Budget 2023 measures affecting employment tax
Ireland’s Minister for Finance presented Budget 2023 on 27 September 2022. The key employment tax measures announced are as follows:
Special Assignee Relief Programme (SARP)
SARP provides income tax relief for certain individuals who are assigned to work in Ireland from abroad. The main benefit of the programme is that 30% of the individual’s income in excess of EUR 75,000 is removed from the income tax net. There are a significant number of qualifying conditions to be satisfied to avail of this relief.
The SARP is being extended for another three years through 31 December 2025. However, for individuals claiming the relief for the first time in 2023, their basic salary will have to be at least EUR 100,000, increased under the budget measures from EUR 75,000. Existing claimants are not affected by this change.
Foreign Earnings Deduction (FED)
Th FED scheme is being extended for another three years through 31 December 2025. The FED provides relief from income tax on up to EUR 35,000 of income for Ireland tax-resident employees who travel out of the state to temporarily carry out employment duties in certain countries.
Small Benefit Exemption
Generally, where an employer provides a voucher or other incentive to an employee, it is chargeable to pay-as-you-earn (PAYE), the Universal Social Charge (USC) and pay-related social insurance (PRSI). The “small benefit exemption” enables an employer to provide a voucher or an incentive to an employee without giving rise to a charge to tax where certain conditions are satisfied.
The budget increases the small benefit exemption limit from EUR 500 to EUR 1,000 per year. An employer can now provide up to two (previously one) benefits, totalling EUR 1,000, in a year. These changes take effect 28 September 2022 so the increases can be provided to employees in the current tax year.
Rate Bands and Credits
There will be a significant increase in the standard rate cut-off point to EUR 40,000 so a single individual can now earn an additional EUR 3,200 before paying tax at 40%. There is also a EUR 75 increase in the personal tax credit, employee PAYE and earned income tax credits.
Finally, while there are no increases to the employer PRSI rates, this may only be a temporary reprieve as this issue is part of the government’s medium-term roadmap for personal tax reform.
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