09 Oct 2019 | 01.20 pm
Budget 2020: Employment Taxes
Employer’s PRSI increasing to 11.05% from 1 January 2020
09 Oct 2019 | 01.20 pm
Extending the Special Assignee Relief Programme out to end 2027 cements Ireland’s competitiveness for attracting key talent, writes Eoghan Quigley (pictured) of KPMG.
Special Assignee Relief Programme (SARP)
SARP was introduced in 2012 to encourage the relocation of key talent in organisations to Ireland and allow the state to compete on the international stage in attracting businesses and key skills. As mentioned by the minister, an independent review conducted earlier this year supports the existence of SARP as essential for Ireland to compete with other jurisdictions who operate specific tax provisions to attract skilled executives.
Over the past number of years, with some fine-tuning, SARP has become a valuable regime where c.800 individuals qualified for the relief in 2016. Where the relevant conditions are met, the individual will avail of a deduction of 30% on earnings over €75,000 up to a cap of €1 million for income tax purposes. The relief is available for inbound employees for up to five years, provided all conditions are met each year.
It is a welcomed announcement that this scheme will be extended from 31 December 2020 until 31 December 2022, allowing employees arriving in Ireland in 2021 and 2022 the opportunity to avail of this relief up to and including 2027 and cementing Ireland’s competitiveness for attracting key talent.
However, it was disappointing the opportunity to remove or amend the €1 million cap introduced last year was not utilised. The introduction of this cap limits the effectiveness of the regime in attracting senior executives to live in Ireland.
Foreign Earnings Deduction (FED)
FED was also introduced in 2012 to encourage the expansion of the Irish indigenous businesses into overseas markets and in particular into emerging markets. The scheme is a key means of supporting Irish employers in managing the cost of sourcing business in emerging markets.
The programme works by allowing a limited deduction from income tax, by way of a refund through the personal tax return, for qualifying work days an employee or director spends in a specific jurisdiction, provided certain conditions are met. The relief can apply to all income earned from the qualifying office or employment including share remuneration.
An independent review conducted earlier this year supported the existence and continuation of the scheme and it was announced FED will be extended to the end of 2022.
Benefit in Kind on Electric Vehicles
As part of the government’s programme to address climate change, in 2018 a 0% benefit-in-kind (BIK) rate was introduced for electric vehicles. This is an attractive position when contrasted with the rate of BIK on company cars generally, which is 30% of the car’s original market value.
It was announced that this 0% BIK rate on electric vehicles will continue to 2022, subject to the existing vehicle value limit of €50,000. This extension, along with increased funding in developing electric car infrastructure to grow the number of charge points nationally, should assist in incentivising the uptake of electric cars. It was also announced the government would introduce an environmental rationale for BIK for commercial vehicles from 2023.
While there was no mention of PRSI changes in the Budget, the previous announcement from Budget 2019 should not be forgotten. This relates to the change from 1 January 2020 whereby there will be a 0.1% increase in the National Training Fund levy payable by employers in respect of reckonable earnings of employees in Class A and Class H employments.
The change leads to the employer’s PRSI rate increasing from 10.95% to 11.05% from 1 January 2020, placing an additional cost on employers.