Tax-relief incentives for foreign executives extended in Finance Bill
¤500,000 cap and tax residency clause shed as scheme extended to end of 2017 Bill includes amendments to close off several tax-avoidance schemes
The Government is to relax the rules governing a special tax incentive scheme to attract foreign executives into Ireland after just 31 individuals availed of it last year.
The move, contained in the Finance Bill published yesterday by Minister for Finance Michael Noonan, is seen as another incentive to drive foreign direct investment here after the removal of the “Double Irish” tax loophole.
The Special Assignee Relief Programme (Sarp), introduced in 2012, reduces the cost to the employer of bringing in highly paid executives or key decisionmakers from abroad in the hope they will further cement the company’s presence here.
Under the original rules an employee was able to make a claim to have 30 per cent of their income between ¤75,000 and ¤500,000 disregarded for income tax purposes.
However, after a low take-up rate in its first two years of operation, Mr Noonan now plans to remove the ¤500,000 cap, making it significantly more lucrative for high-paid individuals to work here. The scheme is also to be extended until at least the end of 2017.
The requirement to be tax resident in Ireland and not elsewhere is also to be shed, meaning candidates need only to be tax resident here. In addition, the new rules allow for the performance of work-related duties outside of the State and reduce the requirement to have been employed abroad by the same employer from 12 months to six months.
In other European countries similar tax schemes for senior executives attract thousands of applications annually.
The Finance Bill, when enacted, gives legal effect to the various taxation measures announced in the budget, including the reduction in the top rate of income tax from 41 per cent to 40 per cent as well as changes to the entry thresholds for universal social charge.
The Bill also amends the State’s company tax residency rules to ensure all companies incorporated in Ireland will automatically be tax resident here, essentially closing the “Double Irish” mechanism for new entrants from January 1st next.
One of the other corporate tax measures announced in the budget was the possible establishment of a “knowledge development box” that will grant tax exemptions to firms developing new technology in the country.
There was no mention in the Bill of the proposed tax rate that might be associated with the box as the establishment of the scheme is still subject to a public consultation process.
Among the other provisions contained in the Bill was the abolition of VAT charged on green fees in member-owned golf clubs from next March. This follows a ruling by the European Court of Justice which found that levying VAT when non-members pay green fees was not in line with EU law.
Tax-avoid ance schemes
The Bill also includes amendments to close off a number of tax-avoidance schemes which are linked to the use of approved retirement funds and “vested” personal retirement savings accounts.
A relief from deposit interest retention tax (DIRT) on savings used by first-time house buyers is also being introduced in response to the tightening of the loan-to-value mortgage requirements being imposed by the Central Bank. The Bill said this would enable a first-time buyer purchasing a home to apply for a refund of the DIRT they paid on the interest earned on sav-
Minister for Finance Michael Noonan (right): said he was amending the tax relief programme applicable to foreign executives.
PHOTOGRAPH: ALAN BETSON ings used towards the deposit on a home.
The Government also took the opportunity to widen the definition of tea, for the purposes of a zero VAT rate, to include herbal teas and fruit infusions.
Minister for Jobs, Enterprise and Innovation Richard Bruton said: “In relation to multinational companies, the Finance Bill solidifies the work done in the budget to bring certainty as well as increased competitiveness to our corporation tax regime.”
The tax relief on the purchase of new hybrid electric vehicles, due to run out on December 31st, has been extended until the end of 2016. The relief is up to ¤1,500 on new hybrid vehicles, which must be in series production. Plug-in hybrids – which can run exclusively on electric-only power over distances of up to 50km – qualify for a grant of up to ¤2,500.