Operational Guidelines: PRSI for those Working Abroad and the Special PRSI Collection System

BREXIT impacts

Ireland / United Kingdom Social Security arrangements from 1 January 2021.

The European Union and the United Kingdom agreed a Trade and Cooperation Agreement which contains a Protocol on Social Security to take effect from 1 January 2021. The Protocol provides for a wide range of social security issues into the future. On the 31 December 2020, the Convention on Social Security agreed between Ireland and the United Kingdom was commenced. Together these Agreements ensure, that all existing social security arrangements for Irish & UK citizens are maintained into the future. Ireland as an EU Member State, will extend on a unilateral basis the advantages of the Convention to Union citizens, as required.

For Brexit-related information see:

• Item was unpublished or removed

For information on social welfare entitlements see:

• Brexit Information
• FAQs on DFA about Brexit

Guidelines used by Special Collection/Postings Section in Waterford

Outline

The Domestic Employer Scheme removes the obligation on certain employers to operate under the PAYE system, with effect from 6th June 1997. The scheme applies to individual domestic employers who employ one domestic employee for less than €40 wages per week. Companies, clubs, organisations and so on, are not covered by the Scheme.

PRSI is paid directly to the Department of Employment Affairs and Social Protection in a single annual payment at the end of each tax year.

Administration and Registration

The Domestic Employer Scheme is administered by:

Information on this scheme together with a Registration Form is available on Tax and Duty Manual 42-04-33.

Guidelines

An employer can qualify for this scheme if she or he:

• is an individual (companies, clubs, organisations and so on do not qualify)
• has only one domestic employee who is employed solely on domestic duties in his or her home - this includes child minding
• pays less than €40 a week to the employee

PRSI Rates

Information on PRSI rates is available in the PRSI Contribution Rates and User Guide (SW14).

Registration

A domestic employer who wishes to register for this Scheme should complete the Registration Form available in Tax and Duty Manual 42-04-33.

PRSI liability for earnings less than €40 per week is paid directly to the Department of Employment Affairs and Social Protection in a single payment at the end of each income tax year.

If earnings are above €40 per week, the employer must register as an employer with Revenue and operate PAYE in the normal way.

The pay to the domestic employee continues to be taxable and the employee must declare this income on income tax returns. For further clarification on any point relating to the submission of income tax returns, please contact your Regional Revenue Office or see attached link for relevant contact details: www.revenue.ie/en/contact/index.

Outline

Volunteer Development Workers (VDWs) who go abroad to work in developing countries are exempt from paying Social Insurance contributions while abroad. They are awarded credited contributions for the duration of their absence, up to an aggregate of 5 years.

Special provisions also apply in respect of the easing of qualifying contribution conditions for the payment of Jobseeker's Benefit, Illness Benefit, Maternity Benefit, Treatment Benefit and Health and Safety Benefit. Details of the qualifying conditions applying to VDWs are included in the relevant Scheme guidelines.

An information booklet and the application form for the Volunteer Development Worker Scheme are available in SW15Booklet

Administration

The Volunteer Development Worker Scheme is administered by:

Volunteer Development Workers

A person is classified as a Volunteer Development Worker (VDW) by the Special Collection Section if they are working temporarily outside Ireland in a developing country and their work has been arranged through Irish Aid.

Developing countries are usually African, Arabian, Asian, Latin-American, Caribbean or Pacific countries, which are described as low or middle income countries by the World Bank. The Minister for Employment Affairs and Social Protection in conjunction with Department of Foreign Affairs and Trade may designate any country as developing, having regard to criteria laid down by international organisations.

For the purposes of the Volunteer Development Workers scheme, Comhlámh, on behalf of Irish Aid, validates the bona fides of the sending Organisation.

PRSI Contributions and Credits

VDWs are exempt from paying Social Insurance contributions while abroad in developing countries. They are awarded credited contributions for the duration of their absence up to an aggregate of 5 years, provided the VDW meets the qualifying conditions of this scheme before starting the overseas assignment.

