Finance Act 2012 was signed by the President on 31st March 2012. The Act provides new and amended reliefs for foreign employees which may be of interest to both domestic and foreign trading companies looking to expand their business in the BRICS Countries or assign employees from abroad to work in Ireland. A new relief was also introduced for key employees in Research and development.
Special Assignee Relief Programme (SARP)
This is an amendment to the existing relief which is aimed at employees who have been assigned from abroad by a foreign company to work in Ireland in their Irish operation in the years 2012, 2013 and 2014. There are a number of conditions to be met in relation to the employer. It must be a company incorporated in a Treaty State or an information sharing State. Salary from an associated company of the relevant employer may also qualify. The employee must be resident and perform their duties of employment in the State.
The relief operates by way of a repayment of income tax at the marginal rate on 30% on the salary between €75,000 and €500,000. The relief is available to employees who are assigned for a minimum of 1 year to a maximum of 5 years. The employee must have worked for the foreign employer for at least 12 months and has not been resident in Ireland in the previous 5 years. An employee who qualifies for this relief will be entitled to receive or be reimbursed for an annual return trip to the country of residence or nationality for the family tax free and €5,000 in school fees for each child paid to a school in Ireland.
The relief does not apply to the USC charge and PRSI and is based on base salary which excludes benefit in kind, termination payments, payments in relation to restrictive covenants, bonus payments and share based remuneration. The employer must certify the employee’s details and annually report to Revenue. The employee becomes a chargeable person who is required to submit an annual tax return for any tax year where the relief is being claimed unless there is a written agreement with Revenue to operate through payroll.
If the SARP relief is claimed then the following reliefs will not apply:-
Key Employees R & D
Cross Border Workers Relief
New FED (Foreign Earnings Deduction)
However, split year residence relief can be claimed in the year of arrival. If the individual qualifies for a Double Tax credit the relief will be reduced by that amount.
Relief for employees engaged in Research & Development Activities
This is a new relief aimed at Companies who qualify for R & D credits to surrender those credits to key employees thereby reducing their income tax liability to not less than an effective income tax rate of 23%, any excess can be carried forward to subsequent tax years. The relief is not available to an individual who was or is a Director of the company or an associated company, has held or holds a material (5%) interest in the company or an associated company and the duties performed are less than 75% on “the conception or creation of new knowledge, products, processes, methods or systems and not less than 75% of the costs of the employees emoluments are ‘expenditure on R&D".
The relief is not available to reduce the employees USC liability and they become a chargeable person in that year requiring submission of an Income Tax Return. The relief is available as refund of an Income Tax liability and will only be issued where PAYE has been operated and is fully paid.
Foreign Earnings Deduction
This is a new relief aimed at Irish Resident individuals and Directors of trading companies temporarily carrying out duties in Brazil, Russia, India, China or South Africa (BRICS Countries) and applies for the tax years 2012, 2013 and 2014. The income tax deduction can be claimed where the individual is present for a total of 60 qualifying days in any 12 month period in one of the BRICS countries and can include a 12 month period straddling two tax years. A Qualifying day is one of 4 consecutive days throughout which the person is present in that Country for the performance of duties of the office and employment.
The maximum relief available in any year will be €35,000 which results in a maximum tax benefit of €14,350. The relief does not apply to the USC charge and PRSI and is only given on income net of Benefit-in-Kind, termination payments, deductible expense and pension contributions, however, share based remuneration will be included. If the individual qualifies for a Double Tax credit the relief will be reduced by that amount.
The Foreign Earnings Deduction will not apply to income which is:
Chargeable under the remittance basis
Qualifies for the new R & D key employee relief
Qualifies for Split Year Residence relief
Qualifies for Cross Border Worker relief
Qualifies for SARP (Special Assignee Relief Programme)
This new relief is a “specified relief” for the purposes of the High Earners Restriction.
For further information on the above reliefs and the conditions that apply please contact the tax department on 01-2615300