Travel abroad as part of your job, the following relief may apply to you

Employees who carry out part of the duties of their employment in Brazil, Russia, India, China South Africa Eygpt and other African countries may claim a tax deduction known as the Foreign Earnings Deduction

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. the “specified amount” (see below); or
2. €35,000.

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).

See the following example below to see how it can work in practice

Tom is required by his employer to travel to Russia to seek new markets for his employer’s goods. He arrives in Russia at 10 p.m. on 10 January 2012 and works there until he departs on12 April 2012 at 8 a.m. His salary is €160,000.

Tom spends 92 qualifying days in Russia (21 in January, 29 in February, 31 in March and 11 in April). Days of arrival and departure are not counted as qualifying days as he is not present in Russia for the whole of these days.

The specified amount is, therefore, the lesser of –

1. €35,000; or
2. the amount calculated by the formula –

             
        92 days / 365 days x €160,000 = €40,328 
               

As €35,000 is the lesser amount, Tom is entitled to reduce, for tax purposes, his salary from €160,000 to €125,000.

Any queries give me a call on 091 7637817 or email me on oliver@taxreturnhelp.ie