Transborder relief applies to employees resident in Ireland, but who carry out their duties outside Ireland. This can apply to employees living near the border, in the Republic of Ireland and working in Northern Ireland. The employee must be present in the State for at least one day a week.
The employment must be qualifying. The duties must be carried out wholly outside the state in a country with which Ireland has a Double tax agreement. The full income must be subject to tax in the other jurisdiction and not be exempt or relieved. The foreign tax must have been paid and the individual must not have a right to repayment. The remittance basis or spit year treatment must not apply.
A qualifying employment is one exercised in full outside Ireland for a continuous period of at least 13 weeks. This does not cover semi-state bodies. Duties within the state that are incidental to those outside the state are ignored. The employee must be in the state at least one day in every week in which he is absent for the purpose of carrying out employment. This does not apply to holiday periods.
The relief works by limiting liability to Irish tax to a specified amounts, This the proportion represented by the non-qualifying income as a percentage of total income. The relief would be total where there is no Irish income.
Split year relief
A person who is taxed on employment income, who becomes resident during a tax year but was not resident in the previous year, may if he satisfies the Revenue that he has come to Ireland with the intention of being a resident in the following year, may be treated as resident only from the date of his arrival. Employment income prior to that date is ignored.
Strictly speaking a person (e.g. an assignee) who arrives in Ireland and spends a sufficient number of days in the state is liable on his worldwide income for the whole tax year. Split year relief may be claimed which allows Irish tax and employment income to apply only from the date of arrival. He must come for more than a temporary purpose
Equally in the year of departure a person may be liable for tax on as worldwide income after departure for the remainder of the year.In the case of departure, if a person(e.g. an assignee) leaves Ireland and is not resident the following year, he may claim split year relief. He must leave Ireland other than for a temporary purpose. This relief operates so that he is not liable to tax on foreign employment income from the date of departure.
Similarly in the case of departure, an employee who satisfies the Revenue that he leaves the State with the intention that he will not be resident in following year, is deemed resident in respect of the period to the date of departure only.
Where a person takes up residence with the intention of staying at least one year, he may be exempted from income tax in respect of employment income earned prior to the date of his arrival. In the absence of this relief, he could be retrospectively liable to income tax for the whole of his employment income in the year of arrival, where he becomes resident in that year (e.g. arriving in May)
The employer may seek a PAYE exclusion order for the period from Revenue.
The relief does not apply to non-employment-income. Double taxation relief may be available in respect of that income.
Special Foreign Earnings Deduction
A special tax reduction was introduced by FA 2012 for individuals carrying out duties in the so-called BRIC countries and South Africa. This is Brazil, Russia, India, China and South Africa. The relief is a special foreign earnings deduction which applied only for the years 2012 to 2014.
The duties must be carried out in the above countries and is limited to the time when the individual is so employed. The maximum reduction was €35,000. Income was reduced for income tax purposes but not for USC or PRSI.
The deduction depends on the number of qualifying days, which must be one of at least 10 consecutive days, in which the person is present in those days for the performance of duty, holidays and weekends count.
The provision applies to directors of trading companies and employees. It is not available for a certain officers in employment which qualify for other relief.
Expansion of Relief
The special relief introduced in 2012 giving, a foreign earnings deduction in respect of individual spending time in the so-called BRICs country was extended by FA 2013 extended to cover the following countries: Egypt, Algeria, Senegal, Tanzania, Nigeria, Ghana, Congo, Tanzania. The purpose was to improve the prospects of access for Irish agricultural products in these markets.
The foreign earnings deduction introduced in 2012 is extended to 2017. The existing states are confirmed and a significant number of other states in the Middle East and Asia are added including Japan, South Korea, Saudi Arabia, Malaysia, as well as Mexico.
The number of qualifying days is amended to reduce the required four to three consecutive days with direct travel to and from the state as treated as presence in the relevant state.
Finance Act 2016 amended the foreign earnings deduction relief, extending it to 2020. Columbia and Pakistan were added to the list of states. The number of qualifying days required in employment in a relevant state was reduced to 30.
Terms of Relief
The amount of the allowance due is less than or equal to €35,000 or the specified amount. The specified amount is calculated using D x E / F.
- D is the number of qualifying days worked in a relevant state during the tax year
- E is all the income received from the employment in the tax year.
This includes any taxable gain realised by share options less any qualifying pension contribution or premium. It excludes allowable expenses payments, Benefits in Kind (BIK), termination and restrictive covenants payments.
F is the total number of days that the employment is held by you in the tax year (there are 365 days in a full tax year).
The specified amount is reduced by your income earned on qualifying days for which Double Taxation Relief is available under a tax treaty.
Special Assignee Relief
The existing system of special assignment relief for higher paid executives has been replaced by a new scheme. The original scheme was introduced in 2008. The new scheme provides an alternative to the existing scheme.
Where an employee is resident for tax purposes in the State and performs duties employment with a qualifying employer and has income of the employment of not less than €75,000, then he is entitled to claim relief for up to a 5 year period. The claim must be made in the first year when the employee is resident in Ireland.
Qualifying employees are those in a fulltime of employment of an employer for at least 12 months before arriving in the State, who arrived in the State in 2012 to 2014 at the request of the employer to either perform duties in the State for a period of 12 months, provided the person has not been resident for five preceding years. Incidental duties performed outside the State do not disqualify.
Certain income is excluded from the employees’ taxable income. The relief involves giving a deduction of a specified amount against the income (and gains) of the employment. The specified amount is 30 percent of the excess salary over €75,000 euro. There is no relief from Universal Social Charge or PRSI.
Where the relief was claimed, the other cross-border reliefs were not available. There is annual reporting obligations on the part of the employer. An application may be made to allow deduction at source. The tax repayment is the marginal rate of tax on the specified amount.
The Special Assignee Relief Programme introduced in 2012 was amended by the 2014 Act. The Relief was extended to individuals who arrived in the state in the years 2015, 2016 and 2017.
Development of Relief
The Relief continues for persons arriving between 2012 to 2014. The €500,000 cap in relation to the formula relating to the availability of the relief is removed for the tax years 2015 to 2017. For persons arriving in 2015 to 2017, the requirement that the person works for 12 months outside that state for a relevant employer prior to coming, is reduced to six months.
The requirement that the duties of the employment are performed for continuous 12 months from the date of first residence is amended to 12 months from the date of first performing the duties in the state. The employer must certify within 30 days of arrival that the six month period applies, that the individual is moving at the request of the employer to perform duties of employment and the duties will be performed for a minimum period of 12 consecutive months. The €500,000 cap is removed.
Reporting obligations apply to relevant employers, which must be returned annually.
Finance Act 2016 extended the special assignee relief program to the end of 2020.
Finance act 2018 amend the special assignees relief programme. The 90 days is replaced by 30 days and allows for increase of the €500,000 To €1 million in the case of a relevant employee first arrives in state after 1 January 2019. The cap of €500,000 ineligible income is from you to substantial growth in very high is failing of the relief. The Is now €1 million.