SARP for Employers
What is SARP relief?
SARP (Special Assignee Relief Programme) is an Income Tax relief available to certain individuals who have been assigned by a relevant employer to work in Ireland, either for that employer or an associated company of that employer. The relief can be claimed for five consecutive tax years and is currently available to qualifying employees arriving in the years up to, and including, 2020. The aim of SARP relief is to encourage multinational employers to redeploy talented employees into key positions within Ireland.
SARP conditions of qualification – what employers need to know
SARP can be claimed by employees who meet the following criteria:
- The employee must have worked for their relevant employer outside of Ireland for the six months immediately prior to being employed here;
- They must be contracted to work in Ireland for a minimum period of 12 months from the date they are first assigned here;
- They must not have been tax resident in Ireland for the five years immediately prior to being assigned here;
- They must be tax resident in Ireland for all of the years in which they claim SARP relief; and
- Their basic salary must be a minimum of €75,000 per year.
It is important to note that employees who avail of SARP cannot claim any of the following:
- Foreign Earnings Deduction;
- Cross Border Relief; and
- Research & Development Relief.
SARP for employers – how to calculate SARP
Under SARP relief, 30% of all income* over a threshold of €75,000 is exempt from income tax. For example; an employee who is paid €175,000 will not pay income tax on €30,000 of that income (€175,000 – €75,000 x 30%). The marginal rate of income tax is 40%, so the value of the relief in this instance would be €12,000.
- The exemption can be spread proportionately across the year, so the threshold for a monthly paid employee is €6,250 per month.
- Expense reimbursements and any amounts contributed into pension schemes cannot be included in the calculations for SARP.
- The exemption is limited to income tax only, so USC and PRSI should be deducted as normal.
The cost of one return trip for the employee and his or her family to their home country can be claimed tax free from their employer, as well as up to €5,000 per child for Irish school fees.
SARP application – how to claim SARP
The employer must apply for SARP relief by completing a Form SARP 1A and submitting it to Revenue within 90 days of the employee’s arrival in the country. If more than one employee is claiming SARP, the employer must submit a separate Form SARP 1A for each employee.
Employer / employee SARP reporting
Employers are obliged to file a SARP Employer Return, containing the pay and tax details for each SARP employee, to Revenue by 23 February following the year end in which SARP was claimed.
SARP employees are considered ‘chargeable persons for self-assessment’ by Revenue, which means they must file a Form 11 (Income Tax Return) to Revenue by 31 October following the year in which SARP was claimed.
How EisnerAmper Ireland can help
At EisnerAmper Ireland, our dedicated team of outsourced payroll professionals possess the knowledge and experience required to assist employers claiming SARP relief for their staff. From the initial application process and the monthly calculations, right through to the filing of the employer return, we can provide expert advice and insight every step of the way.
Our income tax specialists are also on hand should your employees require any advice and assistance with their income tax filing obligations. Learn more about our outsourced payroll services here.
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* From 1 January 2019 the government plan to introduce a ceiling of €1 million on eligible income.Latest News →
Budget 2019 Tax Considerations
With Budget 2019 announced yesterday, EisnerAmper Ireland examines its effect on Irish-based businesses across the following four areas:
- Corporation Tax
- Indirect Tax
- Employment Tax
- Personal Tax
1. Corporation Tax
Relief from corporation tax for certain start-up companies
The Minister for Finance and Public Expenditure & Reform, Paschal Donohoe TD, announced that the relief is to be extended for a further three years. The relief will, therefore, be available to companies which commence qualifying trades in the period up to 31 December 2021, where relevant conditions are met.
As this relief is linked to the amount of employer’s Pay Related Social Insurance (PRSI) paid by a company in each accounting period, it continues to support job creation in the start-up sector. A company can benefit from a maximum tax credit of €40,000 per annum in its first 3 years of trading.
Accelerated Capital Allowances for Employer-Provided Fitness and Childcare Facilities
This measure, introduced in Finance Act 2017, is being amended and will commence with effect from 1 January 2019. Its purpose is to incentivise employers to provide fitness and/or childcare facilities for the use of their employees, by providing an accelerated deduction for the capital investment costs incurred.
In line with European Union Anti-Tax Avoidance Directive (ATAD), the Minister announced changes to the existing Irish Exit Tax regime. These changes are in effect from 10 October 2018.