This award of credits to a Volunteer Development Worker operates as follows:

• persons who have at least 104 Class A PRSI contributions before departure will receive credited contributions for overseas service. These contributions will maintain their PRSI contribution record while working overseas
• if a person has less than 104 Class A contributions, Comhlámh, on behalf of Irish Aid, will pay Class A PRSI contributions on his or her behalf until she or he has 104 Class A contributions paid. After the 104 Class A contributions are paid the VDW will receive credited contributions for the remainder of his or her overseas service
• where there are two consecutive Tax Years where a person has no contributions paidor credited immediately prior to going abroad as a VDW, Comhlámh, on behalf of IrishAid, will pay 26 Class A contributions for the first 26 weeks of the assignment and credited contributions are awarded for the remainder of the VDW's overseas service

Qualifying Conditions:

• the VDW must be employed under conditions of pay which are similar to local conditions in the developing country
• the VDW must be over 16 years of age
• the VDW must be resident in Ireland prior to departure, and
• the work should be arranged through -

A non-governmental agency in Ireland, or

A governmental or non-governmental agency in any Member of the European Union (other than Ireland), or

Directly with the Government of the developing country.

Comhlámh, on behalf of Irish Aid, validates the credentials of the Sending Agency and verifies that a VDW is working overseas on “Volunteer Terms”. Following that validation process, Comhlámh contacts the Special Collection Section and the period of assignment is noted.

Note: Members of religious orders whose work involves pastoral duties do not qualify for this scheme.

Outline

Payment of social insurance is compulsory for all employed persons in the European Economic Area (EEA). As a general rule, social insurance is payable in the country where the person works.

However, exceptions to this general rule are provided for under Council Regulations (EU) No 883/2004 and 987/2009. These Regulations provides that a person normally employed in one Member State, who is sent by his employer to another Member State, can continue to be subject to the Social Insurance provisions of the first Member State, provided that the anticipated duration of that work does not exceed 24 months. Such employees are often referred to as posted workers. This means that a posted worker remains covered under the social security scheme of the sending state and a Portable Document A1 is issued.

Third country nationals who are legally resident in a Member State may avail of the provisions of EU Regulations 883/2004 and 987/2009.

Contributions shall be paid to the social security scheme of the sending country and the employer should ensure that the worker remains insured against accidents at work and occupational diseases. The worker and the members of his or her family remain entitled to cash benefits in case of sickness or maternity, family benefits and benefits for accidents at work or occupational diseases from the sending country. The worker remains insured against unemployment under the scheme of the sending country.

Administration

The Scheme is administered by:

International Postings Section

Procedure for application

An Irish employer wishing to send an employee to work in another Member State, while continuing to pay Irish social insurance, must firstly obtain Portable Document A1 from the Department of Employment Affairs and Social Protection. The International Postings Section has the authority to issue Portable Documents A1, where the period of overseas work does not exceed 24 months.

Application forms to cover the circumstances of an individual posting within the EU / EEA are available below.

If it is known from the outset that the overseas work is longer than 24 months the prior approval of the other Member State should be obtained, under Article 16 of EU Regulation 883/2004, before a Portable Document A1 is issued.

When received, each application is examined to ensure that:

• the employee is actually being posted from Ireland
• where the employee is engaged with a view to being posted, she or he must be subject to Irish Social Insurance legislation for a least one month immediately before posting
• a direct relationship exists between the employer and the employee during the period of posting
• the employee is not being posted to replace another posted worker whose period of posting has ended
• the employee is employed by the employer posting him or her

When the Portable Document A1 is granted the employer and employee are informed of the following:

• that the employee remains subject to Irish Social Insurance for the period of theposting and is therefore exempt from Social Insurance in the Member State whereshe or he has been posted
• the provisions of the posting cease to apply if the direct relationship between theposted worker and the employer which posted him or her is not maintained
• the Portable Document A1 must be available for inspection by the Social Securityauthorities in the Member State where the employee is employed
• they must notify International Postings Section if there is any change in thecircumstances of the posting

In certain circumstances it is possible to extend the posting period beyond 24 months. If the duration of the work to be done extends beyond the period originally anticipated, owing to unforeseen circumstances, the Social Insurance legislation of the first Member State can continue to apply provided the host Member State agrees to the extension.

