• Service: Tax, Global Mobility Services, International Corporate Tax
  • Type: Regulatory update
  • Date: 3/28/2014

Ireland - Tax treatment of termination payments 

March 28:  The European Commission today issued a release announcing that it has officially asked Ireland to amend the Irish tax termination payments because this treatment is alleged to discriminate against individuals who work in group companies in other EU Member States.


An employment termination payment is a lump sum payment which firms make to employees who stop working for them, and are taxed at different rates depending on the employee’s age and length of employment.

To compute the tax relief on such payments, Irish law takes into account the number of years of service in group companies in Ireland—but not the years of service in group companies in other Member States and EEA countries (Norway, Lichtenstein and Iceland). According to the EC, this results in a greater tax burden for individuals who worked in group companies in other EU/EEA Member States.

Today’s EC release states that the EC considers that these Irish tax rules are contrary to the free movement of workers set out in the EU law.

Reasoned opinion

The EC request takes the form of a “reasoned opinion.” If Ireland fails to comply within two months, the EC may refer the matter to the Court of Justice of the European Union.

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