Small benefit exemption

The tax rules have for several years permitted employers to provide one non cash incentive of up to €500 per annum to an employee without giving rise to a charge to tax where certain conditions are met. This is commonly referred to as the “small benefit exemption”. 

In a welcome move, the Minister has announced an extension to the current relief. 

Firstly, an employer will be permitted to provide up to two qualifying awards per annum and secondly, the maximum tax-free amount per annum has been increased to €1,000. This will provide employers with some further scope to reward employees in a tax-efficient manner. 

The incentive is often given as a Christmas voucher. Under a financial resolution, this amendment will come into force with effect from 28 September 2022, so the enhanced benefits are accessible in the current tax year. 

Key Employee Engagement Programme

The Key Employee Engagement Programme (KEEP) is a tax relief for share option schemes which commenced in 2018 specifically for employees and directors of certain qualifying SME companies. 

The Minister announced in his Budget speech that KEEP is being extended until 31 December 2025 and that a number of positive amendments will be made to the scheme. 

The relief is being modified to permit the buy-back of KEEP shares by the company from the relevant employee to qualify for the relief. 

In addition, the lifetime company limit for KEEP shares is being raised from €3 million to €6 million. 

Lastly, some key Finance Act 2019 provisions with regard to group structures and qualifying individuals are being brought into effect. These provisions allow companies who operate through typical group structures to qualify for KEEP and amend the “qualifying individual” definition to also include certain part-time and flexible working employees. 

Special Assignee Relief Program

The Special Assignee Relief Programme (SARP) was introduced from 1 January 2012 and is a key component in Ireland’s competitive foreign direct investment offering to attract mobile international talent. SARP reduces the income tax burden for qualifying expatriate executives for up to five consecutive tax years from first arrival in Ireland. 

The minister announced the extension of SARP for qualifying individuals arriving up to the end of 2025, and that from 2023, the minimum base salary for an employee to avail of the relief will increase from €75,000 to €100,000. 

Foreign Earnings Deduction

In another positive development, the Minister announced an extension of the existing Foreign Earnings Deduction relief until 2025. This relief provides relief from income tax for Irish employees who spend time working in certain qualifying counties.

The extension should hopefully continue to incentivise Irish businesses to develop and expand into new emerging markets. 

PAYE Compliance

The Budget also included an announcement that Revenue will undertake targeted compliance interventions with respect to the operation of PAYE by companies. The focus of these interventions is expected to be the operation of PAYE on share schemes, which is a continuation of Revenue’s ongoing review of tax compliance in respect of share option schemes. 

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