Ireland

Personal tax credits

The main personal tax credits are as follows:

Notes

1. With effect from 1 January 2014, available for the principal carer of the child only.
2. Reducing credit available for subsequent years.
3. Where carer’s income exceeds EUR 7,200, the tax credit is reduced by a sliding scale. If one’s income is EUR 10,400 or more, then one cannot claim the tax credit.
4. The first EUR 3,000 paid for full-time courses and the first EUR 1,500 paid for part-time courses is disregarded in calculating the relief.
5. Expenses paid to nursing homes that provide 24-hour nursing care are tax relieved at the marginal tax rate.

Special assignment relief programme (SARP)

SARP for those employees who arrive in Ireland between 1 January 2015 and 31 December 2025

The relief is available for a maximum of five consecutive tax years, both to Irish domiciled and non-Irish domiciled individuals who are required by their existing employer organisation to come to Ireland between 2012 and 2025 to work here for a minimum period of 12 months. The individual can be engaged under an Irish or non-Irish employment contract.

Qualifying individuals will be entitled to exclude 30% of employment earnings over EUR 100,000 (effective from 1 January 2023) from the charge to Irish tax. There is a maximum income limit of EUR 1 million, upon which relief may be claimed.

In addition, qualifying individuals are entitled to receive tax-free payment or reimbursement of the reasonable costs of one return trip to their 'home' country and school fees (up to EUR 5,000 per annum) for each child, subject to restrictions. The relief may be claimed up-front by way of a payroll deduction or by way of a repayment after the tax year end. Either way, advance approval by the Irish Revenue is required.

In order to qualify and claim SARP relief, the individual must:

• have a 'base salary' of at least EUR 100,000
• be tax resident in Ireland (the individual can also be resident elsewhere)
• have been non-resident in Ireland for the five years immediately preceding the year of arrival
• have been employed on a full-time basis by a 'relevant employer' for the entire six months immediately prior to arrival, and
• perform duties for a minimum period of 12 consecutive months from the date the individual is first assigned.
• The individual must have a Personal Public Service Number (PPSN, or tax/social security number) at the time the application is submitted to Revenue.

The relevant employer must be incorporated and resident in a country with which Ireland has either a DTT or an exchange of information agreement. The employer must certify to the Revenue Commissioners, within 90 days of the date the individual arrives in the state, that the qualifying conditions have been met.

There are differing conditions in relation to what is included as earnings both for the base salary and the income to which the 30% is applied. Certain other reliefs (e.g. for non-Irish workdays) cannot be claimed in conjunction with SARP relief. The relief also imposes certain reporting obligations on employers.

It should be noted that while the income is relieved from tax, it is not relieved from the USC or PRSI (where applicable).

Illness/Maternity/Paternity benefit

Certain benefits paid by the Department of Employment Affairs and Social Protection are liable to tax. They remain exempt from PRSI and USC.

Remittance basis of taxation (RBT)

RBT provides favourable taxation treatment for non-Irish domiciled individuals in respect of foreign investment income (e.g. rental) and foreign-source employment income relating to overseas duties. RBT is not available in relation to earnings from a foreign employment exercised in Ireland. Such earnings are liable to PAYE, subject to certain exclusions. Where RBT applies, the amount of foreign income taxable in Ireland is limited to the amount remitted to Ireland. Where an individual subject to RBT transfers foreign-source income (or property bought using that income) to their spouse or civil partner and that income or property is remitted to Ireland, the remittance will be deemed to have been made by the individual.

Capital gains arising on the disposal of non-Irish assets by non-Irish domiciled individuals are liable to Irish CGT only to the extent that the gain is remitted to Ireland.

Where an individual subject to RBT transfers the proceeds from the disposal of a non-Irish asset to their spouse or civil partner and those proceeds are remitted to Ireland, the remittance will be deemed to have been made by the individual. The table below summarises the position:

Foreign earnings deduction (FED)

FED relief was introduced in 2012 to encourage companies that are expanding into emerging markets. The relief applies to individuals who spend significant amounts of time working in a relevant state. The relief has been extended to 2025.

The relief provides for a reduction in the individual's employment income (excluding certain benefits in kind but including share-based reward) by apportioning the income by reference to the number of qualifying days worked in a relevant state in the year over the number of days that the employment is held in the year. The reduction is capped at EUR 35,000 in any year.

The list of qualifying countries includes Algeria, Bahrain, Brazil, Chile, China, The Democratic Republic of the Congo, Colombia, Egypt, Ghana, India, Indonesia, Japan, Kenya, The Republic of Korea, Kuwait, Malaysia, Mexico, Nigeria, Oman, Pakistan, Qatar, Russia, Saudi Arabia, Senegal, Singapore, South Africa, Tanzania, Thailand, the United Arab Emirates, and Vietnam. In order to qualify for relief, an individual must work in a qualifying state for at least 30 days.

Trans-border workers relief

Income tax relief is available to individuals who are resident in Ireland but who work outside Ireland. The relief operates in such a way as to effectively exclude from Irish tax the income arising from a qualifying employment. In order to qualify for the relief, the individual must hold an employment outside Ireland for a continuous period of at least 13 weeks in a country with which Ireland has a DTT. Income from the qualifying employment must be fully taxed in that country and the foreign tax paid. The individual must also be present in Ireland for at least one day a week during the period of the qualifying employment.

Research and development (R&D) tax credit

Finance Act 2022, which was enacted into law in December 2022, brought about a number of positive changes to the R&D tax credit. These changes ensure that Ireland’s R&D tax credit is a fully payable credit whereby companies can have each instalment of their R&D tax credit paid out to them or they can elect to offset part of all of each instalment against other tax liabilities of the company (i.e. employment taxes, VAT, corporation tax). Finance Act 2023, which was enacted into law in December 2023, has further enhanced the R&D tax credit by increasing the rate of the credit from 25% to 30% with effect for accounting periods beginning on or after 1 January 2023.   

The R&D tax credit is now a 30% credit for eligible costs incurred on qualifying R&D activities. In order for a project to qualify for the R&D tax credit, it must represent systematic, investigative activity in a field of science or technology that seeks to achieve scientific or technological advancement and resolve scientific or technological uncertainty. In addition to a 30% credit, a trading company should also obtain a standard corporate tax deduction for the costs, resulting in an effective 42.5% credit. 

The R&D tax credit rules provide for a three-year fixed payment R&D tax credit regime whereby a company will claim 50% of their credit for an accounting period in year one, 30% of the credit in year two, and 20% of the credit in year three. For each instalment, a company can elect for the instalment to be paid out in cash to the company or for the instalment to be treated as an overpayment of tax that can be used to offset other taxes due and payable by the company. 

Where a company elects to treat an instalment or part of an instalment as an overpayment of tax and the amount so elected is in excess of the company’s tax liabilities, the company has an option to surrender the excess to reward key employees who have been involved in the R&D activities of the company, allowing them to effectively receive part of their remuneration tax free. In order to qualify as a ‘key employee’:

• the employee must not have been a director of the employer company
• the employee must not have had a material interest in the employer company
• the employee must perform at least 50% of their duties ‘in the conception or creation of new knowledge, products, processes, methods, or systems’, and
• at least 50% of the emoluments of the employee must qualify as R&D expenditure.

The effective rate of tax of the employee cannot be reduced below 23%, and unused tax credits that the employee has been allocated may be carried forward. The employee may only make a claim to the Irish Revenue for a tax refund after the end of the tax year. It is important to note that the amount that can be surrendered by a company to a key employee(s) cannot exceed the corporation tax payable by the company in respect of that accounting period.