The foreign earnings deduction (FED) is a tax relief designed for Irish tax residents who spend significant time temporarily working abroad in specific emerging markets. By meeting a minimum requirement of 30 qualifying workdays in a designated country, employees can significantly reduce their Irish income tax liability.
While the relief applies only to income tax—and not to the universal social charge or pay-related social insurance—it serves as a key incentive for Irish businesses expanding their international presence.
To qualify, each “qualifying day” must be part of a trip lasting at least three consecutive days, with duties substantially devoted to the employment. The deduction is calculated based on the proportion of the year spent working in relevant states, capped at the new EUR 50,000 limit.
The relief must be claimed by the employee in the year-end personal tax return.
As from 1 January 2026, the maximum annual deduction increased from EUR 35,000 to EUR 50,000 and the list of qualifying countries expanded to include the Philippines and Türkiye for the 2026–2030 period.
Qualifying Days / 365 × Specified Income = Taxable Income Deduction
70 / 365 × EUR 100,000 = EUR 36,986
As EUR 36,986 is below the EUR 50,000 annual limit, the full amount is deductible from the employee’s taxable income. At the 40% tax rate, this results in an income tax saving of EUR 14,795.
While the extension of the relief demonstrates a positive message from the government to support the expansion of Irish indigenous business overseas, many major trading partners (like the US, UK and the EU) continue to be excluded. This limits the relief's usefulness for companies that are not specifically targeting the listed emerging markets.
The introduction real-time relief through the payroll process would also have been welcomed to provide employees with the immediate cash flow benefit together with the simplification of the administrative requirements to claim the relief. However, it is positive that the government continues to engage and expand this relief.
Mark Hynes
BDO in Ireland
While the relief applies only to income tax—and not to the universal social charge or pay-related social insurance—it serves as a key incentive for Irish businesses expanding their international presence.
To qualify, each “qualifying day” must be part of a trip lasting at least three consecutive days, with duties substantially devoted to the employment. The deduction is calculated based on the proportion of the year spent working in relevant states, capped at the new EUR 50,000 limit.
The relief must be claimed by the employee in the year-end personal tax return.
As from 1 January 2026, the maximum annual deduction increased from EUR 35,000 to EUR 50,000 and the list of qualifying countries expanded to include the Philippines and Türkiye for the 2026–2030 period.
| Relevant Jurisdictions for 2026 | |
| Region | Jurisdiction |
| Americas | Brazil, Chile, Colombia, Mexico |
| Asia & Oceania |
China, India, Indonesia, Japan, Malaysia, Pakistan, Philippines, Singapore, South Korea, Thailand, Vietnam |
| Middle East |
Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, Türkiye UAE, |
| Africa |
Algeria, Egypt, Ghana, Kenya, Nigeria, Senegal, South Africa, Tanzania |
Example (2026 Rules)
Assume an employee earns a salary of EUR 150,000 per annum in 2026 and spends 90 qualifying days in Türkiye and Egypt. The calculation is as follows:Qualifying Days / 365 × Specified Income = Taxable Income Deduction
70 / 365 × EUR 100,000 = EUR 36,986
As EUR 36,986 is below the EUR 50,000 annual limit, the full amount is deductible from the employee’s taxable income. At the 40% tax rate, this results in an income tax saving of EUR 14,795.
BDO Perspective
While the extension of the relief demonstrates a positive message from the government to support the expansion of Irish indigenous business overseas, many major trading partners (like the US, UK and the EU) continue to be excluded. This limits the relief's usefulness for companies that are not specifically targeting the listed emerging markets.The introduction real-time relief through the payroll process would also have been welcomed to provide employees with the immediate cash flow benefit together with the simplification of the administrative requirements to claim the relief. However, it is positive that the government continues to engage and expand this relief.
Mark Hynes
BDO in Ireland