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Foreign Earnings Deduction (FED)

  1. Overview
  2. Who qualifies for FED?
  3. How much allowance can you claim?
  4. How do you apply for FED?

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, Benefits in Kind (BIK), 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.

Examples 1 and 2 below show how Foreign Earnings Deduction (FED) is calculated.

  • Example 1

    Tom is required to travel to Russia to seek new markets for his employer’s goods. Tom leaves Ireland on 8 January 2022 at 22.00 and arrives in Russia at 06.00 on 9 January 2022. He worked there until departing for Ireland on 11 April 2022 at 22.00. His salary is €160,000.

    Tom spends 93 qualifying days in Russia. This consists of 23 days in January, 28 days in February, 31 days in March and 11 days in April.

    Relief due is:

    (93 days * €160,000)/ 365 days = €40,767.

    Tom is allowed to reduce his salary of €160,000 for Income Tax purposes by €35,000, which is the lesser amount.  Tom’s taxable salary in 2022 is €125,000. Tom’s salary for Universal Social Charge (USC) and Pay Related Social Insurance (PRSI) purposes in 2022 is €160,000.

  • Example 2

    Ann leaves Ireland on 6 November 2021 at 20.00 to travel to Singapore via London. She arrives in Singapore on 7 November 2021 at 09.00 and remains there until her return to Ireland on 4 December 2021 at 08.00.

    On 4 February 2022, she leaves Ireland at 18.00 and arrives in Malaysia at 03.00 on 5 February 2022. She works there until her departure on 10 February 2022 to travel to Ghana. She arrives back in Ireland on 20 February 2022 at 10.00.

    Her salary is €170,000 in 2021 and €180,000 in 2022.

    Ann has 42 qualifying days in total. This consists of 27 qualifying days in Singapore in 2021 and 15 qualifying days in both Malaysia and Ghana in 2022.

    Relief due is:

    2021

    (27 days * €170,000)/365 days = €12,575.

    As €12,575 is the lesser amount, Ann is allowed to reduce her 2021 salary for Income Tax purposes from €170,000 to €157,425. Ann’s salary for USC and PRSI purposes in 2021 is €170,000.

    2022

    (15 days * €180,000)/365 days = €7,397

    As €7,397 is the lesser amount, Ann is allowed to reduce her 2022 salary for Income Tax purposes from €180,000 to €172,603. Ann’s salary for USC and PRSI purposes in 2022 is €180,000.

Next: How do you apply for FED?

Published: 22 February 2024 Print this page

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