The 2012 Special Assignee Relief Programme | INS Global

SARP in Ireland - The 2012 Special Assignee Relief Programme

SARP in Ireland - The 2012 Special Assignee Relief Programme

September 11, 2023

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Key Takeaways

  1. SARP, or the Special Assignee Relief Programme, is a tax relief scheme in Ireland designed to attract talented workers
  2. The government extended the program to new applicants until 2025
  3. The employing company must be registered and operating in Ireland
Summary

 

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.