do not expect a decrease in the number of employees. If anything, we expect them to grow as we continue to hire in Ireland. “

Multiple jurisdictions

The Revenue Commissioners said multinational companies, by their nature, involved multiple jurisdictions. “Revenue administers corporate tax on a self-assessment basis, overseen by risk-based compliance interventions,” the tax administration said.

“It is up to every business to make decisions and make decisions about its corporate tax obligations taking into account all facts and circumstances, applicable law and published guidance. “

Behind the scenes, the Finance Department is very alarmed by Facebook’s move, with talks apparently underway between Merrion Street and Revenue.

Sources have pointed to the possible loss of income tax for workers who do not reside here, and there are fears that Facebook’s move could set a precedent for other companies. One source called the move “extremely worrying” and said if it became a trend it would present “huge challenges for the income base.”

While other companies plan to reopen offices that have been largely closed since the pandemic, many have already recalled staff to Ireland for tax reasons after allowing them to work abroad during the closures.

Fergal O’Brien, director of the corporate lobby group Ibec, admitted that the employer had decided to send its staff back to Ireland. “From a corporate and personal tax perspective and when it comes to labor law issues, it is incredibly complex for companies to have staff based in multiple jurisdictions,” he said.

“We know of a number of companies who have advised their employees on the need to return to Irish jurisdiction.”

A consideration

Mark Kennedy, managing partner at Mazars accounting firm, said there was no hard and fast rule about out-of-state work and added that taxation was just one consideration among many. .

“I am aware of situations where people have brought back individuals from abroad. I am aware of situations where people have found arrangements that work well in other countries, ”he said.

“One of the impacts of the pandemic and of working from home has certainly been that more companies have people working overseas and this has raised issues in terms of income tax and potentially the tax situation. businesses and individuals.

“But it’s not just a question of taxes. There are a lot of business issues inherent in these kinds of arrangements, right down to work-life balance, productivity, coordination, and cultural issues like teamwork and staff collaboration.

Peter Vale, Tax Partner at Grant Thornton Accountants, said: “There is no doubt that if you have employees in another jurisdiction, in most cases it would require the company to register for payroll taxes. in that jurisdiction. Generally, an employee working from home in another jurisdiction would not create a presence for corporate tax purposes in that jurisdiction.

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