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In this article, we outline the key measures, which relate to employees and employers. There are welcome measures for individuals and employers such as the enhancement of the small benefit exemption, extensions to key reliefs, and positive adjustments to the tax treatment of employer pension contributions to employees’ PRSAs.
But, there is also provision for a new, unexpected, reporting requirement for employers which will likely mean an additional compliance burden, however, advance consultation with key stakeholders is expected before this measure is commenced.
The Bill includes proposed measures in relation to additional reporting requirements for employers on certain tax-free benefits and expenses, referred to as ‘reportable benefits’. Reportable benefits include the following:
- Incentives covered under the small benefit exemption e.g. vouchers/other non-cash benefits
- Remote working allowance of €3.20 per day
- Travel and subsistence payments
Revenue are expected to provide the prescribed format and manner in which these benefits and expenses should be reported.
This will place an increased compliance burden on employers and consideration will need to be given to how this data will be collated by employers e.g. the reporting of expenses often rests with Finance teams rather than the HR/payroll function.
It is expected that a stakeholder consultation process will take place before these measures are introduced. We will be closely monitoring any developments and participating, as appropriate, in the consultation process.
Small Benefit Exemption
As announced on Budget day, the small benefit exemption is increased from €500 to €1,000 per annum. In addition, an employer can now provide up to two non-cash tax-free benefits, usually a voucher, per annum, subject to the maximum annual tax-free amount of €1,000.
These new measure are effective for the 2022 tax year onwards, meaning that employers may reward employees this year with a total tax free benefit up to €1,000.
Special Assignee Relief Programme (SARP)
SARP is a key relief in attracting senior talent and is the main expatriate tax relief available in Ireland. It is key to Ireland’s attractive FDI offering.
The relief operates by providing relief from income tax on a proportion of employment income, for up to five years.
SARP is in operation since 1 January 2012, and was due to expire for new entrants arriving in Ireland after 31 December 2022. The Bill provides for an extension to the relief up to 31 December 2025.
The Bill also provides from an increase in the income threshold to avail of SARP from €75,000 to €100,000 for relevant employees who arrive in Ireland in any of the tax years 2023 to 2025. It may be worth considering if potential future claimants of the relief could relocate to Ireland prior to the 2023 tax year, to avail of the lower income threshold of €75,000.
In addition, the Bill provides that employees, who arrive in Ireland in the tax years 2023 to 2025 and wish to claim SARP, must have a PPS number prior to applying for the relief. It will therefore, be important to apply for a PPS number timely to ensure the requirement to apply for SARP within 90 days of arrival is met.
Foreign Earnings Deduction (FED)
The Bill confirms the Budget day announcement, extending the current FED relief to 31 December 2025. This is another welcome measure, with the aim of incentivising employers and employees in expanding trade links in specified emerging markets.
The Bill introduces new pension related measures not previously announced. The main measures include:
- Employer contributions to a Personal Retirement Savings Account (PRSA) will not be considered a taxable BIK from 2023.
- The tax treatment of the new Pan European Pension Product (PEPP) is to be aligned with the tax treatment of PRSAs.
- The tax treatment of lump sums from foreign pension schemes to be treated in the same way as lump sums from an Irish pension scheme, for an Irish resident individual i.e. €200,000 tax free lump sum rules will apply.
- The Cycle to Work scheme is to be extended to include cargo bikes and ecargo bikes and the tax free threshold will be increased to €3,000 from 1 January 2023.
- The €3,200 increase in standard rate band for individuals and married couples is provided for in the Bill. In addition, the €75 increase to the main income tax credits for employees and individuals and the €100 increase in the Home Carer credit is included. These measures will take effect from 1 January 2023.
- The Bill includes provision to extend the income tax exemption to any payments made relating to the COVID-19 Related Lay-off Payment (CRLP). This once off lump sum payment can be made to certain employees, subject to qualifying conditions, to ensure that they are not disadvantaged by temporary lay-offs caused by the Covid-19 public health restrictions.
- No further detail in relation to the proposed enhancements to the Key Employee Engagement Scheme (KEEP) as announced in the Budget. Details are expected at Committee Stage of the Bill.
For additional information, contact a member of the Employer Solutions team or your usual Grant Thornton contact.