What is Foreign Earning Deduction (FED)?

Foreign Earnings Deduction (FED) is a tax relief available to individuals who are tax residents in Ireland but work abroad temporarily. This deduction allows you to reduce your taxable income for Income Tax purposes, thus lowering your overall tax liability.

Who Qualifies for FED?

To qualify for FED, you must meet certain criteria:

• Residency: You must be a tax resident in Ireland.
• Work Abroad: You must spend some time working in a relevant state. Relevant states include countries like Brazil, Russia, India, China, South Africa, and many others (click here to see the complete list in the official guidelines).
• Qualifying Days: You need to work in a relevant state for at least 30 qualifying days in a tax year or a continuous 12-month period spanning two tax years.

However, there are certain circumstances where you cannot claim FED, such as being a civil or public servant, receiving specific tax reliefs, or being taxed using split-year residence rules.

How Much Allowance Can You Claim?

The amount of the allowance due is the lesser of €35,000 or the specified amount.

The specified amount is calculated using (D x E) / F.

• D is the number of qualifying days worked in a relevant state during the tax year or during a continuous 12-month period spanning two tax years.
• E is all the income received from the employment in the tax year or during a continuous 12-month period spanning two tax years. This includes any taxable gain realised by share options less any qualifying pension contribution or premium. It excludes allowable expenses payments, BIK Payments termination and restrictive covenants payments.
• F is the total number of days that the employment is held by you in the tax year (there are 365 days in a full tax year).

The specified amount is reduced by your income earned on qualifying days for which Double Taxation Relief is available under a tax treaty.

How to Apply for FED

To apply for FED, you must submit a written application to Revenue within four years after the end of the tax year. Your application should include a statement from your employer detailing the dates of your departure and return to Ireland, as well as the locations where you worked abroad.

Foreign Earnings Deduction (FED) offers a valuable tax benefit for individuals who work abroad temporarily while maintaining tax residency in Ireland. By understanding the eligibility criteria, claiming process, and potential benefits, you can maximize your tax savings and optimise your financial situation. Be sure to consult with a tax advisor or accountant to ensure compliance with all regulations and to make the most of this tax relief opportunity.