Tag Archive for: Budget

Budget 2025 Analysis

Budget 2025 Analysis

On the day the rate of inflation within the Eurozone dropped to 2% and against a backdrop of calls from economists warning against overheating the economy, Minister Jack Chambers delivered an €8.3bn budget comprising of €1.4bn in tax measures and €6.9bn in public spending.

A budget surplus of €23.7bn was recorded, boosted largely by Corporation Tax receipts and the Apple Tax judgement proceeds. But when these are excluded, there was a general deficit. It was acknowledged that the Apple back-tax must be used wisely on significant long-term investments in public services such as housing, water, electricity, and transport.

Income tax changes were mainly limited to a threshold increase to €44,000, above which the higher 40% rate of tax would apply and small increases to the main income tax credits and USC rates.

For the SME sector, we see positive enhancements made to The Employment Investment Incentive Scheme (EII) and the commitment to introduce the new capital gains tax rate of 16% for angel investors when disposing of a qualifying investment. The changes will help encourage investment in innovative start-up SME’s and unlock more equity investment in smaller, early stage businesses that are typically most in need of funding.

Also in this sphere, the decision to include Class S PRSI payments in the calculation for the Start-Up relief is welcomed. Although it is somewhat diluted by capping the payment at €1,000 per individual.

The decision to increase the aggregate small benefit an employer can give an employee to €1,500 along with increasing the number of annual benefits from two to five should hopefully address some of the issues that have recently arisen with the new Enhanced Reporting Requirements.

To address concerns over bulk purchasing of residential properties the rate of stamp duty is being increased to 15%. However, its doubtful a 5% rate hike will have the desired effect.

Mindful of implications for large companies under the OECD Pillar Two Agreement it is interesting to note the introduction of a participation exemption option for dividends from foreign subsidiaries and the commitment to address the taxation of foreign branches.

Pre-budget, the feeling was that the Budget would see some significant changes in funding rules associated with PRSAs. However, the minister’s speech lacked any comments on this area. Perhaps it’s a case of wait for the Finance Bill.

The changes to personal tax and welfare support measures will grab the media headlines. However, it is the commitment to FDI and support to grow the domestic SME sector that is vital for a stable economy.

View the Budget 2025 highlights here.

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Budget 2025 Highlights

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Budget 2025 Highlights

Minister for Finance, Jack Chambers delivered the final Budget today, 1 October 2023. Below we outline the highlights of Budget 2025.

Personal Tax

  • Income Tax Standard Rate Bands increase by €2,000 to €44,000 (single person), with the married single earner band increasing to €53,000, and the married dual income band increasing to €88,000.
  • Personal, PAYE, Earned Tax Credits to increase by €125 to €2,000.
  • Home Carer and Single Person Child Carer Tax Credits will increase by €150 to €1,950 and €1,900 respectively.
  • Incapacitated Child and Blind Person’s Tax Credits will increase by €300 to €3,800 and €1,950 respectively.
  • Small change to the second rate-band of Universal Social Charge which will increase from €25,760 to €27,382. The 4% rate is reducing to 3% from 1 January 2025.
  • Alignment to the tax treatment of Automatic Enrolment Retirement Savings Schemes so that they are similar to that of PRSAs. Employer contributions are tax relieved. Funds grow tax free and a tax-free lump sum can be taken on draw down of the fund up to a maximum of €200,000.

