Global Mobility Tax

SARP – 2023 Update

 

 

The Special Assignee Relief Programme (“SARP”) was introduced on 1st January 2012 to provide Income Tax Relief for eligible employees assigned to work in Ireland from abroad.  It was due to expire for new entrants on 31st December 2022, however, Finance Act 2022 extended the relief for a further three years, up until 31st December 2025.

 

 

Prior to 1st January 2023, an individual was required to earn a minimum basic salary of €75,000 per annum (excluding all bonuses, benefits or share based remuneration) in order to be eligible for SARP.

 

 

From 1st January 2023 onwards the employee must have a minimum base salary of €100,000 per annum.  This amount excludes all bonuses, commissions or other similar payments, benefits or share-based remuneration.

 

 

A number of conditions need to be satisfied for this relief to apply, as follows:

 

  1. The individual must be an employee of either (i) a company incorporated and tax resident in a country with which Ireland has a Double Taxation Agreement/Exchange of Information Agreement or (ii) an associated company of a relevant employer. The individual must arrive in Ireland in any of the tax years, from 2012 to 2025, at the request of his/her/their employer, to perform employment duties in Ireland for that employer or with an associated company of that employer.

 

  1. The individual must have been employed by a relevant employer for six months immediately prior to arriving in Ireland.

 

  1. The individual must perform employment duties in the State for at least twelve consecutive months from the date of arrival in Ireland.

 

  1. The employee must not have been tax resident in Ireland for the five tax years preceding the year of arrival.

 

  1. The individual must be Irish tax resident, although he/she/they may also be tax resident in another country.

 

  1. The individual must be tax resident in Ireland for all years for which he/she/they claim the relief.

 

  1. When applying, SARP applicants must have a PPS number issued to them.

 

  1. Within ninety days of the individual’s arrival in Ireland, the employer must submit the SARP application (SARP 1A) to Revenue’s SARP Unit, certifying that all the above conditions have been met for the relief to apply. In addition, the employer company must have complied with the normal PAYE employee commencement regulations.

 

  1. If the individual is not Irish tax resident in the year of arrival, Relief may start from the following year.

 

 

Example

Mark arrived in Ireland from USA on 17th October 2019 on a 5-year contract.

 

He was not Irish tax resident in 2019.

 

As Mark was tax resident in Ireland in 2020, he was entitled to claim relief under SARP.

 

His first year of claim was, therefore, 2020.

 

He can continue to claim SARP up to and including 2025 if he continues to satisfy the relevant conditions for the Relief.

 

 

 

SARP Relief

The relief operates by:

  • exempting, from Income Tax,
  • 30% of a qualifying employee’s annual employment income above a qualifying income threshold (€75,000 prior to 1st January 2023 and €100,000 from 1st January 2023 onwards),
  • Subject to an earnings cap (since January 2019, an earnings cap of €1m has been in effect),
  • for a period of 5 years.

 

Relief is not extended to Universal Social Charge (USC) so the individual must pay USC on the full amount of his/her/their salary.

 

The specified amount is not exempt from PRSI, unless the employee is relieved from paying Irish PRSI under either an EU Regulation or under a bilateral agreement with another jurisdiction.

 

The relief operates by providing a deduction for income tax purposes from remuneration based on the following formula:

 

(A-B) X 30%

 

A = Qualifying Remuneration i.e. total remuneration.  This includes:

  • Income, profits or gains from his/her/their employment in the State with a relevant employer or associated Company.
  • Allowances, benefits-in-kind, bonuses, share awards, commissions, etc.
  • The following is deductible from the total remuneration figure when calculating the Relief: employee contributions to an Irish approved pension plan or a foreign pension plan eligible for Irish tax relief as well as remuneration eligible for Double Taxation Relief in Ireland.

 

B = €100,000 (prior to 1st January 2023 it was €75,000)

 

 

Example:

Thomas arrived in Ireland on 1st January 2023 and meets all the above conditions to qualify for SARP relief.

 

His salary is €120,000, his bonus is €15,000 and he receives a benefits in kind (e.g. medical insurance) valued at €3,000.

 

A = €138,000 i.e. €120,000 + €15,000 + €3,000

 

B = €100,000 i.e. qualifying Income Threshold

 

SARP Deduction = (€138,000 – €100,000) = €38,000 @ 30% = €11,400

 

Thomas’s marginal Income Tax rate in Ireland is 40%, therefore his Income Tax saving is €4,560 i.e. €11,400 x 40%

 

It’s important to keep in mind that 8% USC and 4% PRSI, if applicable, will apply to this employment income.

 

 

 

Important Points to keep in mind:

 

  1. Revenue recently clarified that employees must have at least one Irish workday each month in the first twelve months. Therefore, all employees eligible for SARP should take account of this when making travel arrangements in their first year in Ireland so as to ensure their SARP Relief isn’t withdrawn.

