Businesses ask for extension of foreign-earnings tax break

Irish Independent

5 days ago

The FED can be claimed by people who are tax-resident in Ireland but who work overseas for part of the year in certain other countries. It provides relief from income tax up to €35,000 of annual pay, which means the most that can be saved in one year is €14,000.
The person must spend a minimum of 30 days working in one of the relevant countries in a tax year.
First introduced in 1994, the relief was cancelled in 2003, but reintroduced in Budget 2012 by Michael Noonan with the stated aim of supporting 'our export drive by aiding companies seeking to expand into emerging markets'.
The original list had just five countries – the so-called BRICS of Brazil, Russia, India, China and South Africa. This has been expanded on several occasions since, and the total number of countries now covered is 30.
In the push for Asian markets, the likes of Singapore and Korea have been added, and several Middle Eastern countries are there too – including Saudia Arabia, Qatar and Bahrain. The relief is now most often claimed by people working in the United Arab Emirates.
The minimum number of qualifying days required in order to be eligible has also been steadily reduced, from an initial 60 to 40 from 2015 onwards, and to the current 30 from 2017.
The cost of the tax relief to the Exchequer in 2022 – the most recent year for which data is available – was €3.2m. There were 447 claimants, down from the 720 recorded in 2019, but it is not clear as yet how big an impact the Covid pandemic had.
The Department of Finance is currently doing a review of FED, with the final report due to be completed in advance of the Budget on October 7, when minister Paschal Donohoe will announce any tax changes.
'Part of the review process will involve gathering stakeholder feedback and reflecting on their insights,' according to a recently published report by the Tax Strategy Group.
'Based on engagements with industry thus far, stakeholders have asserted that FED plays an important role in encouraging and incentivising Irish businesses to expand their operations internationally. The most common proposals put forward by stakeholders have been to enhance the level of the relief to make trips abroad more worthwhile for employees and to extend the list of qualifying countries to further encourage diversification of markets.'
The report by the Tax Strategy Group notes that the current economic uncertainty underlines the importance of building resilience, and that a Government push towards trade diversification could help promote this.
In his speech to the National Economic Dialogue, a pre-Budget discussion forum, Foreign Affairs and Trade Minister Simon Harris said the diversification of trade is 'more important than ever before', and that a set of actions focused on trade and market diversification is underway.
'There is an opportunity now for new ambition in our approach to market diversification,' Mr Harris said. 'This can encompass EU, UK or further afield. We are working with Irish exporters in exploring new markets, leveraging existing EU trade agreements, and strengthening their international presence.'