The Finance Bill 2012: Attracting FDI and Project Champions?

March 15, 2012

The Finance Bill, as initiated, provides for a new Special Assignee Relief Programme (SARP) and enhancements to the Research and Development (R&D) tax regime, which are intended to attract key personnel to Ireland.


The proposed new SARP will operate by exempting 30% of a qualifying individual’s employment earnings between €75,000 and €500,000 from Irish income tax. This means that up to €127,500 of the employee’s annual income could be sheltered from Irish income tax. The relief does not cover PRSI or the Universal Social Charge.

The cost of one family trip to the employee’s home country and up to €5,000 per child in school fees can also be provided by the employer tax-free.

To qualify for the new SARP, an employee must:

  • Arrive in Ireland during the years 2012 – 2014
  • Be employed full-time by the employer for 12 months prior to the move to Ireland (i.e. it does not apply to new hires)
  • Be employed full-time by a company incorporated and resident in a tax treaty country or by an associated company (which can include an Irish resident company)
  • Exercise all employment duties in Ireland for a minimum of 12 months (apart from incidental duties abroad)
  • Have a base salary of €75,000, excluding benefits
  • Be non-resident in Ireland for the preceding 5 years but resident in the year of claiming the relief

The proposed new SARP regime is more accessible than its predecessor due to the relaxation of a number of conditions, including the threshold salary amount. It also applies to Irish domiciled “ex pats”. However, there may be cases where higher earning employees would have benefitted more under the previous regime.

The regime remains subject to change until passed by the Oireachtas. Some helpful amendments have been suggested at Committee Stage:

  • The continuation of the previous SARP regime to allow individuals to claim under that regime for up to 5 years from the first year of claim.
  • The removal of a condition for the new SARP that would have required that the individual does not spend more than 30 days working outside Ireland.

R&D Tax Credits

As currently drafted the Finance Bill proposes allowing companies to reward key employees (excluding directors), whose duties are primarily R&D related, with a portion of the company’s R&D credit. The credit will only be available to employees who do not have more than a 5% shareholding and will be subject to the effective tax rate on the employment income not being reduced below 23%. However, unused credit may be carried forward by the employee.

The new provisions proposed in the Bill will only be available to profit-making companies and therefore the changes may not benefit many start-ups.

While these proposals could be improved upon, and may be as the Bill progresses through the legislative process, the attention now being given to personal taxation in the context of foreign direct investment is to be welcomed.

Contributed by Niamh Keogh.

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