 

  1. In the case of new applicants arriving in Ireland from 1st January 2023 onwards, please be aware that the portion of employment income which is eligible for Relief is 30% of their annual employment income above €100,000. For qualifying employees who arrived in Ireland before 1st January 2023, however, their relief calculated as 30% of their annual employment income above €75,000.

 

  1. Employees who qualify for SARP Relief are also eligible to receive certain travel expenses and certain costs associated with the education of their children in Ireland tax free.

 

  1. Employees who have started their Irish role before actually arriving in Ireland, will not be entitled to claim SARP relief, unless (i) the employee was prevented from travelling to Ireland to take up his/her/their position here due to unforeseen circumstances beyond his/her/their control and (ii) the Irish employment duties carried out by the individual abroad do not exceed five “workdays” in the six months period prior to his/her/their arrival in Ireland.

 

  1. Employees must have a PPS number when making their application.

 

  1. Individuals should register their employment with Revenue before applying for SARP.

 

  1. The SARP Relief cannot be claimed by new hires with no previous group employment history.

 

 

 

EMPLOYEES

 

SARP relief can be claimed by the employee in one of two ways:

 

  1. Through the year-end Tax Return

An employee who receives SARP Relief is considered to be a “chargeable person” for Income Tax purposes.  He/she/they is/are required to submit an Income Tax Return to the Irish Revenue Commissioners in respect of each year for which relief is claimed.   The Form 11 Tax Return may be filed by way of a paper form or through the Revenue’s On-Line Service (ROS).

 

Employees who have registered and qualify for SARP must file a Form 11 Tax Return by 31st October following the end of the tax year.

 

 

 

  1. Through payroll

By completing Part C of Form SARP 1A and submitting it to Revenue, SARP Relief can be granted at source through the employee’s payroll.

 

The employer is required to make this application only once.

 

Relief can be granted at source through payroll for the duration of the assignment, up to a maximum of five years, providing the employee continues to satisfy all the relevant conditions.

 

 

 

If you would like further information on the new SARP regime, please contact us to make an appointment.

 

 

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so.. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Working in Ireland – Part 1

Introduction

Your residency affects your tax treatment in Ireland.

As an Irish resident, ordinarily resident and Irish domiciled individual you will be taxed on your worldwide income wherever it arises.

You will be taxed on all Irish and foreign source income in full and where possible you will be entitled to a tax credit for any foreign tax paid on foreign source income.

Residence

You will be considered to be Irish resident if you are present in the state for:

a) 183 days during the tax year in question or

b) 280 days or more over a period of two consecutive tax years.

Notwithstanding b), if you are present in Ireland for 30 days or less in a tax year you will not be treated as resident for that year unless you elect to be resident.

If you are not tax resident in the year of arrival under the above rules, you may elect to be tax resident for the year of arrival.

If you have any queries relating to whether or not you should elect to become Irish resident, please contact us on 01 872 8561

Ordinarily Resident

You will be considered ordinarily resident if you have been resident in the state for the previous three consecutive years.

Regardless of whether or not you are actually resident in the state in the fourth year, you will be considered ordinarily resident for the fourth year.

If you leave Ireland, you will cease to be ordinarily resident when you have been non resident for three consecutive years. You will not be considered to be ordinarily resident from the fourth year.

Domicile

Domicile is a general legal concept.

It is relevant to you in relation to how certain foreign source income will be taxed in Ireland.

Under Irish law, every person acquires a domicile of origin at birth. In most cases this is the father’s domicile, however, in situations where the parents are unmarried or the father has died prior to the individual’s birth, the domicile of the mother is taken.

Your domicile can change if you acquire a domicile of choice.

For more information, please contact us on 01 872 8561

Tax Treatment

As a non resident, but ordinarily resident and Irish domiciled individual you will be taxed on all Irish and foreign sourced income in full.

The following income is exempt:

a) Income from a trade or profession, all duties of which are exercised outside Ireland.

b) Income from an office or employment, all duties of which are performed outside the state.

c) Foreign income providing it does not exceed a threshold amount of €3,810 in a tax year.

As a non resident, non Irish domiciled but ordinarily resident individual, you will be taxed on all Irish source income in full and foreign source income to the extent that it has been remitted into Ireland.

Again, the following income is exempt:

a) Income from a trade or profession, all duties of which are exercised outside Ireland.

b) Income from an office or employment, all duties of which are performed outside the state.

c) Foreign income providing it does not exceed a threshold amount of €3,810 in a tax year.

As non resident, non domiciled and non ordinarily resident, you will be taxed on Irish source income in full and on foreign source income in respect of a trade, profession, employment or office where the duties are exercised in Ireland.

As an Irish resident and ordinarily resident but non Irish domiciled individual, you will be taxed on Irish source income in full and on remittances of foreign source income.

Should you have any queries in relation to residency, ordinary residency or domicile, we would be delighted to discuss them with you.