 Enterprise/SMEs

  • Ireland is the only country in the EU which taxes dividends from foreign subsidiaries. It is proposed to introduce a participation exemption for Foreign Dividends to simplify the double taxation relief provisions. Companies will have an option to claim the exemption or continue to use the existing tax and credit relief by way of an election on the company’s annual Corporation Tax return. The exemption will apply for distributions received on or after the 1 January 2025.
  • Capital Gains Tax Relief for Angel Investment to encourage investment in innovative start-ups is to commence shortly. Qualifying investments will be certified by Enterprise Ireland with a minimum investment in new shares of at least €10,000. Relief will apply if shares are held for at least 3 years. A reduced rate of Capital Gains Tax of 16% will apply on a gain of up to twice the initial investment. A lifetime limit of €10m will apply to the relief.
  • A 12-year clawback period for Retirement Relief on disposals to children on businesses valued at over €10m.
  • The various reliefs for Investment in Corporate Trades are being extended for a further two years to 31 December 2025. The €500,000 investor limit on EII investment is being increased to €1m, while it is being increased to €980,000 for SURE investments.
  • The first-year payment threshold for the Research & Development Tax Credit is being increased to €75,000. The first-year payment threshold, which allows for a claim to be repaid in full rather than spread over 3 years.
  • The Section 486C Start Up Relief is currently calculated by reference to the amount of employer PRSI paid – up to €5,000 per employee. It is proposed that amounts paid under Class S will also be considered, subject to a maximum of €1,000 per individual.
  • New relief for up to €1m of expenses incurred on companies on their first listing on a recognised stock exchange in Ireland or the EU/EEA area. The relief is to support companies in the scale up phase of their growth and development.
  • The cumulative tax-free limit for small benefit exemption is being increased to €1,500 and the number of times an employer can provide a benefit is being increased from two to five per annum.
  • An exemption from taxable benefit in kind on the provision of EV home chargers.
  • The CO2 thresholds for claiming capital allowances on business cars is being revised downwards from 2027. An expenditure of €24,000 will be allowable for cars with CO2 emissions of 0-120g/km, a reduced €12,000 for vehicles with emissions of 121-140g/km and no zero for vehicles with CO2 emissions greater than 141g/km.

Agri-Food Sector

  • CAT Agricultural Relief will now require that the donor must meet a 6-year Active Farmer test.
  • The measures for Stock Relief which were due to expire at the end of 2024 are being extended to the end of 2027.
  • 50% Accelerated capital allowances for farm safety equipment.
  • Farmer’s Flat Rate VAT compensation being increased to 5.1%.

 Housing/Cost of Living Measures

  • The Rent Tax Credit is being increased by €250.
  • The deduction for pre-letting expenditure from rental income will be extended for a further three years, to the end of 2027. The deduction is capped at €10,000 per property.
  • The Help to Buy (HTB) scheme is being extended to the end of 2029.
  • The Stamp Duty rate applied where 10 or more residential properties are acquired in any 12-month period is being increased from 2 October 2024 from 10% to 15%. In addition, a 6% rate will apply to residential properties valued excess of €1.5m.
  • A temporary one-year Mortgage Interest Tax Relief introduced last year is being extended for a further year. Relief will be available for the increased mortgage interest paid in 2024 over 2022. The relief is capped at €1,250 per property and applies to mortgages outstanding of between €80,000 and €500,000 on the 31 December 2022 and fully LPT compliant. Relief is at the standard rate.
  • The rate of the Vacant Homes Tax is again increased with effect from 1 November 2024 to 7 times the property’s existing LPT liability.
  • The 9% VAT rate for Gas and Electricity supplies is extended to 30 April 2025.

 VAT

  • The registration thresholds are being slightly increased to €42,500 for the supply of services and €85,000 for the supply of goods from 1 January 2025.
  • The supply and installation of heat pumps is reduced from 23% to 9%.
  • The Farming VAT Flat Rate is being reduced to 5.1% from 1 January 2025.

Other Measures

  • The universal relief of €10,000 to the OMV for vehicles in Category A-D is extended for a further year to end 2025.
  • The Capital Acquisitions Tax thresholds are being increased as follows.
    • Category A threshold €400,000
    • Category B threshold €40,000
    • Category C threshold €20,000
  • Two new audio-visual incentives are being introduced. Both require European Commission approval.
    • A Corporation Tax credit for expenditure on unscripted productions. The credit will be granted at 20% of the expenditure up to a limit of €15m per project.
    • Scéal Uplift for film production up to a maximum expenditure of €20m. This incentive will form part of section 481 Film Relief.

