I work for an Irish-based IT company with offices in Australia. Last October, I was transferred to one of our Australian offices and will return to Dublin this month. I would like to know what the tax implications are, considering I'm still being paid from the Dublin office in Irish pounds. Have I a case for asking for an income tax refund and, if so, can you give me any idea how much?

In addition, I also hold a number of share options in the company and would like to know if vesting them while working abroad - and possibly eligible for deductions in tax - would be preferable to exercising them at home?

Mr P.P., e-mail

The simple answer is that you do have a case for a refund of income tax. How much this amounts to depends both on your income and the amount of time you have spent abroad.

The broad parameters of the provisions governing such temporary work abroad are that you must spend a minimum of 90 days abroad in either the one tax year or a 12-month period which spans two consecutive tax years.

Work in Britain and Northern Ireland is not covered under this arrangement and those working in the public service are not eligible. The provisions affect people who are resident for tax purposes in the Republic.

The other main provision is that the time spent abroad should be primarily devoted to work. Of course, that does not mean the Revenue is going to discount weekend days and national holidays from the total days out of the State; it is more that the provision is not designed to include time spent out of the State on holiday.

Your claim against the full income tax liability is made under what is called the Foreign Earnings Deduction. It is claimed at the end of the relevant tax year when you submit your tax return to your local tax office. You will need to include a note giving a breakdown of your earnings, showing how much was earned in the Republic and how much abroad. You will also need to include the number of days - with the relevant dates - spent abroad and any background details which may help the Revenue to make its decision.

There is, as ever, a formula to calculate exactly how much you will be eligible to claim back against your income tax. To work it out you need to multiply the number of days spent abroad by your total earnings for the year and then divide that figure by 365.

For the sake of argument, let us say that you annual income is £35,000 (€44,441) and that you spend 182 days, or almost six months abroad. I have no idea of your income but your letter indicates that six months is pretty much the amount of time you have spent in Australia.

You can now work out your foreign earnings deduction. (182 [X] 35,000)/365 = 17,452.05. You then deduct that sum (£17,452.05) from your income to determine how much is liable to income tax in the Republic. Using the figures above, you get £35,000 £17,452.05 = £17,547.95. That is the amount upon which you will pay income tax in the Republic.

To get some idea of the difference between your tax bill if you claim no deduction for your work abroad and the one you for which you are liable after such a foreign income deduction: let's assume you came home on April 5th as the 1998/99 tax year expired.

In the first scenario, your taxable income would be £35,000 minus whatever allowances you can claim. For the purposes of this illustration, let us assume, you claim on the basic personal allowance and one for PAYE - a total of £3,950. That leaves a sum of £31,050, of which the first £10,000 is taxed at 24 per cent and the balance at 46 per cent. That yields a tax take of £2,400 at the basic rate and £9,683 at the top rate, a total of £12,083. If, as I assume, you are a PAYE worker, that amount will already have been automatically deducted from your salary.

In the scenario where you claim the foreign earnings deduction - as you should - your salary of £35,000 is reduced to £17,547.95 after taking account of the deduction. Claiming the same reliefs - totalling £3,950 - produces a taxable income figure of £13,597.95. Of this, £10,000 is taxed at 24 per cent and £3,597.95 at 46 per cent. The tax bill is £2,400 plus £1,655.01, a total of £4,055.01.

You are entitled to a refund of the difference between the figures - £8,027.01 in this case. As you can see, given the sums involved, it is well worth getting it right.

Of course, if you come home later in April, the same principle applies, you simply work out how many days in each tax year were spent abroad and work out the foreign earnings deduction formula and subsequent figures from that data - for example - 170 days in the 1998/99 tax year and 12 in the 1999/2000 tax year.

Regarding your stock options, I cannot see that they will be treated in the same way, although it might certainly be an issue to check with your accountant. As Irish tax resident, domiciled in the Republic despite your sojourn in Australia, you would be liable to Irish income tax on the profits yielded by such options. The foreign earnings deduction is a very specific relief and applies only to earnings relating to employment abroad.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, Fleet Street, Dublin 2 or e-mail to dcoyle@irish-times.ie. This column is a reader service and is not intended to replace professional advice. Due to the volume of mail, there may be a delay in answering queries. All suitable queries will be answered through the columns of the newspaper. No personal correspondence will be entered into.