Liam Lawlor
Question:179 Mr. Lawlor asked the Minister for Finance if he will confirm the VAT to be levied upon a self-employed person (details supplied) in County Dublin earning less than £20,000 per annum. [17923/00]
Written Answers. - Tax Code.
I am informed by the Revenue Commissioners that a self employed person supplying services does not have to register or account for VAT if the turnover from the supply of those services does not exceed, or is not likely to exceed, £20,000 in any continuous period of 12 months. If the threshold is not exceeded the self employed person may, subject to certain conditions, elect to register and account for VAT. A business with a turnover of less than £20,000 does not have to charge VAT to its customers but it cannot reclaim VAT charged to it by its suppliers.
Further information is available in the Revenue information leaflet "VAT for Small Business – A Revenue Guide", a copy of which has been sent to the Deputy. If the taxpayer has a specific problem, the Office of the Chief Inspector of Taxes, VAT technical services unit, Setanta Centre, Nassau Street, will be happy to assist further in the matter. The telephone number is: 6716777, ext: 70777.
Ruairí Quinn
Question:180 Mr. Quinn asked the Minister for Finance if his attention has been drawn to the fact that a large number of service companies in the construction sector have difficulties in their understanding of their obligations in respect of taxation for employees who are hired on a contract basis given that there seems to be a lack of clarity in the application of existing taxation legislation, specifically in relation to the obligation of a European worker, just arrived in Ireland, to pay tax; whether such workers have a tax free holiday; the obligation of the same worker to pay VAT; the steps an employer should take to ensure that he is not held liable for the payment of tax of these persons at a future Revenue audit; if he will ensure that the Revenue Commissioners in conjunction with his Department issue a tax guidance bulletin that would outline the precise position in relation to these matters; and if he will make a statement on the matter. [17950/00]
I am informed by the Revenue Commissioners that the taxation regime for individuals, whether or not they are hired on a contract basis, depends on whether the individuals are employed or self-employed. The terms "employed" and "self-employed" are not defined in law. The question of which category a worker is in depends on what the individual does and the terms and conditions, be they written, verbal or implied, under which he or she is engaged. In most cases it will be clear whether an individual is employed or self-employed. However, it is recognised that in some cases it may be difficult to determine where the dividing line falls. To assist this process Revenue, in conjunction with the Department of Social, Community and Family Affairs, have published guidelines and issued a joint information leaflet on factors to be taken into account in determining whether an individual is to be treated as employed or self-employed for tax and social insurance purposes. Guidelines have also been devised with specific reference to the factors relevant to the construction industry sector. These guidelines are included in Revenue information leaflet IT 25.
With regard to the Deputy's specific example of a European construction worker working in Ireland, the tax legislation covering the residence of individuals and the provisions of double taxation agreements would have a bearing on the taxation position. In general individuals are liable to income tax in Ireland in respect of income from a trade or employment exercised in the State.
There is no general entitlement to a "tax holiday" and no such concept exists in Irish tax law. Instead the tax treatment depends on the circumstances of each case as governed by national tax law and international double taxation treaties.
Where an individual is self employed and is a resident of a country with which Ireland has a double taxation convention (a treaty country), he or she would be liable to income tax only where he or she trades through a permanent establishment situated in the State. A building site would be regarded as a permanent establishment if the individual is present on the site for a period of time, typically six months. Relevant contracts tax (RCT) would apply to any payments made to that person by a builder. Tax should be deducted by the builder at 35% unless the person has a C2 certificate and the builder has been authorised by the inspector of taxes to make payments without deduction of RCT. There are procedures in place for the person to reclaim this RCT if no liability arises. The obligations of principal contractors and sub-contractors are set out in Revenue information leaflets IT63 and IT64.
If, on the other hand, the individual is an employee then the person who is contractually obliged to make the payment to the worker would in general be the employer for the purposes of collecting income tax and PRSI levies through the PAYE system. In certain circumstances there is provision within the PAYE regulations for a person to have more than one employer – a paying employer, such as a service company, and an employer under whose control the employee works – and for interaction between both employers to ensure that PAYE and PRSI is operated by one of them. An employer resident outside the State and not trading in the State through a permanent establishment would not be required to operate PAYE.
Where an employee who is a resident of a treaty country is working for an employer who is resident outside the State and the employer is not trading in the State through a permanent establishment, then provided the employee is present in the State for less than 183 days he or she would not be liable to income tax. An employee who is not a resident of a treaty country is liable to income tax in respect of an employment exercised in the State, irrespective of how long the employee is in the State or whether the employer has a permanent establishment in the State.
With regard to the Deputy's question on VAT a person established in the State who, otherwise than as an employee of another person, engages in the supply within the State, of taxable goods or services in the course or furtherance of business, is a taxable person for VAT purposes where their turnover from such supply exceeds set thresholds. Currently these thresholds are, in general, £40,000 for persons supplying goods and £20,000 for persons supplying services. An unestablished person supplying goods or services in the State is not entitled to any turnover threshold and is a taxable person in respect of all such supplies. All taxable persons are liable to register and account for VAT on their supplies of goods and/or services.
Where an invoice charging Irish VAT is received from a supplier the validity of any of the details shown on it may be verified by contacting the tax district dealing with the business. It is recommended that this be done if there is any reason to doubt the authenticity of such invoice details. This is the best way to protect the position of the Irish business in the event of a subsequent tax audit.
I am informed by the Revenue Commissioners that they will undertake a review of the information leaflets currently available for the construction industry in light of the Deputy's question and will consider what further material should be made available. In the meantime, companies in doubt as to their obligations are advised to contact their local tax office for advice.