Read our tax team’s analysis of Budget 2025.

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Budget 2024 Analysis

Budget 2024 Highlights

Delivering a €14bn Budget package, Minister McGrath described Budget 2024 as a ‘’step change” in planning for the future. As we have navigated through unprecedented challenges – the pandemic, Brexit, the war in Ukraine, and rates of inflation not seen for some 40 years, the Irish economy made a strong rebound in the past 12 months.

However, the continued effects of inflation, capacity constraints in the housing and labour markets and the current cost of living crisis have resulted in a deterioration of living standards for individuals, families and businesses for which today’s Budget contained immediate once-off supports aimed to respond to the acute needs of those who need it the most.

While Ireland continues to generate strong tax receipts, for the first time in several years there is a downward revision for 2023 as compared to earlier projections, which will continue into next year. Whilst the Minister welcomed a projected Government surplus of €8.8 billion for next year, it was acknowledged that our tax receipts must be used wisely to deliver a comprehensive set of financial supports and set the scene for significant future investments in public services such as housing, health, education and transport.

Income tax changes were mainly limited to a threshold increase to €42,000, above which the higher 40% rate of tax would apply, small increases to the main income tax credits and USC rates.

Whilst the Minister confirmed that we will keep our attractive 12.5% corporation tax rate, today’s Budget is set to make a fundamental change in global tax policy with the introduction of a new 15% minimum tax rate for large companies as provided for under the OECD Pillar Two Agreement.  This is a once-in-a-generation reform to our corporation tax system, and marks the culmination of a ten-year, global project to reform the taxation of multi-national enterprises.

For the SME sector, we see positive enhancements made to The Employment Investment Incentive Scheme (EII) and the introduction of a new targeted capital gains tax rate of 16% for angel investors when disposing of qualifying investment. The changes will help encourage investment in innovative start-up SME’s and unlock more equity investment in smaller, early stage, businesses that are typically most in need of funding.

The extension of the R&D Tax Credit regime, with an increased tax credit from 25% to 30% is welcomed as Ireland aims to stay competitive in the FDI space.

What was significant though was the Minister’s reference to a “future-proof” of public finances by establishing two new funds to save for future generations. The larger of the funds is the Future Ireland Fund, set to grow to €100 billion by 2035, to assist with paying for the additional health and pension costs associated with Ireland’s ageing population.

The government will also establish a second, smaller €14 billion infrastructure and climate fund, available to catch up on targets to cut greenhouse gas emissions and act as a buffer against capital spending cuts in any future downturn.

It is likely that the one-off support measures will grab the media headlines. However, it is the discussions and outcomes around the changing future tax base to enable us to fund public services and put in place a long-term plan that will make the economic future safer for all.

View the Budget 2024 highlights here.

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Budget 2024 Highlights

Budget 2024 Highlights

Minister for Finance, Michael McGrath delivered the final Budget today, 10 October 2023. Below we outline the highlights of Budget 2024.

