The Special Assignee Relief Programme is an initiative aimed at encouraging skilled personnel to relocate to Ireland by granting an exemption from income tax for 30% of earnings between €100,000 and €1m.

The policy objective is to facilitate the expansion of employment and investment by reducing the cost of assigning key individuals to Irish affiliates.

SARP was introduced in Finance Act 2012 and has been regularly extended since then as a temporary measure. The current expiry date is the end of 2025. There will be a general election before then, and if the composition of the government changes it is likely that SARP will be scrapped.

Ahead of Budget 2024, Sinn Féin, the Social Democrats, Labour and Social Justice Ireland all placed SARP on their hit-list of tax incentives to be abolished. For socialist politicians SARP is viewed as conferring an unfair tax advantage on a small group of high-earners.

The latest SARP data issued by Revenue relates to tax year 2021, when there were 1,982 individuals recorded on SARP employer returns, submitted by 552 employers.

The estimated ‘tax cost’ of SARP in 2021 was €41.8m, up from €36.6m in 2020. Just over one in four SARP claimants were resident in the US prior to taking up employment in Ireland.

Alan Seery, tax partner at O’Neill Foley in Kilkenny, observes that FDI firms locating in Ireland often need to second senior personnel to help establish and maintain their operation in Ireland.

“Ireland’s personal tax rates are generally not attractive to such individuals who are moving from tax free environments in the Middle East or from the US, where much lower rates of tax apply to modest incomes,” says Seery.

“In Ireland, a marginal tax rate of 48.5% applies to income over €40,000, rising to 52% for income over €70,000.  In addition, other countries seeking to attract FDI investment have similar, and in many cases more generous, reliefs for key employees transferring.”

An Indecon review of SARP for the Department of Finance in 2019 found that the companies availing of SARP in 2017 paid over €2.5bn in corporation tax and collected over €1.9bn in personal taxes.

Seery believes that without SARP, FDI investment may be diverted to other countries. “This would result in a significant loss of investment and tax revenue to Ireland,” Seery adds.

Seery’s view is that it would be extremely risky to jeopardise the benefit of continuing and potential investments from the FDI sector by removing SARP “to placate ill-informed left-wing idealists”.

He adds: “Proponents of left-wing views are usually anti-business in all respects, so their criticism of SARP is to be expected. Such proponents fail to take into account that every country in the world that has implemented aggressive socialist and/or anti-business policies have become failed states (e.g. Venezuela, Cuba, Zimbabwe) or have embraced free market principles following economic collapse arising from unsustainable socialist or communist policies. 

“In an Irish context, it is disappointing to note that most of the current opposition parties continue to espouse failed economic policies for Ireland to follow with little challenge from mainstream media,” says Seery.

Frank Green at Mazars makes the point that as a small country Ireland needs to import skills from other locations.

“While Ireland has a low CT rate, the personal tax rate at effectively 52% is very high. Attracting top class talent is high agenda item for all countries and Ireland needs to have SARP to create that incentive,” says Green.

Daryl Hanberry at Deloitte argues that tax policy that is competitive and effective in attracting top mobile talent to Ireland is vital to Ireland’s position in retaining and attracting inward investment. Hanberry’s view is that SARP tax relief is deliberately complex in order to minimise the number of people claiming the relief.

“In an era where it is very difficult to attract employees to Ireland, this is an area that needs to be reviewed as a priority given the reliance on multinational companies in funding the Exchequer,” he says. “Individuals still likely pay taxes in Ireland post SARP at rates higher than they were paying in the home country. This is not a tax exemption by any means.”

Far from scrapping SARP, Hanberry believes the regime should be reviewed from an international competitiveness perspective.

Sarah Meredith at Grant Thornton also believes there is a strong case for enhancing the SARP tax relief.

“It has been a vital tool in attracting senior executives to Ireland, which has knock on implications in supporting large multinational businesses. This is turn has been critical to driving both corporate tax and payroll receipts for the Exchequer,” she says.

Aidan Meagher at EY says that the international landscape to attract FDI is very competitive and tax relief similar to SARP is available in most competitor locations. 

“The highest rate of federal tax in the US is 37%, so it is very hard to incentivise a US national to come and work in Ireland and pay income tax at 48% unless there is a scheme like SARP in place,” says Meagher. “FDI is a significant factor why we have full employment in Ireland, with that key talent paying income tax in Ireland rather than elsewhere.”

A Department of Finance review of personal taxes published in July 2023 stated that SARP was highlighted as a tax incentive which supported and enhanced a competitive economy.

“Some of the proposals included enhancing and extending the SARP scheme and making it a permanent feature of the personal taxation system. In contrast, a small number of respondents suggested the scheme should be abolished primarily on equity grounds,” said the report.

Photo: Alan Seery, tax partner at O'Neill Foley