Comprehensive Guide to SARP Tax Relief in Ireland
The Special Assignee Relief Programme (SARP) is a tax relief initiative in Ireland designed to attract skilled employees from overseas to work in the country.
Introduced by the Irish government, SARP provides significant income tax relief for qualifying individuals, making Ireland an attractive destination for top-tier talent.
This guide delves into the specifics of SARP, eligibility criteria, benefits, application process, and tips for maximizing this tax relief.
What is SARP?
SARP, or the Special Assignee Relief Programme, is a tax incentive that aims to reduce the income tax burden on high-earning individuals relocating to Ireland for work.
By doing so, it encourages multinational companies to assign key personnel to their Irish operations, thereby:
- Attracting foreign direct investment
- Creating high-value jobs
- Enhancing Ireland’s competitiveness in the global market
Other countries around Europe and beyond have similar reliefs / incentives in place for similar reasons which we have discussed in previous articles on this blog.
See for example Italy’s tax breaks for impatriates of up to 90% or the 30% Dutch ruling tax facility in the Netherlands.
Key Benefits of SARP
1. Income Tax Relief: Qualifying employees can receive income tax relief on a portion of their earnings, specifically the amount exceeding €100,000 (prior to 1 January 2023 this threshold was €75,000). This significantly reduces the overall tax liability.
However, SARP applies only to income up to €1,000,000.
2. Tax-Free Benefits: Additional benefits such as certain employer-provided expenses and school fees can be exempt from tax.
3. No Upper Earnings Cap: Unlike many other tax relief programs, SARP does not impose an upper limit on earnings, making it particularly attractive to high earners.
4. Enhanced Corporate Presence: By making it financially attractive for top talent to relocate to Ireland, SARP helps multinational companies enhance their operations in the country.
Eligibility Criteria
To qualify for SARP, employees must meet specific criteria:
1. Employment with a Relevant Employer: The employee must work for a company that is tax resident in a country with which Ireland has a double taxation agreement.
2. Minimum Income Threshold: The individual must earn at least €100,000 annually (prior to 1 January 2023 this threshold was €75,000), including bonuses, fringe benefits, stock options and other non-regular income.
3. Pre-Assignment Employment: The employee must have been employed by the relevant employer outside of Ireland for at least six months prior to the assignment.
4. Assignment Duration: The assignment to Ireland must be for a minimum of 12 months.
5. Notification to Revenue: Employers must notify the Revenue Commissioners within 90 days of the employee’s arrival in Ireland.
Calculating SARP Relief
The relief is calculated as follows:
1. Determine Qualifying Income: Identify the total income, excluding bonuses, benefits-in-kind, and any income earned prior to the assignment in Ireland.
2. Subtract the Threshold: Deduct €100,000 from the qualifying income.
3. Apply Relief Rate: The SARP relief rate (currently 30%) is applied to the balance, reducing the taxable income by that amount.
For example, if an employee’s qualifying income is €200,000, the calculation would be:
- Qualifying income: €200,000
- Less threshold: €100,000
- Balance: €100,000
- Relief: 30% of €100,000 = €30,000
- Taxable income: €200,000 – €30,00 = €170,000
Application Process
1. Employer Notification: The employer must notify the Irish Revenue Commissioners of the employee’s assignment to Ireland within 90 days of their arrival.
2. Complete Form SARP 1A: The employer must complete Form SARP 1A, which includes personal details, employment information, and a declaration of eligibility.
Additionally, the employer must also submit an annual return by 23 February of the following year.
3. Submit Form to Revenue: The completed form must be submitted to the Revenue Commissioners.
4. Maintain Records: Both the employer and employee should maintain detailed records for 6 years to support the claim for SARP relief in case of an audit by the Irish Tax Authorities.
Employee Claim: although the SARP application is typically submitted by the employer per step 1 and 2 above and implemented via the Irish payroll, expat employees can also make a SARP claim through their annual tax return (Form 11) by 31 October following the tax year end.
Maximizing SARP Benefits
1. Plan Ahead: Ensure that the assignment to Ireland is well-planned to meet the minimum duration and other eligibility criteria.
2. Utilize Tax-Free Benefits: Take advantage of the tax-free benefits allowed under SARP, such as school fees and certain relocation expenses.
3. Professional Advice: Engage with tax professionals such as us at GMTS to ensure compliance and maximize the relief available under SARP.
4. Timely Notification: Ensure that the employer notifies the Revenue Commissioners within the stipulated timeframe to avoid disqualification.
Common Pitfalls and How to Avoid Them
1. Late Notification: Missing the 90-day notification window can disqualify an employee from SARP. Employers should prioritize this requirement upon the employee’s arrival.
In particular with obtaining a PPS number (PPSN) – Irish equivalent of a US social security number – which has to be included in the SARP application.
2. Incomplete Documentation: Inadequate records can lead to issues with claiming relief. Both employers and employees should keep detailed documentation of the assignment and related expenses.
3. Misunderstanding Eligibility: Ensure a thorough understanding of the eligibility criteria, particularly the pre-assignment employment requirement and the income threshold.
Recent Changes and Future Outlook
The Irish Revenue have clarified that tax equalized expats, from 1 January 2024, should not have SARP relief included in their initial gross-up calculations.
Instead, the SARP relief ought to be calculated on the grossed-up amount arrived at without already considering the pre-gross up SARP.
This update issued by the Irish Tax Authorities has the net effect of reducing the amount of SARP relief available to Irish expats.
The Irish government has also extended SARP until the end of 2025, demonstrating its commitment to attracting international talent.
However, the scheme is subject to regular review, and potential applicants should stay informed about any future changes.
Conclusion
The Special Assignee Relief Programme (SARP) offers a valuable opportunity for high-earning employees to benefit from significant tax relief while working in Ireland.
By understanding the eligibility criteria, application process, and strategies for maximizing benefits, both employees and employers can take full advantage of this incentive.
As Ireland continues to position itself as a global business destination, SARP remains a crucial element in attracting and retaining top international talent.
SARP FAQs
1. What is the minimum income required to qualify for SARP?
The minimum income required is €100,000 annually (prior to 1 January 2023 this threshold was €75,000), including bonuses and non-regular income but excluding remuneration eligible for Foreign Tax Credits (FTCs) as a result of the Double Tax Treaty (DTT) application.
2. How long must an employee be assigned to Ireland to qualify for SARP?
The assignment must be for a minimum of 12 months.
3. Are there any tax-free benefits under SARP?
Yes, certain employer-provided expenses and school fees may be claimed tax-free up to €5,000 per child for school fees paid to an approved school in Ireland.
4. What is the deadline for notifying the Revenue Commissioners about an employee’s assignment?
The employer must notify the Revenue Commissioners within 90 days of the employee’s arrival in Ireland.
5. Can SARP be claimed if the employee was not employed by the company outside of Ireland for six months before the assignment?
No, the employee must have been employed by the relevant employer outside of Ireland for at least six months prior to the assignment.
5. Is there anything else that could make an expat ineligible for SARP?
Yes, the expat having been already tax resident in Ireland in the 5 tax years prior to arrival tax year.
Also, to maintain eligibility for the SARP, the expat employee has to have at least 1 Irish workdays per month in the initial 12 month period.
By adhering to these guidelines and leveraging the benefits of SARP, expat employees and employers can make the most of Ireland’s attractive tax relief program, enhancing both individual and corporate prosperity.
Still have some questions on the Irish SARP?
Contact us should you require further clarifications on how SARP works. We offer a free ½ hour consultation.
