The Special Assignee Relief Programme (“SARP”) was introduced in Ireland from 1 January 2012. The programme was designed to encourage the relocation of key talent within organisations to Ireland, and is available for up to five consecutive tax years from first arrival. A number of conditions need to be satisfied for the relief to apply, and these are outlined below, together with practical guidance regarding the application of the relief. This note covers employees coming to Ireland between 2015 and 2022.
In order to qualify for SARP, the following conditions must be satisfied:
Importantly, within 90 days of the employee’s arrival to Ireland, the employer must certify that all of the above conditions have been met in order for the relief to apply. This is achieved through the completion of the Form SARP 1A and submission by the employer to Irish Revenue’s SARP unit.
The relief operates by providing a deduction for income tax purposes from remuneration based on the following formula:
(A-B) X 30%
Whilst a qualifying condition for the relief to apply considers minimum base salary per annum, the relief itself applies to total remuneration i.e. allowances, benefits-in-kind, bonuses, equity awards, etc. Employee contributions to an Irish approved pension plan or a foreign pension plan eligible for tax relief are deductible from total remuneration before the relief is calculated. Likewise, remuneration eligible for double tax relief in Ireland must also be deducted from total remuneration before calculating any relief due.
From 1 January 2019, an earnings cap of €1m has been introduced – this will apply with immediate effect for individuals arriving on or after 1 January 2019. For SARP qualified employees who arrived before 31 December 2018, the introduction of this cap is delayed until 1 January 2020.
This annual threshold is pro-rated in years of arrival/ departure.
The relief applies to income tax only, and effectively means a 28% income tax rate on earnings above the relevant threshold in the tax year (i.e. 70% * 40%).
There is no relief from the Universal Social Charge “USC” or Irish Social Security “PRSI”.
Patrick arrived in Ireland on 1 January 2019 and meets all the conditions to claim SARP relief. His base salary is €85,000, and he receives additional benefits in kind valued at €5,000.
A = €90,000
B = €75,000 SARP
Deduction = (€90,000 - €75,000) = €15,000 @ 30% = €4,500
Patrick’s marginal tax rate in Ireland is 40%, so the income tax saving is €1,800 (€4,500 * 40%). 8% USC and, if applicable 4% PRSI continues to apply to the income qualifying for the SARP deduction.
Employees who qualify for SARP are also eligible to receive one tax-free home leave trip per annum for them and their family, and they can also have school fees paid by the employer tax-free, capped at €5,000 per annum for each child. These benefits are provided at the employer’s discretion.
In either case, the employee must have registered for SARP within 90 days of their arrival.
An employer must submit an annual return by 23 February following the tax year, detailing the following information for all qualifying employees:
In addition, the annual return must set out the increase in number of employees employed or retained as a result of the qualifying employees working in Ireland.
Employees who have registered for SARP must file a Tax Return by 31st October following the end of the tax year.
In practice, we have encountered the following practical challenges when supporting SARP applications:
Revenue apply the 90 day application window strictly, so it is important that individuals who qualify for the relief (or potentially qualify for the relief – see Protective Claims) are identified and notified timely.
The employee must have a minimum income level of €75,000 p.a. to qualify (i.e. base salary). This de-minimus cannot include bonuses, benefit in kinds or share options. This can make it difficult for certain employees to benefit from the relief, especially if their pay is variable or equity forms a large component.
In some instances, it might not be known within the 90 day application period whether an individual will qualify for SARP relief e.g. it might be unclear from their travel pattern whether they will be considered tax resident of Ireland. In such cases, a protective claim is recommended, however, such applications are processed inconsistently by Revenue.
The SARP regime does not apply to new hires with no previous group employment history. This can impose practical difficulties where a company wishes to directly recruit key employees to develop its Irish business.
In particular where SARP relief is claimed via the year-end Tax Return, a significant refund can be generated. Some employees have experienced significant delays with such refunds being processed and paid by Revenue.
In addition, a refund will only be released where the employer and employee returns are aligned – in some cases, the employees’ position might not be finalised until the submission of their return on 31 October following the year of assessment, whilst the employer return needs to be submitted by 23rd February. It may therefore be necessary to amend the employer submission accordingly, which could have an impact on other employees claiming the relief.
Where remuneration is eligible for a Foreign Tax Credit “FTC” in Ireland under a Double Taxation Agreement, SARP is not eligible on this element, even if the credit is not claimed. As well as creating reporting complexities to both the employer and employee, this could have a significant financial impact, particularly where the other jurisdiction has low income tax rates.
In particular we see this impact employees whose RSU’s vest while Irish resident, but who primarily worked outside of Ireland during the vesting period. If an RSU vests whilst an employee is resident in Ireland, it may be fully taxable in Ireland. If the employee worked in another jurisdiction during the vesting period, then a portion of this award may be double taxed, with relief granted via a FTC on the Irish Tax Return. The availability of this FTC means that only the portion of the award that is primary taxable in Ireland is eligible for SARP relief.
If you would like further information on the SARP regime, please get in touch with our Global Mobility team via this form.