Personal Tax
  • Income tax standard rate bands increase by €2,000 to €42,000 (single person), with the married single earner band increasing to €51,000.
  • Personal, PAYE, Earned Tax credits to increase by €100 to €1,875.
  • Home Carer Tax Credit will increase by €100 to €1,800.
  • Incapacitated Child Tax Credit to increase to €3,500.
  • Small change to the second rate-band of Universal Social Charge which will increase from €22,920 to €25,760. The 4.5% rate is reducing to 4% from 1 January 2024.
  • Increase in the exemption from Income Tax, USC and PRSI to €400 on profits arising from domestic microgeneration of electricity which is supplied to the grid.
Enterprise/SMEs/Agri-sector
  • Introduction of 15% Corporation Tax rate, under the OECD Pillar Two agreement, on trading profits of large companies. SME sector unaffected. Further details to be announced in the Finance Bill.
  • Capital Gains Tax relief for Angel Investment in innovative start-ups. Qualifying investments will be certified by Enterprise Ireland with a minimum investment in new shares of at least €10,000. Relief will apply if shares are held for at least 3 years. A reduced rate of Capital Gains Tax of 16% will apply on a gain of up to twice the initial investment. A lifetime limit of €3m will apply to the relief.
  • From 1 January 2025 the upper levels of Retirement Relief will apply on disposals to children and to others between the ages of 55 and 70. A €10m limit will be introduced for disposals to a child up to the age of 70.
  • With effect from 1 January 2024 the minimum holding period of investment to claim relief under the Employment Investment Incentive (EII) scheme is being standardised at 4 years with the limit on such investments being increased to €500,000. Further changes to EII will be set out in the Finance Bill.
  • The rate of the Research & Development Tax Credit is being increased to 30% in respect of 2024 expenditure. The first-year payment threshold, which allows for a claim to be repaid in full rather than spread over 3 years, is being increased to €50,000.
  • Section 481 Film Relief investment cap being increased to €125m.
  • Accelerated capital allowances for energy efficient equipment are to be extended for a further two years to the end of 2025.
  • Accelerated capital allowances for farm safety equipment are to be extended to 31 December 2026.
  • Stamp Duty Consanguinity relief which reduces the duty applicable on transfer of farmland between family members from 7.5% to 1% is being extended to 31 December 2028.
  • The threshold for Stock Relief for registered farm partnerships is increasing to €20,000, while the aggregate lifetime limit of stamp duty relief for young trained farmers is being increased to €100,000 from 1 January 2024.
Housing/Cost of Living Measures
  • The Rent Tax Credit is being increased to €750. The tax credit will also be extended to parents paying their children’s rental costs while in third level education in the case of Rent-a-Room accommodation or “digs”.
  • A new Rented Residential Relief is being introduced for Landlords. The relief will be granted at the standard rate of tax and will be as follows; €3,000 in 2024; €4,000 in 2025; and €5,000 in 2026 and 2027. The tenancy must be registered to the PRTB, or the property let to a Local Authority. The value of the relief will be €600 to €1,000. The relief will be clawed back if the property does not remain in the rental market for the 4 years.
  • The Help to Buy (HTB) scheme is being extended to the end of 2025. Amendments are being made to the scheme to enable contributions through the Local Authority Affordable Purchase scheme to be considered when calculating the 70% loan-to-value requirement.
  • A temporary one-year Mortgage Interest Tax relief of up to €1,250 is being introduced for homeowners on variable or tracker mortgages with outstanding mortgage of between €80,000 and €500,000 on the 31 December 2022 and fully LPT compliant. Relief will be at the standard rate on the interest rate increases between 2022 and 2023. The relief will be claimed on filing a tax return for 2023.
  • The rate of the Vacant Homes Tax is being increased with effect from 1 November 2023 to 5 times the property’s existing LPT liability.
 VAT
  • The registration thresholds are being slightly increased to €40,000 for the supply of services and €80,000 for the supply of goods from 1 January 2024.
  • From 1 January 2024 the rate of VAT on audiobooks and eBooks will be reduced to 0%.
  • The 9% VAT rate for Gas and Electricity supplies is being extended to 31 October 2024.
  • The supply and installation of solar panels in schools is being reduced to 0% from 1 January 2024.
  • The Farming VAT flat rate is being reduced to 4.8% from 1 January 2024.
 Other Measures
  • The fund for the Charites VAT Compensation Scheme is being increased from €5m to €10m.
  • The aggregate value of items donated in a year under the Heritage Donation scheme to be increased from €6m to €8m.
  • The tapering relief applied to benefit in kind on battery electric vehicles is being enhanced so that the current Original Market Value deduction of €35,000 remains until 2025 followed by €20,000 in 2026 and €10,000 in 2027. The universal relief of €10,000 to the OMV is being extended for a further year to end 2024.

