Revenue’s Manual Tax and Universal Social Charge treatment of income arising from having or exercising of the public office of director of an Irish incorporated company has been updated to include a new paragraph (1.1) “Payments to Directors”.
This paragraph outlines that PAYE must be operated on all payments to directors, even if the nature of the payment cannot be established by the company at the time it is made.
See extract from Revenue Manual below
The relevant legislation is Section 19 of the Taxes Consolidation Act 1997.
Payments to Directors Payments to office holders, in their capacity as office holders, are chargeable to tax under Schedule E and subject to deductions at source under the PAYE system.
Where a company makes a payment to a director and, at the time of the making of the payment, the company is unable to establish by way of documentary evidence at that time that the payment is something other than in the nature of remuneration arising from the directorship, then such a payment is paid to the director in his or her capacity as an office holder and is subject to deductions under the PAYE system. Note: By virtue of section 987 of the Taxes Consolidation Act 1997, failure to comply with any employer obligation provided for in Chapter 4 of Part 42 of the Taxes Consolidation Act 1997 and the related regulations, may result in liability for a fixed penalty of €4,000. The Company Secretary shall be liable for a separate penalty of €3,000.
Example A director is in receipt of payments from a company amounting to €36,000 annually, paid monthly. The company state that the payments are “payments on account” to cover travel and subsistence, payments made by the director on behalf of the company, director’s loan payments and remuneration. They reconcile the director’s current account at the end of the year when preparing the annual accounts. As these payments are made to the director in his or her capacity as an office holder, deductions under the PAYE system must be made by the company on the making of the payments.