Qualifying Conditions

Portable Document A1s are available to:

• employees of a company trading in Ireland who are sent by their employer to another Member State of the *European Economic Area (EEA) for a temporary period. Either the employee who is being posted abroad, or his or her employer, should complete an application form and declaration prior to commencing overseas employment
• persons who are normally self-employed in Ireland who obtain temporary self employment in another Member State of the EEA. There is a separate application form for self-employed persons and they are required to show they have normally traded in Ireland on a self employed basis for at least two months immediately before posting. On returning to Ireland a self-employed person must make an income tax return under the self assessment scheme and pay any PRSI due to the Revenue Commissioners. See separate information on PRSI for the Self-Employed HERE
• The following countries form the European Economic Area:

Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, United Kingdom.

Iceland, Norway, Liechtenstein

Switzerland

Outline

Payment of social insurance is compulsory for all employed persons in the *EEA countries. As a general rule persons subject to EU Regulation 883/04 shall be subject to the legislation of a single Member State only.

Special rules apply to persons normally employed in the territory of two or more Member States:

• the legislation of the Member State of residence if he or she works for one, or more employer(s), and he or she pursues a substantial part of his or her activity in the Member State of residence
• Otherwise the circumstances of the Employee and his or her Employer, or Employers, will be decided upon by the International Postings Section with reference to the appropriate criteria carried in the Regulations

A person who normally pursues an activity as an employed person in two or more Member States is a person who:

• while maintaining an activity in one Member State, simultaneously exercises a separate activity in one or more other Member States, irrespective of the duration or nature of that separate activity
• continuously pursues alternating activities, with the exception of marginal activities, in two or more Member States, irrespective of the frequency or regularity of the alternation

Substantial activity pursued in a Member State means that a quantitatively substantial part of all the activities of the worker are pursued there, without this necessarily being the major part of those activities. A 25% activity level is an indicator that a substantial part of all the activities of the worker are being pursued in a Member State.

Administration

The Scheme is administered by:

International Postings Section

Procedure for application

An application for Portable Document A1 must be made to the relevant institution in the employee’s country of residence.

Application forms to cover the individual circumstances of a worker pursuing activities in two or more Member States within the EU / EEA are available at the above address.

The institution in the Member State of residence must decide which Member State’s legislation should apply. This decision is made initially on a provisional basis and the institution in the country of residence must inform each Member State where an activity is performed and where the employer’s registered office is located. If the decision is not contested by any Member State within two months, the provisional decision becomes definitive and a Portable Document A1 is issued.

• The following countries form the European Economic Area:

Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, United Kingdom.

Iceland, Norway, Liechtenstein

Switzerland

Outline

There are two methods of paying Pay-Related Social Insurance (PRSI) in respect of employed persons:

• through the PAYE system, where an employee’s income tax liability is assessed under the PAYE income tax system and PRSI contributions are collected by Revenue, or
• through the Special Collection System for employers who operate a foreign payroll with no access to an Irish payroll and for non-PAYE employees who do not hold PAYE exclusion orders. It is only in those specific scenarios that PRSI contributions are paid directly to the Department of Employment Affairs and Social Protection

The primary Regulations dealing with the Special Collection System are the Social Welfare (Consolidated Contributions and Insurability) Regulations, 1996 (Statutory Instrument 312/1996).