Read our tax team’s analysis of Budget 2024.

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Temporary Business Energy Support Scheme | Budget 2023 (Updated 20 October)

Temporary Business Energy Support Scheme

Update 20 October 2022:

Under the Finance Bill 2022 published today, the TBESS will be extended to include Case 2 trades, i.e. professional firms such as doctors, accountants, solicitors and dentists and new businesses will also be eligible for the scheme. The Government has also decided that where a business operates from more than one location, the cap will be increased from €10,000 to a maximum of €30,000 a month.

 

27 September 2022:

As part of Budget 2023, Minister for Finance, Pascal Donohoe, announced the introduction of a Temporary Business Energy Support Scheme to assist businesses with their energy cost over the winter months.

This new scheme will be open to businesses carrying on Case I trades, are tax compliant and have experienced a significant increase in their natural gas and electricity costs.

The scheme will be administered by the Revenue Commissioners and will operate on a self-assessment basis. Businesses will be required to register for the scheme and to make claims within the required time limits.

The scheme will operate by comparing the average unit price for the relevant bill period in 2022 with the average unit price in the corresponding reference period in 2021. If the increase in average unit price is more than 50% then the threshold would be passed and the business will be eligible for support under the scheme.

Once eligibility criteria are met, the support will be calculated on the basis of 40% of the amount of the increase in the bill amount.

A monthly cap of €10,000 per trade will apply, as well as an overall cap on the total amount which a business can claim.

The scheme’s payments will be backdated to September and run until at least February.

If you require any assistance with the new Temporary Business Energy Support Scheme, please contact Carol Hartnett, Manager in our Accounting & Financial Advisory Department.

Read our Budget 2023 Highlights and Budget 2023 Analysis.

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Budget 2023 Analysis

Budget 2023

Delivering an €11bn Budget package, Minister Donohue described Budget 2023 as a ‘’Cost of Living Budget’’.  With individuals, families and businesses struggling with both the effects of inflation and the effects of the current energy crisis, this Budget contained immediate one-off supports aimed to respond to the acute needs of all. With even stronger than expected tax receipts in 2022, the Minister had plenty of firepower to deliver a comprehensive set of financial supports and set the scene for significant future investments in public services such as housing, health, education and transport.

Income tax changes were mainly limited to a threshold increase to €40,000, above which the higher 40% rate of tax would apply. There were also small increases to the main income tax credits.

What was significant though was the Minister’s reference to the recent work of Tax Strategy Group and to it assisting Government as a roadmap for personal tax reform over the next number of years to include the possible introduction of a 3rd rate of Income tax and changes to the operation of USC and PRSI.

The Minister took the opportunity re-affirm Ireland’s commitment to the OECD-led reform of Corporate Tax and to acknowledge Corporate Ireland’s significant contribution to the Country’s national tax purse. As expected, the Minister announced a National Reserve Fund which is to be immediately funded with €2bn from “excess” Corporate Tax receipts, with a further €4bn committed for 2023.

The extension of the Knowledge Development Box (KDB) and improvements to the R&D Tax Credit regimes are also welcome as Ireland aims to stay competitive in the FDI space.

For the SME sector, a.k.a. ‘’the backbone of our domestic economy’’, the main offer of financial support came in the form of a Temporary Business Energy Support Scheme which will see businesses who have experienced a 50% increase in energy costs from 2021, reclaim 40% of the increase.

Welcome too were the extensions to the KEEP and SARP incentive schemes although many had been requesting far wider changes to the schemes to what has been decided.

Whilst it is likely that the one-off support measures will grab the media headlines, it is the discussion and outcome of a changing future tax base to fund public services that will have a more profound longer-term impact on our society.

View the Budget 2023 highlights here.

