When assigning workers to projects or new duties abroad, you might find it difficult to manage the problem of tax compliance and double taxation for workers based in a different country. To simplify matters and attract talented workers to the country, the Irish government first introduced the Special Assignee Relief Programme, aka SARP, in Ireland in 2012.
Here, we discuss this tax relief program in Ireland, updates to the system in 2023, the conditions you need to know so you can benefit from it and reduce your tax burden in Ireland.
What is the SARP in Ireland?
SARP, or the Special Assignee Relief Programme, is a tax incentive scheme in Ireland designed to attract talented workers. Established in 2012, SARP aims to encourage international businesses to relocate employees to Ireland in order to boost economic growth.
Transferring or relocating employees is expensive, and it’s often problematic for the employee in question. That’s why the benefits of SARP in Ireland are meant to increase the attractiveness of tthe market for current employees and make it easier for them to relocate.
Under SARP in Ireland, qualifying individuals and companies may benefit from tax relief for:
- Income over €100,000 at a special rate for 5 years
- 1 return trip home
- Up to €5,000 tax deductible for the education of their children or the children of a partner or dependent
- Additional tax credits to be used to lower Irish corporate tax
Those who applied before 2023 can still benefit from the original threshold of €75,000.
The income relief is calculated as exempting 30% of the applicant’s income above the minimum threshold from income tax. This income includes:
- Salary
- Any company profits they are eligible to
- Allowances
- Benefits in kind
- Bonuses
- Commission
- Employee contributions to an Irish-based or Irish-approved pension plan
SARP aims to make Ireland an even more attractive destination for expatriates and highly skilled professionals. It also contributes to the country’s continued economic development by fostering innovation and job creation.
Originally, the program was set to expire in 2022. However, the government extended the program to new applicants until 2025.
Those who apply before this time can benefit from the maximum period of 5 years.
What are the Requirements to Apply for SARP in Ireland?
To be eligible, employees and employers must both meet specific criteria. This includes:
Employee Eligibility
- The applicant’s income must be within the range of €100,000 to €1,000,000 per year.
- The applicant must be working in Ireland on assignment by a foreign employer or be recruited by an Irish employer from abroad.
- They should have specialized skills, expertise, or experience not readily available or in high demand in Ireland.
- The applicant must have or be applying for a Personal Public Service (PPS) number.
- The applicant must be registered with the PAYE (Pay As Your Earn) tax system.
- They must not have been residents in Ireland for 5 years prior to their application.
Employer Eligibility
- The employing company must be registered and operating in Ireland.
- They should engage in activities such as trading or providing services internationally.
- The employer must not have any significant tax arrears or defaults.
- The employer must be offering employment of at least 12 months in Ireland.
- Form SARP 1A must be submitted within 90 days of the employee arriving in Ireland.
How to Apply for SARP in Ireland
Employers must apply for SARP on behalf of the employee(s). The application form above (SARP 1A) plus all relevant evidence documents should be submitted to the Irish Revenue Commissioner within 90 days of their arrival in Ireland.
SARP requirements and thresholds may change over time. As a result, you should also consult with tax professionals or visit the official Irish Revenue website for the most up-to-date information before applying.
What are the Benefits of the SARP System in Ireland?
The SARP system offers many benefits to Ireland, you, and your overseas employees. However, it also poses some challenges that need to be a part of any decisions you make before application.
Benefits of the SARP in Ireland
Talent Attraction
SARP helps Ireland to attract highly skilled professionals and key talent. This makes the country more competitive on the global stage and boosts the local talent pool. This is also a great benefit to global companies looking to expand operations in Ireland by making the move more beneficial to the employees growing their influence in Ireland.
Economic Growth
The program contributes to Ireland’s economic growth by encouraging corporations with interests in multiple countries to establish or expand their operations in Ireland. This, in turn, leads to job creation, increased foreign direct investment, and improved infrastructure. Such international growth centered in Ireland expands the resources and infrastructure available to companies with local operations.
Skills Transfer
SARP facilitates the transfer of specialized skills and knowledge to the Irish workforce. Expatriate employees often share their expertise with local colleagues, fostering a culture of learning and development. In exchange, this boosts the productivity of locally employed staff for companies thinking long-term.
Cost Savings
SARP provides tax relief for both employees and employers by reducing the overall cost of relocating and employing skilled personnel. These costs are typically a big challenge when considering international labor, so savings can translate into substantial benefits for companies.
Challenges of the SARP in Ireland
While offering several benefits, there are also the limitations of SARP in Ireland to consider and plan for.
Administrative Burden
Applying for and participating in the SARP program requires a company to navigate complex administrative processes and adhere to specific reporting requirements. This can be time-consuming and may necessitate additional resources if your HR team doesn’t prepare enough.
Compliance Risks
Companies must ensure total compliance with SARP rules and regulations to avoid potential penalties or damage to their reputation. Even minor mistakes can lead to penalties that may put your expansion plans at risk. That’s why staying up to date with all changing tax laws and requirements can be challenging but remains necessary.
Dependency on Expatriate Talent
Using SARP as part of a plan to make relocation a positive experience for current employees is a great wa yto ease short-term issues. However, reliance on expatriate talent through SARP can create a potential risk if employees leave or the program undergoes changes. Companies should have strategies in place to develop local talent as well for projects that go beyond the 5-year limit.
Income Threshold
The €100,000 tax bracket threshold means that only higher-level employees can avail of the tax benefits. This may limit the kind of workers you can send to Ireland if you’re relying on the program as an incentive.
Skills Transfer
Expatriate employees are more likely to work in isolated roles. This is especially true if they are the only employees sent in this way or they work for specific project periods. This isolation limits their ability to share their expertise with Irish colleagues.