The Special Collection system caters for a very narrow and specific employee group that fall outside of the normal employee group that have their PRSI collected by the Revenue Commissioners, as follows:

• those whose earnings are paid from an employer’s office outside the State but are not obliged to register with Revenue
• persons who are self-assessed for income tax purposes but classified as employees for PRSI purposes - for example Sub Post Masters, Social Welfare Branch Office Managers, medical professionals employed on a fee basis by the various Health Service Executive areas
• those in receipt of Share based remuneration where the employee realises a gain in respect of share options and at the time those options are exercised, the employee is no longer an employee of the employer who granted those options
• Domestic Employees employed in the home of their employer on domestic duties only, and who earn less than €40 per week in the domestic employment
• Church of Ireland Ministers employed by the Representative Church Body (Class E PRSI applies)
• locally hired employees of Embassies

Employers must be approved in advance by the Special Collections Section before being accepted into Special Collections arrangements.

Administration

The Special Collection System is administered by:

Employers whose registration for Special Collections has been accepted must remit PRSI payments on a monthly basis to the Department of Employment Affairs and Social Protection, as instructed by the Special Collections Section. This also involves the submission of an End of Year PRSI return [Form SC1 below], the issue of an End of Year summary to the employee Form SC4 and the issue of a cessation of employment certificate to the employee Form SC3 if an employee ceases employment during the income Tax Year.

The application form for an exemption from the payment of PRSI is available from the above section.

Exemption from payment of PRSI

An exemption from liability to pay employment contributions may be granted, for a period not exceeding 52 weeks, in respect of the temporary employment of a person who is not ordinarily resident in the State and whose employer is not ordinarily resident in the State, or does not have his or her principal place of business in any EEA State, or a country with which Ireland has concluded a Bilateral or Reciprocal Agreement.

The application form for an exemption from the payment of PRSI is available from:

Outline

Ireland has bilateral or reciprocal agreements on Social Security with a number of other countries.

These countries are:

• Australia
• Canada
• Japan
• New Zealand
• Republic of Korea
• Québec
• United Kingdom (Isle of Man, Jersey, Guernsey, Alderney, Herm and Jethou)
• United States of America

Employees posted from Ireland by their Irish employer to these States to work for a temporary period are compulsory insured under Irish Social Insurance legislation for the periods set out below. During this period of retention under Irish social insurance legislation, PRSI contributions are payable in Ireland and social insurance is not payable in the other State.

These periods can, in limited circumstances, be extended.

Administration

The schemes of posting under the Bilateral or Reciprocal Agreements are administered by:

International Postings Section

The qualifying conditions for postings under the various Bilateral Agreements are broadly similar. The principal condition is that the posted person must be subject to Irish Social Insurance legislation prior to posting. In addition, the employer must be resident or have a place of business in Ireland and the posting itself must be of a temporary nature.

Special Provisions Relating to the United Kingdom (Isle of Man and Channel Islands)

The provisions of EU Regulation 883/2004 apply to persons being posted from Ireland to the UK. It should be noted, however, that the Regulation does not apply to the Isle of Man, Jersey, Guernsey, Alderney, Herm and Jethou. The posting provisions of the Ireland-UK Reciprocal Agreement apply to persons being posted to these islands.

Posting of employees outside the EU/EAA

In National legislation, Article 98(1) and (2) of Statutory Instrument 312/96 makes provision to retain a person sent by an Irish employer to work temporarily in another country on Irish social insurance (PRSI) for the period of the overseas posting.

This Article applies to postings outside the States of the European Economic Area, outside the countries with which Ireland has a Bilateral Agreement and outside the islands included in the Ireland/UK Reciprocal Agreement.

Employees can be retained on the Irish social insurance system for the first 52 weeks of a posting by way of application to the International Postings Section. In exceptional circumstances, this period may be extended beyond 52 weeks by request to the Department of Employment Affairs and Social Protection.

Unlike the posting provisions of the EU Regulations and Bilateral Agreements, retention under the Irish PRSI system by virtue of Article 98 of Statutory Instrument 312/96, does not exempt the employee from paying social insurance contributions in the other country.

Administration

The provisions of Article 98 of Statutory Instrument 312/96 are administered by:

International Postings Section

Procedure for Application

An Irish employer wishing to post an employee overseas should obtain an application form from Special Collection Section at the address above.