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Budget 2023 Highlights

Budget 2023

Minister Pascal Donoghue delivered his final Budget today, 27 September 2022. With inflation currently running at 8.5% and projected to be 7.5% in 2023, the so-called Cost of Living Budget was heavily focused on addressing rising energy costs. Below we outline the highlights of Budget 2023.

Enterprise/SMEs/Agri-sector
  • Temporary Business Energy Support Scheme to assist businesses with their energy costs over the winter months. Open to businesses carrying on Case I trade, are tax compliant and have experienced significant increase in gas and electricity costs. Read more about the scheme.
  • Extension of the KEEP scheme to end of 2025 with increasing the company limit to €6m.
  • Special Assignee Relief Programme (SARP) extended to 2025 with minimum income limit up to €100,000.
  • Section 481 Film Relief to be extended to 2028.
  • Changes in the Research and Development Tax Credit and Knowledge Development Box (KDB) regime, with a company having the option to call for payment of their eligible R&D tax credit or to request an offset against other liabilities. The existing caps on the amount’s payable is to be removed. The first €25,000 of a claim will be payable in year one. The KDB is being extended a further 4 years to 2027. To comply with changes in international tax, specifically the Small Business Technology Transfer (STTR), there will be legislation changes for an increase in the effective rate of the KDB to 10%.
  • Foreign Earning Deduction (FED) scheme to extended to end of 2025 and provides relief from income tax on up to €35,000 of income for employees required to travel out of the State to temporarily carry out duties of employment in certain qualifying countries.
  • New 10% levy on concrete products.
  • Accelerated Capital Allowances for the construction of modern slurry storage facilities whereby the cost will be written off over two rather than seven years.
  • The Stamp Duty Reliefs for Young Trained Framers and Farm Consolidation are being extended to end of 2025.
  • The Capital Gains Tax Relief for Farm Restructuring is also being extended to the end of 2025.
  • Two special Stock Relief measures for registered farm partnerships and for young trained farmers being extended until the end of 2024.
Housing
  • Vacant Home Tax charged at a rate equal to three times the property’s existing basic Local Property Tax (LPT) liability. It will apply to residential properties which are occupied by for less than 30 days in a 12-month period.
  • Help to Buy Scheme will be continued until end of 2024 in its current form.
  • A new Renter’s tax credit of €500 will be introduced and backdated to 2022.
  • The relief for landlords for pre-letting expenditure will continue with an increase in qualifying costs up to €10,000 and the period of vacancy reduced to 6 months.
 VAT
  • The 9% VAT rate for the hospitality and tourism sector will cease in February, returning to 13.5% at this point.
  • The 9% VAT rate of electricity and gas will be extended until 28 February 2023.
  • Defibrillators, Hormone replacement therapy (HRT), Nicotine replacement products and period products will become VAT free.
  • VAT on newspapers, including digital editions, will be reduced to 0% from 1st January 2023.
Personal Tax
  • Small change to the second rate-band of Universal Social Charge which will increase from €21,295 to €22,920.
  • Income Tax Standard Band will increase by €3,200 to €40,000, with the married single earner band increasing to €49,000.
  • Personal, PAYE and Earned Tax Credits will increase by €75.
  • Home Carer Tax Credit will increase by €100.
 Other Measures
  • Revenue will conduct a range of targeted projects to include PAYE compliance interventions involving a focus on share schemes and increased debt management.

Read our Head of Tax Services, Eddie Murphy’s analysis of Budget 2023.

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Budget 2023 – What to Expect

Budget 2023

Eddie Murphy, Partner & Head of Tax Services, outlines what to expect in Budget 2023.

Budget 2023 is being delivered on 27th September. This is a few weeks earlier than planned, demonstrating the urgency and seriousness of the cost-of-living crisis we are all facing.

A once-off financial package close to €3 billion is to be made available to help struggling households.

It is also expected that the income tax package in the budget will include increasing standard income tax rate bands to reduce the amount of income being taxed at the 40% rate.

