Revenue Clamps Down on ‘Digital Nomad’ Income Tax Collection

Digital Nomad Income Tax Collection

Date:

Category:

Share this article:

Never mind working from home. For an increasing number of people, the biggest perk the digitisation of work presents is the possibility of working as far away from home as possible.

As the WFH phenomenon has proven conclusively, as long as you’re armed with a laptop and an internet connection, nowadays you can carry out an impressive range of job roles from anywhere you please.

Some people are taking this quite literally, choosing an itinerant existence that essentially combines long-term travel with holding down a steady job. They’re known as digital nomads.

It’s a great life for those who take the leap. But it’s not without its complications. Not least around paying tax on what you earn.

Changes to Income Tax exemptions

Earlier this year, Ireland’s Revenue changed its rules on how Income Tax is to be collected from employees who are based abroad but work for Irish firms. The changes relate to anyone who is classed as a non-resident but splits their time between working overseas and in Ireland.

For these individuals, Irish tax law states that Income Tax and USC contributions should only be withheld by employers on earnings accrued for work carried out in Ireland. The assumption is that, if the worker is a resident in another country, they will be subject to local taxation on earnings from duties carried out there.

This still applies. However, the new requirement is that employers must seek prior approval in writing from Revenue before they in effect exempt earnings on duties carried out abroad from Irish taxation.

Adapting to new realities

This can be interpreted as a clear tightening of the reins on those free spirits who flit here, there and everywhere in the course of their working lives. By their very nature, digital nomads often don’t stay in one place very long and often carry out work in places where they are not residents. This is a new reality of global travel and communication links that state-based visa and taxation systems are yet to catch up with.

What Revenue has done is give itself the opportunity to look at individual cases and decide whether a non-resident worker should in fact be exempt from Irish taxation. It may well be the case that the work they carry out, digital in its nature, actually contributes to the Irish economy but from afar, rather than to that of the country they are residing in or passing through. Paying Income Tax in Ireland may therefore be more appropriate.

This brings the system for individuals who spend some time in Ireland without being resident here into line with the rules for employees who are based abroad full-time. For these workers, authorisation must be sought not to deduct Income Tax and USC contributions in the form of a PAYE Exclusion Order

If employers do not seek prior authorisation for excluding earnings accrued while abroad from tax deductions, then they must withhold contributions on all earnings. This could lead to employees being taxed twice if they also pay Income Tax in another country. Although they can apply for relief later down the line.

The changes do not affect anyone who is classed as a resident in Ireland, but who might spend part of their time abroad, including as they work. Irish residents taking up the digital nomad lifestyle will still have Income Tax and USC withheld on all their earnings.

Speak to an expert

If you require tax advice about Revenue’s new tax rules, request a call back below.

This website uses cookies

With these cookies, we and third parties can collect information about you and your internet behaviour, both within and outside our website. Based on this, we and third parties adjust the website, our communication, and advertisements to your interests and profile. You can read more information in our cookie statement.

If you opt for acceptance, we will place all cookies. If you opt for rejection, we will only place functional and analytical cookies. You can adjust your preferences at a later time.

Accept Reject More options

This website uses cookies

With these cookies, we and third parties can collect information about you and your internet behaviour, both within and outside our website. Based on this, we and third parties adjust the website, our communication, and advertisements to your interests and profile. You can read more information in our cookie statement.

Functional cookies
Arrow down

Functional cookies are essential for the proper functioning of our website. They allow us to enable basic functions such as page navigation and access to secure areas. These cookies do not collect personal information and cannot be disabled.

Analytical cookies
Arrow down

Analytical cookies help us gain insight into how visitors use our website. We collect anonymised data about page interactions and navigation, enabling us to continuously improve our site.

Marketing cookies
Arrow down

Marketing cookies are used to track visitors when they visit different websites. The goal is to display relevant advertisements to the individual user. By allowing these cookies, you help us show you relevant content and offers.

Accept all Save

Name

Subtitle
Developer
Location
They are focussed on creating a future-focused and relationship-driven culture, that keeps its promises to you, our team members, and partners.
Xeinadin