Background
Historically, travel expenses incurred by non-executive directors for the purpose of attending board meetings have been reimbursed as out-of-pocket expenses.
Recently, the tax authorities in Ireland suggested that such payments be treated as income and be subject to payroll taxes.
This view arose from the fact that an employee is not entitled to treat as a tax allowable expense the cost of travelling to his/her place of work. The tax authorities viewed the location of the board meeting as the place of work. Thus, claiming costs incurred in attending such meetings should not be treated as expenses but rather as income.
Recent Developments
The Finance Bill 2015 was published in Ireland on October 22, 2015. The bill proposes that expenses incurred by non-resident, non-executive directors travelling in the course of their duties, will be exempt from income tax. It has been confirmed that from 2016, these expenses may be reimbursed tax-free for qualifying expenses relating to travel to attend board meetings in Ireland.
Consequences for the Industry
This is a positive development for the Irish funds industry. The benefits to the industry are as follows:
- It demonstrates the commitment of the Irish government to ensuring that Ireland is a manager friendly location for the establishment of investment funds
- It removes an impediment to the physical attendance of non-resident directors at board meetings. Thus, contributing to a strong fund governance environment.
- It facilitates funds wishing to appoint directors with specific expertise which may be located outside of Ireland.
How can KB Associates Assist?
KB Associates offers a range of services to investment funds including UCITS1 /AIF2 operational support, UCITS/AIF management company services, service provider selection, the provision of directors, MLRO3 services and company secretarial services.
If you would like to discuss any issues raised in this article or related to KB Associates’ services in general, please feel free to contact Mike Kirby (+353 1 667 1980), Peter Northcott (+44 203 170 8813) or Mike Parton (+1 345 946 4224).
1 Undertakings for Collective Investment in Transferable Securities
2 Alternative Investment Fund
3 Money Laundering Reporting Officer