This same budget must also encourage investment and future growth in Irish businesses. This can be achieved by strengthening and improving the Employment Investment Incentive Scheme and Entrepreneur Relief. For indigenous Irish businesses, these are key determinants and drivers of their initial and onward growth.

Budget 2023 is expected to contain short-term measures of financial assistance to individuals and businesses alike. However, the Government must continue to also look at the medium and longer term to ensure it continues to support both FDI and Irish SME businesses in their drive to create and grow sustainable employment in this country.

Stay tuned for our Budget analysis next week.

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Budget 2022 Highlights

Budget 2022 was delivered by Minister for Finance, Paschal Donohoe and Minister for Public Expenditure, Michael McGrath today. Below we highlight the main changes that could affect you.

COVID-19 Support Measures

  • The EWSS will remain in place until 30th April 2022 in a graduated form. The scheme will close to new entrants on the 31st December 2021. Those in the scheme at the end of December may continue to avail of the supports until the end of April. A two-rate structure of €151.50 and €203 per week will apply for the months December, January and February. For the final two months of the scheme a flat rate of €100 will apply however the reduced Employer’s PRSI rate will not apply in these two months.
  • The 9% VAT rate for the hospitality and tourism sector will remain in place to the end of August 2022.
  • The waiver from Commercial Rates for those in the Arts, Hospitality and Tourism sectors will apply for Q4 2021.
  • The tax debt warehousing scheme will be expanded to allow self-assessed income taxpayers with employment income who have a material interest in their employer company to warehouse income tax liabilities relating to their Schedule E income from that employer company.

Climate and Environmental Measures

  • A Carbon tax yearly increase of €7.50 until 2030, equivalent to about 2c per litre for Petrol and 2.5c per litre for Diesel.
  • From the 1st January 2022 a revised 20 band VRT table will come into effect. 1% increase for vehicles between bands 9-12, 2% increase for bands 13-15 and 4% increase for bands 16-20.
  • The €5,000 VRT relief for battery electric vehicles to continue until the end of 2023.
  • Accelerated Capital Allowances scheme for Energy Efficient Equipment extended for gas vehicles and refuelling equipment for 3 years.
  • Accelerated Capital Allowances scheme for Energy Efficient Equipment will not be available where the equipment is directly operated by fossil fuels.
  • An exemption from Tax on the sale of surplus electricity to the National Grid, limit of €200, by households.
  • Commencing in 2023 the BIK exemption for batter electric vehicles will be extended out to 2025 with a tapering effect on the vehicle value. The original market value of the vehicle will be reduced by €35,000 for 2023; €20,000 for 2024; and €10,000 for 2025.

Housing Measures

  • Introduction of a new Zoned Land Tax based on the market value of the land and outset rate of 3% to encourage house building. However, there is a two-year lead-in time for land zoned before January 2022 and a three-year lead-in time for land zoned after January 2022. It will replace the current 7% vacant site levy but unlike the levy there will be no minimum site size.
  • The relief for landlords for pre-letting expenditure will continue for a further 3 years.
  • Help to Buy Scheme will be continued in 2022 in its current form.

Business Measures

  • For the vast majority of companies, the 12.5% trading rate will remain. The increased 15% will apply only to those large multinational companies with turnover greater than €750m.
  • A refundable Digital Gaming Tax Credit for expenditure incurred on the design, production and testing of a game. The relief will be available at a rate of 32% on eligible expenditure of up to a maximum limit of €25m per project.
  • Extension of 3 years to the Employment Investment Incentive Scheme (EIIS) – wider range of investment funds and the 30% expenditure rule will be removed, to make it more attractive and accessible for investors and start-up businesses.
  • The relief from Corporation Tax for start-up companies will be amended such that the relief will be available for up to five years rather than three.
  • Threshold for the higher rate of Employers’ PRSI will increase from €398 to €410.

