Claim SARP relief on time

Since 1 January 2021, Special Assignee Relief Programme(SARP) claims must be filed within 90-days of an employee arriving in Ireland.

In March 2020, Revenue introduced a concessionary measure whereby the 90-day employer filing obligation in respect of the SARP 1A form was extended by a further 60 days. This concessionary measure ceased to apply on 31 December 2020. We would like to remind employers that with effect from 1 January 2021, all SARP 1A forms must be filed within the 90-day timeframe.

Special Assignee Relief Programme (SARP)

SARP was originally introduced in 2012 as a key component of Ireland’s Foreign Direct Investment (FDI) strategy.  The aim of the relief is to reduce the cost to employers of assigning skilled individuals in their companies from abroad to take up positions in the Irish-based operations of their employer, thereby creating more jobs and facilitating the development and expansion of businesses in Ireland.

Overview of the relief

SARP provides for income tax relief on a proportion of income earned by an employee who is assigned by his or her relevant employer to work in Ireland for that employer or for an associated company in Ireland of that relevant employer.

Where certain conditions are satisfied, an employee can make a claim to have a proportion of his or her earnings from the employment with the relevant employer or with an associated company disregarded for income tax purposes.

For 2015, and subsequent years, the proportion is determined as 30% of an employee’s income over €75,000. For 2020 and subsequent years, an upper income threshold of €1 million applies for all claimants.

Income which is disregarded income for income tax purposes is not exempt from the Universal Social Charge (USC) or PRSI.

The relief can be claimed for a maximum period of five consecutive years commencing with the year of first entitlement.

In addition, employees who qualify for relief under SARP may also receive free of Irish tax, certain expenses of travel and certain costs associated with the education of their children in Ireland.

What are the main conditions that must be satisfied to avail of SARP?

  • Employees must be assigned by their overseas employer to work in Ireland for that employer (or for an associated company in Ireland);
  • The employee must previously have worked for their overseas employer for a minimum period of 6 months immediately before arriving in Ireland;
  • The foreign employer must be a company incorporated and tax resident in a country with which Ireland has a double taxation agreement or a tax information exchange agreement.
  • The employee must not have been tax resident in Ireland for the previous 5 tax years before arriving in Ireland.
  • The employee must be tax resident in Ireland for all years for which the relief is claimed.
  • The employee must work in Ireland for a minimum period of 12 months.
  • The employee must earn a minimum basic salary of €75,000 per annum excluding all bonuses, benefits or share based remuneration.
  • The individual’s relevant employer or associated company must certify, within 90 days of the employee’s arrival in Ireland to perform duties of his/her employment, that the individual satisfies the conditions above.

In addition to international assignees, returning Irish citizens may also avail of the relief provided all other conditions are fulfilled. Certain other tax reliefs (e.g. the Foreign Earnings Deduction) may not be claimed in conjunction with SARP.

How is the SARP relief calculated?

The tax relief is granted by way of calculating what is known as the “specified amount” and relieving that specified amount from the charge to income tax, for example:

Elaine is a relevant employee who earns €180,000 in 2021. Relief is calculated as follows:

A - B x 30% = relief due

A = €180,000     B = €75,000  (annual threshold)

€180,000 - €75,000) x 30%€31,500

While €31,500 of Elaine’s income is relieved from tax, it remains liable to the USC and depending on Elaine’s circumstances may also be liable to PRSI.

Elaine's marginal tax rate is 40%.

€31,500 x 40% = €12,600.

Relief due for 2021 is €12,600 

What are the application and reporting requirements to avail of SARP?

Employers must certify to Revenue that an employee meets certain conditions. The certification must be made within 90 days of arrival in Ireland, otherwise the relief will be denied.

Employees making a claim will automatically become chargeable persons for the year of the claim, which will result in a tax return filing requirement for the individual.

The relief also requires an employer to submit an annual SARP return to Revenue by 23 February of the following year.

If you have any questions in relation to the above, or if you would like to discuss this topic further, please contact a member of the Mazars employment tax team below:

Staff Member

Position

Email

Telephone

Ken Killoran

Tax Partner

kkilloran@mazars.ie

01 449 4451

Amy O’Boyle

Tax Manager

aoboyle@mazars.ie

01 449 4418

Mark Spelman

Tax Manager

mark.spelman@mazars.ie

01 449 6457

 

September 2021

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