Supporting Businesses

The Minister introduced a timely package of improvements to a number of tax supports to Irish businesses.

Foreign Earnings Deduction (“FED”) and Special Assignee Relief Programme (“SARP”)

FED is an income tax relief available to employees who temporarily carry out their duties overseas in specific countries and the purpose of the relief is to encourage Irish businesses to export to these new markets. SARP provides an income tax relief for employees who are assigned to work in Ireland. 

During 2019, the Department of Finance conducted a review of both of the above reliefs and it was concluded that the policy rationale for their existence is strong. Both schemes have been extended to 2022. There were no further changes to the reliefs in the Finance Bill.

Key Employee Engagement Programme (“KEEP”)

As we are aware, SME’s and start up experience difficulties in recruiting and retaining skilled workers and find it difficult to match the salaries that are being offered by multinationals enterprise. KEEP was designed to incentivise talent to take up employment with SME’s . It provides for CGT treatment on the disposal of share acquired under a share option scheme as opposed to Income Tax. To date there has been relatively little uptake on the relief and section 10 of the Finance Bill reflects the amendments, which were announced on Budget day. The amendments to be enacted will impact on the following:

  • Allow companies who operate through group structures to avail of the relief. There is a new definition for a qualifying group consisting of a qualifying holding company, its qualifying subsidiary/subsidiaries and its relevant subsidiaries
  • The definition of a qualifying individual has been amended to allow for part-time and family friendly working arrangements. Going forward, the employee must work at least 20 hours per week for the company and devote not less than 75% of his/her working time to that company.
  • There was a technical amendment which will now allow the use of existing shares rather than just newly issued shares.

The amendment will become effective subject to Ministerial Order once the relevant notifications have been made at an EU level.

Employment Investment Incentive (‘EII’)

The EII scheme was overhauled in Finance Act 2018 and the changes announced in the Budget and Finance Bill continue that reform. The main changes introduced were as follows: 

  • Previously, a EII claim in respect of the investment was split over two years i.e. 30% in year 1 and the remaining 10% in year 4, subject to fulfillment of certain conditions. With effect from 8th October 2019, full income tax relief will now be granted in the year of investment. 
  • Previously the annual investment amount qualifying for tax relief was capped at €150k. This investment limit will now be increased from €150k to €250k. There will also be a new €500,000 investment limit for those investors who are prepared to invest in EII programme for ten years or more. This amendment will be effective from 1st January 2020.

There are a number of other technical amendments to ensure that the conditions in relation to investments made prior to 8th October 2019 continue to apply and that the clawback provisions will also apply to investments to be held for 10 years.

Return to Budget 2020 Analysis.