THE IRISH Department of Finance is facing calls to extend the Foreign Earnings Deduction (FED), a tax incentive aimed at promoting Irish business growth in overseas markets.
The FED allows Irish tax residents who spend time working in specified countries abroad to reduce their income tax liability.
The relief can be applied to up to €35,000 of income annually, potentially saving an individual up to €14,000 in taxes each year.
To qualify, a person must spend a minimum of 30 days working in one of the eligible countries within a single tax year.
First introduced in 1994, the FED was discontinued in 2003 but later reinstated in the 2012 budget by then-Finance Minister Michael Noonan.
At the time, the measure was framed as part of a broader initiative to help Irish companies access and grow in emerging markets.
Initially covering just five nations—Brazil, Russia, India, China, and South Africa—the scheme has expanded over the years to include 30 countries.
Additions have focused on Asia and the Middle East, with Singapore, South Korea, Saudi Arabia, Qatar, and Bahrain now among the eligible destinations.
The United Arab Emirates currently sees the highest usage of the relief.
The eligibility criteria have also changed.
Originally requiring 60 qualifying days abroad, the threshold was lowered to 40 in 2015 and further reduced to 30 days in 2017 to make it more accessible.
According to figures from 2022—the most recent data available—the relief cost the state €3.2 million. That year, 447 individuals claimed the deduction, down from 720 in 2019.
However, it remains unclear to what extent the pandemic influenced this drop.
The Department of Finance is currently conducting a full review of the FED, with results expected ahead of the budget announcement on October 7.
Finance Minister Paschal Donohoe is expected to reveal any proposed changes at that time.
Stakeholder consultations form a key part of this review process.
According to the Tax Strategy Group, industry feedback so far highlights the importance of FED in encouraging international expansion.
Many stakeholders have called for not only a higher level of relief to better support overseas assignments but also an expanded list of qualifying countries to reflect shifting global trade dynamics.
The same report from the Tax Strategy Group stated that in light of the uncertain global economic conditions, diversifying trade routes is more critical than ever for Ireland’s economic resilience.
Speaking at the National Economic Dialogue, Foreign Affairs and Trade Minister Simon Harris echoed this sentiment, stating that trade diversification is becoming increasingly essential.
“There’s a real opportunity to be more ambitious in how we explore and enter new markets,” he said. “This includes efforts within the EU, post-Brexit UK engagement, and tapping into global opportunities. We’re supporting Irish exporters to grow their international footprint and make use of existing EU trade deals.”
As businesses face rising costs and geopolitical uncertainty, expanding access to tax incentives like the FED could prove to be a timely move in supporting Ireland’s global trade goals.
