Global Mobility & Employment

Key measures

From an income and employment tax perspective there were a number of key measures:

• There will be an increase in the standard rate income tax bands of €2,000 bringing the point at which a single person pays the top rate of tax up to €44,000 per annum.
• The Universal Social Charge (USC) is to be amended so that the ceiling for the second-rate band will increase by €1,622 from €25,760 to €27,382.
• The USC second rate of 4% will be reduced to 3% which will apply on income between €27,382.01 and €70,044.
• There will be an increase of €125 in the personal tax credit, the employee tax credit, and the earned income tax credit. There is also an increase of €150 per annum in the home carers tax credit and single person child carer credit.
• The temporary universal relief of €10,000 applied to the Original Market Value of a company car (including vans) for vehicles in Category A-D and the amendment to the lower limit of the highest mileage band is being extended to 31 December 2025.
• A BIK exemption will apply where an employer incurs an expense in connection with the provision of a facility for the electric charging of vehicles at the home of a director/employee.
• It is proposed to increase the “small benefit exemption” to €1,500 and increase the number of benefits that an employer can give, from two to five per year (cumulative total of first five benefits in a year shall not exceed €1,500).
• The report arising from the Department of Finance consultation on share-based remuneration has been published and contains a number of recommendations which the Minister for Finance said he will consider in due course. We will issue commentary on this shortly.

Our view
 

It has been well flagged that Budget 2025 would be a giveaway budget and there are some tax giveaways. The increase in the standard rate tax bands is relatively substantial in a budget context and reduces the tax burden for a single individual earning over €44,000 by €400 per year. However, as our marginal rate remains at 52%, Irish employees still have one of the highest personal tax burdens in the OECD.

It is positive to note that the temporary €10,000 reduction in the Original Market Value of a company car for vehicles in Category A - D (including vans and electric vehicles) is to be extended by a further year until 31 December 2025. The introduction of a BIK exemption for the provision of a facility to be used for the charging of an electric vehicle in the home of an employee or director is welcome.

The changes to the small benefit exemption are positive although the Minister missed an opportunity to simplify the system by having a cap of €1,500 without a limit on the number of non-cash benefits. As well as the increase in the overall value of the annual exemption available, €1,000 to €1,500, it is positive to note the increase in the number of non-cash benefits which can be provided. This welcome move will increase the flexibility to allow employers award their employees/directors in a tax efficient manner by awarding them non-cash awards up to a cumulative annual maximum value of €1,500 from 1 January 2025.

The Special Assignee Relief Programme is a valuable relief that encourages skilled individuals to relocate to Ireland by providing an income tax exemption for earnings in excess of €100,000 up to a cap of €1m. In our view, the current relief is insufficient and too restrictive and it is disappointing that no changes to the relief were announced. In addition, the relief is due to come to an end for new entrants from 31 December 2025. An early indication of the extension to the relief would have been welcome considering how close to that deadline Budget 2026 will be.

In the Budget 2025 Tax Policy Changes publication it is stated “Revenue will conduct a range of targeted compliance management activities in 2025. It is expected that additional Exchequer receipts will arise from increased taxpayer compliance in a range of economic areas.” The estimates provide for a €70M yield from this compliance.

While the statement on compliance does not specifically mention payroll and expenses it is likely that at least part of the €70M will come from these areas. In particular Revenue are likely to focus on the data received under the Enhanced Reporting Requirements (ERR) returns filed in 2024 to target areas where they identify risk. They will likely commence with a focus on those employers who have not complied with the requirements. It is recommended that employers who have not filed returns or who are only partially compliant address their obligations before the end of 2024.

We understand that Revenue are planning to continue their compliance campaign in relation to share options in respect of option exercises prior to 2024. It is anticipated that they will issue up to 3,500 letters to individuals where the individual tax returns do not align with the employer RSS1 returns. In addition, they have indicated that they intend to expand the compliance to reconcile the data returned on Employer Share Awards (ESA) returns to payroll submissions. It can be expected that they will also review the 2024 RSS1s which are due to be filed in March 2025 to compare these with the 2024 payroll records. To minimise risk employers should ensure that share options exercised in 2024 are correctly reported via payroll in 2024.