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AITI Registered Tax Consultant
Special Assignee Relief Programme 16-07-2012

Special Assignee Relief Program

The idea behind this relief is to assist multinational and Irish companies in attracting key high income talent into Ireland by reducing their level of taxable income here by up to 30%.  

Like all reliefs it comes with a list of terms and conditions which in this case are aimed at ensuring that the right quality of talent is targeted and that the incentive is not open to abuse.  As ever the fear of abuse has probably resulted in overly restrictive conditions which will impede the goal of the relief.

Conditions

In order for an individual to be eligible to avail of the SARP, the following conditions must be met:

  1. The employee must arrive in Ireland between 01/01/2012 and 31/12/2014
  2. The relief applies to employees of companies incorporated and tax resident in a DTT country or tax info exchange agreement country or associated companies such as Irish ones.  The employee must have been employed by the relevant employer for the 12 months prior to arriving in Ireland and must perform substantial duties here for 12 months.
  3. The relief applies for the first 5 years of the individual’s residency.
  4. The employee must not have been tax resident in Ireland for any of the 5 years preceding the year of arrival.
  5. The employee must have a minimum base salary of €75,000 &  30 % of salary in excess of €75,000 (up to a maximum of €500,000) is excluded from Irish tax.
  6. The relief only extends to income tax, not Universal Social Charge (USC) or PRSI.
  7. Certain remuneration is excluded when calculating the minimum base salary such as BIK, bonus payments, stock options etc.

To illustrate how the relief will operate I will set out a couple of examples.

Example 1

Elizabeth is a 35 year old key employee (who otherwise meets the criteria for the relief) earns €200,000 including benefits in kind valued at €20,000. Elizabeth made the maximum contribution to her pension of €23,000 (€115,000 @ 20%). As Elizabeth’s income less benefits is greater than the threshold of €75,000 for eligibility, she is entitled to claim the relief.

 

The relief is calculated as follows:

A = (€200,000 - €23,000) = €177,000

B = €75,000

Relief: (€177,000 - €75,000) x 30% = €30,600

 

While €30,600 of Elizabeth’s income is relieved from tax, it remains liable to the USC.

Relief due for 2012 is €12,546 (€30,600 @ 41%).

Example 2

Giorgio is a 36 year old key employee (who otherwise meets the criteria for the relief) earns €84,000 including BIK valued at €12,000. As Giorgio’s income less benefits does not exceed the threshold of €75,000 for eligibility for the relief, he is not entitled to claim the relief.

As an individual must have a minimum relevant income of €75,000 to be eligible to claim the relief, Giorgio is not entitled to claim the relief as his income less benefits does not exceed the threshold of €75,000.

Making a claim

The relief can be claimed in two ways either through the PAYE system (the employer can make the relevant application to have the relief given at source through the PAYE system), or alternatively an eligible employee can make a claim after the end of the tax year to their relevant tax district.  The form (SARP 1) must be certified by the company that is employing the individual in the State.

Exceptions

If an employee makes a claim for the SARP, relief cannot be given in respect of the Foreign Earnings Deduction (Sec 823A TCA), Cross Border Relief (Sec 825A TCA) or Research & Development Relief (Sec 472D TCA). 

Conclusion

The aim of this relief is to incentivize employees to locate here in the face of similar schemes abroad.  These individuals could be transferred to head up new divisions of the company or take charge of new product development. Similar schemes are in operation in some of the countries with which Ireland competes for investment and can be a persuading factor when companies decide where to locate investment projects.

It is hoped that this measure will help improve the quality of Ireland’s human capital which in conjunction with our corporate tax regime will help Ireland to compete for Foreign Direct Investment.

 



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