Administrative Complexity
SARP involves navigating local administrative processes and reporting requirements for both employers and employees. Complying with these rules can be burdensome and time-consuming, keeping your staff away from other tasks.
Limited Coverage of Expenses
SARP primarily focuses on income tax relief and some costs related to relocation. It does not cover all the costs employees will require, such as housing, relocation, and other expenses for expatriate employees and their families.
Possible Public Perception Issues or Employee Problems
Some individuals, including locally-based employees, may view SARP as a tax incentive benefiting only high-earning expatriates. This can possibly cause concerns about income equality or criticism of company policy.
Dependence on Tax Treaties
The effectiveness of SARP in addressing double taxation concerns depends on the possibility of integrating it with tax treaties between Ireland and other countries. Tax treaties are also subject to change, making it an ongoing job to ensure compliance.
The Advice of an INS Global Compliance Expert on the Matter of Double Taxation and SARP in Ireland
When dealing with overseas employee tax procedures, it’s essential to have the right knowledge and expertise to avoid compliance errors. Failure to meet your responsibilities as an employer due to a lack of knowledge is rarely an excuse. In Ireland as in many countries, the potential penalties for tax errors are particularly severe.
That’s why it’s always best to work with a local advisor or consultant with in-depth understanding of local tax requirements. This way, you can avoid problems that can derail your expansion efforts later.
Here, we have put together some tips on double taxation from our compliance assurance experts so you are never caught unawares.
Get Tax Relief for Employees and Employers
Under SARP, eligible employees can avail themselves of tax relief on a portion of their income. This relief helps to reduce the impact of double taxation.
The relief effectively reduces the Irish income tax liability of the employee. While SARP in Ireland doesn’t remove the chance of double taxation for those employees who come from countries with worldwide taxation, it does reduce it.
Equally, companies who participate in the SARP system can claim a tax credit against Irish corporate tax liability. This credit helps offset the typically high costs associated with bringing skilled employees to Ireland.
Understand Relevant Bilateral Tax Treaties
Ireland has a network of double taxation treaties with 74 countries, with others in discussion. A full list is available here.
These treaties help determine which country has the primary right to tax specific types of income. They also provide mechanisms for avoiding or reducing double taxation. Companies can utilize these treaties in addition to SARP to benefit their employees and reduce overall relocation costs.
Finding Professional Advice
If you’re worried about double taxation, it’s best to seek advice from tax experts who specialize in international tax matters. Compliance errors can cause serious expansion delays going forward. Professionals can help navigate the complexities of tax laws and ensure you aren’t paying more than necessary.
The specific impact of double taxation can vary based on individual circumstances and the tax treaties in place between Ireland and other countries.
Why Choose INS Global to Handle Your Employment and Tax Responsibilities in Ireland?
Sending your employees overseas doesn’t have to be a difficult operation. Despite the possibility of enhanced administrative risk, partnering with a professional EOR (Employer of Record) and payroll outsourcing services provider like INS Global can ensure payroll tax compliance worldwide for a single minimal monthly fee.
INS Global can provide you with the expertise of a qualified team of legal professionals who have in-depth knowledge of the best way to expand safely and efficiently to Ireland. Furthermore, we keep track of any new developments as they happen and help you adjust accordingly. This is so you don’t miss out on any crucial changes or laws that could affect the way you do business
With the help of our EOR services in Ireland, international business expansion is now more secure and simpler than ever. Our services are available in more than 100 countries worldwide, giving you a safe and secure way to integrate operations in multiple countries at once.
Get in touch with an INS Global expansion advisor today for further details.
FAQ
What is the PAYE tax system in Ireland?
The PAYE, or Pay As You Earn, system is the primary tax system in Ireland. Employers manage tax and social security payments as part of the monthly payroll process by deducting relevant amounts at source. This reduces the need for additional yearly tax procedures, ensuring regular payment amounts each month.
How does tax relief work in Ireland?
Ireland operates a system by which you can apply for specific tax relief or tax credits. This is possible on behalf of your employees based on their circumstances. An official summary of the available relief structures is available here.
Who is eligible for SARP in Ireland?
To be eligible for the SARP in Ireland, an employee must have the following:
What tax benefits does SARP provide to employees?
SARP offers eligible employees a reduction of 30% on income over €100,000 for 5 years of their Irish income tax liability.
How does SARP address double taxation for employees?
SARP in Ireland aims to alleviate double taxation concerns by reducing income tax liability for international employees. By effectively lowering the amount your employees pay in Ireland, you can reduce the possibility of double taxation problems and simplify tax matters.
What tax benefits does SARP provide to employers?
Employers participating in SARP can claim a tax credit against their required Irish corporate tax. This credit helps to offset the costs associated with relocating skilled employees to Ireland.
Can SARP participants make use of other tax incentives in Ireland?
SARP participants may also be eligible for other tax incentives and reliefs in Ireland. These include the Research and Development (R&D) Tax Credit or the Employment and Investment Incentive (EII) scheme. The availability of these incentives may vary, so we advise that you seek counsel from a legally qualified tax specialist when applying for SARP in Ireland.
What is an Employer of Record (EOR) in Ireland, and how does it work for managing taxes and payroll in Ireland?
An EOR is a third-party organization that takes on the legal responsibilities of being an employer for a workforce. EORs handle payroll processing, tax withholding, and statutory compliance on behalf of foreign companies. Ireland requires that employees receive payment accurately and on time while remaining compliant with Irish employment and tax laws. All of these processes become the responsibility of the EOR.
Do I still have control over my employees when using an EOR in Ireland?
Yes, when you partner with a professional global EOR services provider, you retain control over your employees’ day-to-day work, responsibilities, and management. The EOR primarily handles administrative and legal aspects, freeing you up to fully pursue your business goals and objectives without hassle.
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