Foreign Earnings Deductions

Foreign Earnings Deduction (FED) in Ireland: A Complete Guide

The Foreign Earnings Deduction (FED) is a tax incentive designed to support Irish residents who work temporarily abroad in emerging markets. It allows qualifying employees to reduce their taxable income for Income Tax purposes, encouraging Irish companies to expand internationally.

Important: FED does not reduce income for Universal Social Charge (USC) or Pay Related Social Insurance (PRSI) purposes.

The scheme has been extended until 31 December 2030.

1. Who Qualifies for FED?

To qualify, you must:

• Be resident in Ireland for tax purposes
• Work in a relevant state for the required number of qualifying days
• Work in the foreign assignment either within a tax year or across a continuous 12-month period spanning two tax years

Qualifying Days Requirements

Relevant States

Initially, FED applied to BRICS countries: Brazil, Russia, India, China, South Africa.

Revenue has since expanded the list to include:

• Egypt, Algeria, Senegal, Tanzania, Kenya, Nigeria, Ghana, Democratic Republic of the Congo
• Japan, Singapore, Republic of Korea, Saudi Arabia, United Arab Emirates, Qatar, Bahrain, Malaysia, Indonesia, Vietnam, Thailand, Chile, Oman, Kuwait, Mexico, Colombia, Pakistan

Example: If an employee is sent to Singapore for 35 qualifying days in 2025, they may claim FED if all other conditions are met.

2. What Counts as a Qualifying Day?

• 2012 – 2014: At least 4 consecutive days worked in a relevant state (arrival and departure days excluded)
• 2015 – 2025: At least 3 consecutive days worked in a relevant state
• Travel time can be included if:
• From Ireland to a relevant state
• From a relevant state to Ireland
• Between relevant states

Additional Notes:

• Saturdays, Sundays, and public holidays count as qualifying days
• Certain circumstances may automatically disqualify you from claiming FED

3. How Much Allowance Can You Claim?

The deduction is the lesser of €35,000 (current) or the specified amount.

Specified Amount Formula

Where:

• D = Number of qualifying days worked in a relevant state
• E = Income earned from the employment during the relevant period (includes taxable share option gains; excludes benefits-in-kind, termination payments, and qualifying pension contributions)
• F = Total number of days of employment during the period (365 for a full tax year)

Adjustments:

• Reduce by any income eligible for Double Taxation Relief under a tax treaty
• From 1 January 2026, the cap increases from €35,000 to €50,000

Example: If you worked 40 qualifying days in a year, earned €60,000 in foreign earnings, and the employment period is 365 days:

4. How to Apply for FED

Steps to Claim:

1. Submit a written application to your local Revenue office
2. Include a statement from your employer detailing:
   • Dates of departure and return to Ireland
   • Location(s) where you worked abroad
3. Claims must be made within four years of the tax year

Important: The deduction is claimed after the end of the tax year.

5. Key Notes and Recommendations

• FED is Income Tax only—USC and PRSI are not reduced
• Keep accurate records of travel and work abroad
• Include all qualifying days and relevant income in your application
• Seek professional advice to ensure maximum deduction and compliance

6. Summary Table: Foreign Earnings Deduction

7. Conclusion

The Foreign Earnings Deduction (FED) is a valuable incentive for Irish tax residents temporarily working abroad in qualifying states. By reducing taxable income, FED encourages international business expansion while supporting employees working overseas.

Proper documentation, accurate tracking of qualifying days, and timely claims are essential to maximise the benefit.

Disclaimer

This article is for general informational purposes only and does not constitute professional accounting, tax, legal, or financial advice. Individual circumstances vary, and Irish tax laws may change. You should consult a qualified Irish tax advisor before taking or refraining from any action based on this information. ST Tax accepts no liability for any loss or damage arising from reliance on this content.