A loophole allowing foreign direct investment (FDI) workers to access a generous tax scheme after their salary increased, even if it was initially too low to qualify, will be closed by the Government.
While claiming the Special Assignee Relief Programme (SARP) in these circumstances would be in line with the legislation, former minister for finance Paschal Donohoe was told the law should be changed to ensure the measure “is targeting employees that will have high-calibre skills and experience on their arrival”.
The SARP allows high-earning executives at multinational firms to benefit from significant income tax reliefs if they relocate to Ireland.
Under the scheme, eligible workers benefit from an income tax exemption on 30 per cent of their earnings between €100,000 and €1 million annually. Following changes in last year’s budget, workers must now earn at least €125,000 per year to benefit.
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Internal Government documents show Mr Donohoe was told before the budget last October that, if a so-called “protective claim” was made by someone earning less than €100,000 on arrival, they could still potentially claim the tax break if their salary increased above that level during their time here.
Officials in the Department of Finance told Mr Donohoe they had recently become aware that “employees who do not meet the minimum salary threshold … may still file employer certification as they may potentially be able to claim SARP in year two to five following their arrival to Ireland” if their salary increased.
The Revenue Commissioners said that in 2024 there were 15 instances where an employee satisfied the qualifying conditions but earned less than €100,000. Revenue confirmed that if these workers’ salaries exceeded the threshold in future they could then claim the relief.
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“Where an employee did not meet the salary requirement initially but met it in a later year, the relief would be properly due,” a Revenue spokeswoman said.
However, she said the enactment of the Finance Bill 2025 applies a change for workers arriving in the State on or after January 1st, 2026. To qualify for SARP, these workers must have an annual base salary of at least €125,000 in the year of arrival, she said.
Successive governments have defended the SARP scheme, arguing it encourages skilled people who are employed by overseas companies to come and work in Irish operations, which adds to jobs and business expansion here. Opposition parties have long criticised the measure.
To benefit from the scheme, someone must have relocated to Ireland and not been tax resident in the State for five years previously. It allows for tax-free payments towards travel, and up to €5,000 for school fees for each child of a beneficiary. It is estimated to have cost the exchequer €56.3 million in 2023, with €300,000 going on travel reimbursement and €500,000 on school fees.
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Eligible employees can avail of SARP for five consecutive tax years from the date of their arrival in Ireland.
The Government agreed to extend SARP, which had been due to expire at the end of 2025, in last year’s budget for another five years, making some technical changes along with the increased minimum salary requirement.
The documents drawn up for Mr Donohoe show a third of claimants earned less than €150,000 in 2023. At the other end of the scale, 99 people earning more than €1 million annually were able to benefit from it. The scheme is expected to cost about €60 million annually going forward.
