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Extension to SARP welcome development

Budget 2023

Restrictions on SARP must be considered carefully to ensure Ireland retains its attractiveness

The relief available under the Special Assignee Relief Programme (SARP) is set to expire on 31 December 2022. While the announcement from the Minister on Budget Day that SARP is to be extended past this date to 31 December 2025 is a welcome development for many multinationals, the announcement that the relief is to be subject to an increased restriction may result in its attractiveness being reduced.

Commenting on the announcements, Colin Forbes, Tax Partner, Deloitte commented;

A tax policy that is competitive and effective in attracting top mobile talent to Ireland is vital to Ireland’s position in retaining and attracting Foreign Direct Investment. The Special Assignee Relief Programme (SARP) is an important measure in this context and a necessity to ensure that we can work towards enhancing our ability to attract highly skilled mobile workers. In our view, the current relief is insufficient and too restrictive. Therefore, while the extension of the relief is welcome, the change to the minimum income limit for new entrants to qualify for the relief announced by the Minister is disappointing.

Forbes concluded:

We know that the recently issued report of the Commission on Taxation made a number of recommendations, chiefly that SARP should be subject to further restriction and that its continuation should be subject to regular review as part of the tax expenditure process. Against this backdrop, the increase to the minimum income limit to apply for the relief from €75,000 to €100,000 for new entrants as indicated by the Minister are to be expected. However, the full impact of such a change will be better known when the Finance Bill is released in the coming weeks.

Foreign Earnings Deduction (FED)

The Foreign Earnings Deduction (FED) plays an important role in encouraging and incentivising Irish businesses to export to emerging markets. However, there are many areas of the relief which require amendment to improve its attractiveness and usefulness for Irish companies. The extension to the FED until 31 December 2025 will be a welcome development for many companies, but continuous reform of the relief will be required to ensure that it remains fit for purpose.

Commenting on the Ministers Budget speech, Billy Burke, Tax Partner, Deloitte said:

FED is an Income tax relief available to employees who spend a minimum of 30 days working overseas in certain territories, allowing an individual to ultimately reduce their tax bill by up to €14,000. Certain aspects of the relief require amendment to ensure that it remains fit for purpose and achieves its objectives. We are not alone in our view, as outlined in the report issued from the Commission on Taxation which notes that the relief does not appear to be adequately targeted to achieve its policy objectives. Broadening the application criteria and extending the annual maximum relief would, in our view, go some way to bridging the gap.

Burke concluded;

While the Ministers speech has outlined an extension to the relief, we are likely to see this as a future area of reform which will be a welcome development to companies wishing to engage in international expansion into new markets. Any future reform to existing rules should be done in consultation with stakeholders to ensure that the policy objectives of the relief are met.