Under ATAD, EU member states are required to introduce or update existing rules to ensure they are in line with EU provisions by 1 January 2020. These rules seek to tax unrealised gains where assets are migrated from Ireland, and as a result, are removed from the scope of Irish tax. Any gains falling under this provision will be subject to tax at 12.5%, rather than the existing Capital Gains Tax (CGT) rate of 33%. There are specific anti-avoidance rules which prevent transfers/migrations benefitting from the 12.5% rate if the main purpose of the transaction is to benefit from the lower tax rate on unrealised gains.
There are no longer exemptions from exit tax for certain companies which are foreign-owned.
Controlled Foreign Company (CFC) Rules
The Minister announced that CFC rules will be introduced for accounting periods commencing on/after 1 January 2019. The CFC rules will be included in the Finance Bill 2018, to be published on 18 October 2018.
Transfer Pricing (TP)
The Minister noted that a review of Ireland’s TP regime would be conducted in 2019, including a public consultation. It was previously confirmed that updated TP legislatiocn will be included in Finance Bill 2019. These updates will also include the formal adoption of the OECD’s 2017 TP Guidelines into Irish domestic legislation.
2. Indirect Tax
The VAT rate for the tourism and hospitality sectors will increase to 13.5% with effect from 1 January 2019. This VAT rate had been reduced to 9% in 2011 as part of a stimulus measure and Budget 2019 has returned to the pre-recession rate for these sectors.
The increased VAT rate will apply to restaurant and catering services, hotel and holiday accommodation, shows, exhibitions and cultural facilities. In addition, disposal of waste material, repair and maintenance services, hairdressing services and the supply of live horses and greyhounds will return to the pre-2011 rate. Such an increase will result in an additional €466 million for the Exchequer but has been heavily criticised by the industry.
Other Indirect Tax considerations
The 9% VAT rate will continue to apply to printed newspapers and sporting facilities.
The VAT rate on electronically supplied publications will be reduced from 23% to 9% with effect from 1 January 2019 following recent EU developments in this area.
There is no increase in the excise rate for diesel, however, any new diesel engine passenger vehicles registered from 1 January 2019 will be subject to a 1% Vehicle Registration Tax.
3. Employment Tax
Key Employee Engagement Programme (KEEP)
Amendments were announced to the KEEP scheme which was introduced in 2018. The ceiling on the maximum annual market value of share options that may be granted by an SME will increase from 50% to 100% of the annual salary. The overall value of the share options also increased from €250,000 to €300,000. However, the three-year limit has now been replaced to a lifetime limit. The maximum value of options that can be granted in a year remains at €100,000.
Benefit in Kind (BIK)
The 0% BIK rate for employers providing electric cars or vans has been extended to 31 December 2021. A cap of €50,000 on the original market value (OMV) of the car or van that is exempt from BIK is applied from 1 January 2019 and any amount in excess of €50,000 is taxable in the normal manner.
Weekly income threshold for the higher rate of employer’s PRSI will increase from 1 January 2019 from €376 to €386. The rate of employer’s PRSI will also increase to 10.95%.
Hourly minimum wage
The hourly minimum wage will increase from 1 January 2019 to €9.80. This has been introduced following a recommendation from the Low Pay Commission.
4. Personal Tax
Income tax and Universal Social Charge (USC)
The Minister announced an increase in the income tax standard rate band of €750 for single and married individuals (one earner) and €1,500 for married individuals (dual earners). Therefore, the 20% tax band has been widened and it will mean that individuals will reach the higher rate of tax (40%) at €35,300. USC band for the 2% rate has increased by €502 to €19,874 and the 4.75% rate has reduced to 4.5%. These changes in USC will benefit all taxpayers.
The earned income credit has been increased by €200 to €1,350 in order to minimise the differential in taxes payable by self-employed individuals and employees under the PAYE system.
Capital Acquisitions Tax (CAT)
The tax-free Group A threshold for gifts or inheritances from a parent to child has increased by €10,000 to €320,000. This is expected to rise further in upcoming budgets.
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EisnerAmper Ireland’s Tax Department provides support to the Firm’s Financial Services and International Business market groups. We advise corporates, their people and principals operating in the technology, life sciences, real estate, structured finance, aircraft leasing and investment funds industries. To find out more, visit our Tax Services page.