Self-employed, PRSI necessary?

esperanza

I am setting myself up as self-employed on a part-time basis. As my income from this activity will be below the threshold (€3,174) required to pay type "S" social security contributions for the self-employed, I would like to know if I would be liable to pay PRSI?

I am already paying social security contributions in another EU member state as a salaried employee.

I am currently not resident in Ireland, but my business will be registered in Ireland.

Any advice on this matter would be much appreciated!

Victor

Where is the business trading? If outside Ireland, you probably won't need to pay PRSI.

For the self-employed, PRSI is calculated on annual profit / income (not dividends) and if you are below the exemption level you pay only the fixed minimum figure.

http://www.oasis.gov.ie/employment/starting_work/social_insurance_in_ireland.html?search=self+employed+PRSI

Self-employment and social insurance (PRSI)
If you are self-employed, you pay Class S social insurance. This entitles you to a limited range of social insurance payments including, Widow's/Widower's Contributory Pension, Orphan's (Contributory) Allowance, Old-Age Contributory Pension, Maternity Benefit, Adoptive Benefit and the Standard Bereavement Grant.

Class S social insurance contributions are paid at a rate of 3% on all income or 253 euro a year, whichever is the greater. If the Revenue Commissioners decide that a self-employed person has no tax liability, then no social insurance contribution is required.

Self-employed people usually pay their social insurance contributions directly to the Revenue Commissioners. A self-employed person should register for Class S social insurance with the Department of Social and Family Affairs and complete Form SE3. Generally, a self-employed person pays their social insurance at the same time they make their annual returns for tax purposes to the Revenue Commissioners. Contact your local tax office for information as to how this is to be paid.

People who are self-employed are also required to pay the 2% Health Contribution unless they are one of the exempt categories referred to earlier or are earning less than 18,512 euro.

Social insurance benefits

esperanza

Thanks for your answer.

You stated that:
"If the Revenue Commissioners decide that a self-employed person has no tax liability, then no social insurance contribution is required."

I don't understand what you mean by "tax liability". Can you please explain?

I am currently resident in France, but will be soon leaving ... not sure where's next, TBH. That's why I want to register my business in Ireland, as it is more stable and practical.

I have another question relating to the place of supply of services:

I found this on the BASIS website:

Place of supply of services - general rule

In order to avoid double taxation or non-taxation, the general rule in relation to the place of supply of services is that services are taxable at the place where the supplier has established his or her business. For most services there is little difficulty in determining the place of their supply.

So....
The place of supply of services will be several European countries. My work is done over the Internet. Do I prove that the place of supply of my services in these countries by including the invoices in my annual returns?

Could anyone explain me this statement in more detail:

"the general rule in relation to the place of supply of services is that services are taxable at the place where the supplier has established his or her business."

Victor

esperanza wrote:

Thanks for your answer.

No problem.

You stated that:
"If the Revenue Commissioners decide that a self-employed person has no tax liability, then no social insurance contribution is required."
I don't understand what you mean by "tax liability". Can you please explain?

I think they mean if you have a nil income tax liability you also have a nil PRSI libility.

I am currently resident in France, but will be soon leaving ... not sure where's next, TBH. That's why I want to register my business in Ireland, as it is more stable and practical.

Are you registering a company (a separate legal entity to you that will need annual accounts submitted and two directors, one Irish) or are you just trading as yourself (a "sole trader").

Directors are employees, not self employed, so they pay PRSI as employees.

I have another question relating to the place of supply of services:

I found this on the BASIS website:

Place of supply of services - general rule

In order to avoid double taxation or non-taxation, the general rule in relation to the place of supply of services is that services are taxable at the place where the supplier has established his or her business. For most services there is little difficulty in determining the place of their supply.

So....
The place of supply of services will be several European countries. My work is done over the Internet. Do I prove that the place of supply of my services in these countries by including the invoices in my annual returns?

Could anyone explain me this statement in more detail:

"the general rule in relation to the place of supply of services is that services are taxable at the place where the supplier has established his or her business."

If one is a manufacturer, it is quite clear that your factory is your place of establisment. If you are a restauranteur, it is your restaurant. If you are an exported, it is your warehouse.

With "the internet" this is fuzzier. As I understand it the EU position is the place of supply is where the supplier is based. That or they have to register for VAT in every country they sell to and apply that rate.

I presume you won't really have any fixed place of business and will work from your home (wherever that may be) or in your client's office.

In such a case, I suspect that you would charge Irish VAT. Your Irish customers would be able to reclaim this. Your non-Irish EU business clients can give you a VAT number and you don't charge VAT. You however may have problems (an administrative burden) reclaiming VAT in multiple countries. Your private (non-business customers would pay the 21% rate of VAR in Ireland).

esperanza

Victor wrote:

Are you registering a company (a separate legal entity to you that will need annual accounts submitted and two directors, one Irish) or are you just trading as yourself (a "sole trader").

Yes, I'm registering as a sole trader.

Victor wrote:

With "the internet" this is fuzzier. As I understand it the EU position is the place of supply is where the supplier is based. That or they have to register for VAT in every country they sell to and apply that rate.

Victor wrote:

I presume you won't really have any fixed place of business and will work from your home (wherever that may be) or in your client's office.

Yeah, I shall be working from home wherever that is! My life is a little gypsy-like at the moment. And while freedom is great, I think I do have to be registered in the country where my business is based for income tax purposes. This could cause hassle, since if I have a job in another EU country I am liable for double taxation. Apparently, income tax matters are not governed by EU legislation. I don't know if it would be *illegal* for me to live in another EU country, while being potentially liable to pay income tax in both. In my opinion, it's my tough luck if I end up paying tax in both countries.

I also forgot to mention that the income from my business will only be about a few thousand euros per year, as it will not be a full-time activity. Would I be right in thinking that I would therefore be exempt from paying income tax?

Victor

I'm not sure the Revenue will accept you if you have an inadequate relationship with Ireland (eh, are you Irish? Have you lived here for more than 6 months per year over the last 3 years to make you tax resident?).

You would get tax credits of about €2,000 which means you could earn about €10,000 before you pay tax (but this would be affected by any other earnings you have in other countries).

esperanza

Yes, I am Irish and have been resident in Ireland for more than 6 months in the past three years. Is this the exact period stipulated by the Revenue?

Victor

Yes, the revenue has rules, depending on residency and domicile. Look at www.revenue.ie

esperanza

Victor wrote:

Yes, the revenue has rules, depending on residency and domicile. Look at www.revenue.ie

Can you tell me where exactly I can find this information on the site? Thanks!

Victor

http://www.revenue.ie/services/taxguide_chapt3.htm

How do I know if I am resident in Ireland for a tax year?

Your residence status for tax purposes is determined by the number of days that you are present in Ireland in a tax year. You will be resident in Ireland for a tax year in either of the following circumstances:

*If you spend 183 days or more in Ireland during a tax year or,

*If you spend 280 days or more in Ireland over a period of two consecutive tax years, you will be regarded as resident for the second tax year. For example, if you spend 140 days here in Year 1 and 150 days here in Year 2, you will be resident in Ireland for Year 2.

And talk to your accountant or these guys www.askaboutmoney.com