As we noted in a recent blog on Ireland’s tax advantages, Ireland offers one of the most attractive corporate tax propositions in Europe for foreign investors seeking to enter the European Union market.
However, corporate tax is just one of many taxes that companies must take into account when choosing a jurisdiction. Another significant expense can be the cost of hiring employees, which includes the amount of personal income tax and social security contributions they must pay.
In many jurisdictions, progressive rates of tax topping out at 50% or more, particularly in parts of Europe, may often serve as a disincentive to highly skilled and mobile employees – who often command substantial salaries – looking to take advantage of career opportunities in other countries.
Fortunately, Ireland’s top rate of personal income tax does not reach the same heights as in competitor nations like Luxembourg, Belgium, and Denmark. Even better, well-remunerated foreign workers in Ireland can reduce the amount income tax they pay thanks to a government scheme called the Special Assignee Relief Programme, or SARP.
The Benefits of SARP
SARP provides Income Tax relief for certain people who are assigned to work in Ireland from abroad. The programme reduces an applicant’s tax liability by disregarding a proportion of their income for tax purposes. Currently, this amounts to 30% of an individual’s income over €75,000
This relief can be claimed for a maximum of five consecutive years, starting with the year in which the relief was first claimed.
In addition, successful applicants are entitled to claim certain expenses free of tax, including travel expenses and costs associated with a child’s education.
Ordinarily, the relief is granted to individuals through their company payroll, although a claim can also be made for the relief at the end of the tax year.
The Rules
As with most schemes designed to provide tax benefits for well-paid, skilled foreign employees, certain conditions do apply to the SARP. These require those intending on availing themselves of the programme to:
- Have arrived in Ireland in any of the tax years 2012 to 2020, at the request of an employer;
- Have worked outside Ireland for the assigning employer for a minimum of six months immediately prior to being assigned to work in Ireland;
- Perform duties for a minimum of 12 consecutive months from the date they were first assigned;
- Have not been tax resident in Ireland for the five years immediately preceding their arrival;
- Be tax resident in Ireland for all years in which they claim the relief; and
- Earn a basic salary of €75,000, excluding bonuses, commissions and similar payments.
Ireland – a global nation
For a country like Ireland, with a relatively small, albeit well-educated and skilled workforce, the ability of companies to recruit talented foreign employees is crucial. Already, well over 500,000 non-Irish nationals live in Ireland, accounting for over 10% of the population. And with foreign direct investment into Ireland having doubled to €30bn between 2016 and 2017, schemes like the SARP are likely considered indispensable by investors, especially in cutting-edge industries such as pharmaceuticals and FinTech, where Ireland is emerging as a world leader.
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