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Foreign Earnings Deduction Update

Foreign Earnings Deduction (FED) is a tax relief available to employees of Irish companies who spend time working overseas in any of 28 qualifying countries.

See details of these countries below

Qualifying Countries
2012 Brazil, China, India, Russia and South Africa
2013 & 2014 Additional qualifying countries Algeria, Democratic Republic of Congo, Egypt, Ghana, Kenya, Nigeria, Senegal and Tanzania
2015 Additional qualifying countries Bahrain, Chile, Indonesia, Japan, Kuwait, Malaysia, Mexico. Oman, Qatar, Saudi Arabia, Singapore, South Korea, Thailand, United Arab Emirates and Vietnam.

It is available to Irish resident individuals who spend at least 40 “qualifying days” working outside of Ireland in any of the qualifying countries in a continuous 12 month period. For years prior to 2015, mind the requirement was a minimum of 60 qualifying days.

The amount of the deduction (i.e. the amount of income from the employment that may be relieved from tax) is the lesser of:

  1. €35,000, or
  2. the “specified amount” (using formula below).

The specified amount

The “*specified amount” is calculated by using the formula

D x E / F where:

  • D is the number of “qualifying days” worked in a “relevant state” in the tax year;
  • E is all the income from the employment in the tax year (including any taxable share options derived from the employment less any qualifying pension premium but excluding tax deductible expenses payments, benefits in kind, termination payments and payments payable under restrictive covenants);
  • F is the total number of days that the relevant employment is held in the tax year (365 days in a full tax year).

“Qualifying employment income” is remuneration from the employment excluding benefits-in-kind, online but including share based remuneration and share option profits.

The relief does not apply to Universal Social Charge or PRSI.

A “qualifying day” is one of at least three consecutive days throughout the whole of which the individual is performing duties in any of the qualifying countries. From 2015 onwards, days of travel between Ireland and the qualifying country can be included as qualifying days as can travel between qualifying countries. Saturdays, Sundays and public holidays, throughout the whole of which the individual is present in a “relevant state” and which form an unavoidable part of a business trip to a “relevant state”, may be counted as “qualifying days”.

The individual must have a minimum of 40 qualifying days in a 12 month period in order to qualify for the relief.

See further detail from the Revenue below

http://www.revenue.ie/en/tax/it/leaflets/it34.html

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