In order to understand the Payroll administration in Ireland, you have to understand the set of rules and obligations associated with it. These include employer obligations, inclusive of the tax and social security payments. Employers are entitled to withhold tax from their employees’ paychecks during every pay period, and they should report these deductions to the Irish Office of the Revenue Commissioners.
The income tax is charged at a progressive rate of 20-40%
Due to the Pay As You Earn system employed to calculated employees’ taxes, payroll administration is quite intricate. Employers use this PAYE system to calculate and subtract the income tax from their employee’s wages and salaries. Furthermore, it is mandatory for Irish companies to calculate and withhold the Pay Related Social Insurance (PRSI). Establishing the income tax calendar for employees is the initial step in payroll administration. In Ireland, the tax calendar begins in January and finishes December 31st. Before administering the payroll, Irish accountants are mandated to complete the PAYE forms first.
Individuals who have an income of less than €13,000 are not liable to pay the Universal Social Charge (USC). However, if your income exceeds this limit, you are accountable for paying the relevant rate of USC on all of your income. For instance, if your income is €13,000, you don’t pay USC. However, if your income is €13,001 you will have to pay 0.5% on income up to €12,012 and 2.5% on income between €12,012 and €13,001.
Below are some Standard Rates of USC (2018):
0.5% Up to €12,012
2.5% From €12,012.01 to €19,372.00
4.75% From €19,372.01 to €70,044.00
8% From €70,044.01 to €100,000.00
8% Any PAYE income over €100,000
11% Non-PAYE (Self-employed) income over €100,000
In the case that you want to set up an Irish branch, you will be able to run payroll for your employees. The branch can be registered as a foreign trader and will get the employer number from the Revenue. After this, your branch can fully function and operate the payroll in accordance with the standard deductions of the necessary income taxes from the employees just like a local Irish company.
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