Personal Tax

  • Income tax standard band increase by €1,500 to €36,800 (single) and €73,600 (married).
  • Increase Personal, Employee and Earned Income Tax Credit by €50 to €1,700.
  • The Dependent Relative Credit will increase from €70 to €245.
  • Tax relief for remote working from home of 30% of vouched expenses for heat, electricity and broadband.
  • Small change to the second rate-band of Universal Social Charge which will increase from €20,687 to €21,295.
  • Amendments are proposed to be announced in the Finance Bill to s.127B TCA’97 which covers the taxation of international air crews to exclude non-resident air crew.

 Anti-Avoidance

  • Introduction of new Interest Limitation Rule will see a limit on deductible interest expenses of 30% of EBITDA for companies within scope of the Anti-Tax Avoidance measures. Disallowed interest may be carried forward and may be deducted in future years if the company has sufficient interest capacity.
  • Finance Bill 2021 will introduce a new anti-reverse-hybrid rules which will bring certain tax transparent entities within scope of Irish tax where the entity is 50% or more owned/controlled by entities resident in a jurisdiction that regard it as tax opaque and, as a result of this hybridity, double non-taxation occurs.

VAT

  • 9% rate to cease at the end of August 2022.
  • Farmers’ Flat Rate Addition is reduced from 5.6% to 5.5%.

 Agri Measures

  • Stock relief to end of 2024.
  • Young Trained Farmer Stamp Duty relief continue to end of 2022 at 1%.

 Other Matters

  • No changes to Capital Gains Tax or Capital Acquisitions Tax.
  • The State Pension (Contributory) will increase from €248.30 to €253.30 per week from 2022.
  • Public Consultation to be launched in coming weeks to inform Commission on Taxation and Welfare.
  • The Finance Bill is due to be published on the 21st October.

For more information, please contact Eddie Murphy, Partner & Head of Tax Services.

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Budget 2021 Analysis

Edward Murphy, Partner and Head of Tax Services, gives his analysis of Budget 2021.

When Minister Donohue delivered his Budget 12 months ago, he told us that we had to be safe and cautious due the possibility of a no-deal Brexit. One year on, Brexit uncertainty is ever more present, but we now also have the monumental pressure of a pandemic. Budget 2021 is a €17.75bn package, the largest in the history of the State. Minister Donohue has attempted to strike a balance between the country’s longer-term financial position and supporting those out of work and those businesses who are struggling to stay alive.

We will dip into our emergency rainy day fund this year for €1.5bn as the Government expects to have to borrow almost €20bn in 2021 to deal with the shortfall in tax receipts and the required significant spending on various Covid-19/Brexit supports and on our health system and infrastructure costs. EU financial supports expected in 2021 on both the Covid-19 and Brexit fronts will be welcomed.

The Minister took the opportunity to again re-affirm Ireland’s commitment to its 12.5% Corporate Tax rate and to acknowledge Corporate Ireland’s significant contribution to the Country’s national tax purse.

The large spending amounts announced on housing, infrastructure, defence, health and education would in any other Budget be seen as stand-out, but in Budget 2021 they are in the shadow of the even larger Covid-19 crisis supports that the government is committing to support businesses.  Targeted sector supports to tourism, hospitality, arts/entertainment and other businesses affected by Covid-19 are aimed at preserving existing jobs or keeping some of the businesses in these sectors on life-support. Employment is the key to survival and recovery. Indeed the ‘green’ initiatives of increasing Carbon Tax to help to fund making homes more energy efficient, appear incidental.

The sheer scale of the challenges facing Ireland may have in one sense helped the Government Partners to agree to Budget 2021’s size and approach.  However, this ‘’borrow now, pay later’’ Budget has moved the relatively recent promise of tax decreases to more now the question of who will pay for this in the longer term?

To see how the budget affects you, you can read our Budget 2021 Highlights.

For more information, please contact Eddie Murphy, Partner and Head of Tax Services.

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