The VAT reclaim provisions contained in s74(4) VATCA 2010 have been abolished with effect from 1st January 2022.
From 1st January 2022, a key change in the Finance Bill 2021 has been introduced in relation to the VAT treatment of cancellation fees, including non-refundable or forfeited deposits, retained by business in the event of a customer cancellation.
Cancellation fees including forfeited deposits would be liable to VAT on the basis that they are either (a) a payment for a vatable service or (b) a right to access a vatable service. This is especially relevant to businesses in the tourism industry including hotels and restaurants.
In this amendment, it would appear that the Irish Revenue Commissioners are applying the CJEU judgements in:
They also appear to be following HMRC’s lead, which, with effect from March 2019, changed its legislation stating that VAT would remain due on retained payments for unused services and uncollected goods.
Prior to 1st January 2022 the Irish Revenue Commissioners had taken the view that if the supplier received a deposit from a customer that the deposit should be treated as an advance payment and VAT would be due when the deposit is received. If, however, the supply didn’t proceed then the vendor/supplier could claim a repayment of the VAT on the deposit. This was on the basis that the receipt of the deposit was not considered to be VATable because no supply of service had taken place. In other words, prior to the amendment in the Finance Act 2021, if the actual supply didn’t proceed, the supplier or vendor could still claim a refund of VAT which it previously accounted for on receipt of the non-refundable deposit.
Pre 1st January 2022, a number of conditions were needed to apply:
The Finance Act 2021 change has deleted from our legislation the previous entitlement of suppliers to reclaim a refund of VAT in respect of the non-refundable deposit, however, it does not affect the VAT treatment of deposits that are refunded to customers. The VAT relief should still be available on those deposits.
For further information, please click: https://www.revenue.ie/en/tax-professionals/documents/notes-for-guidance/vat/vat-guidance-notes-fa2021.pdf
Section 18 of the Finance Bill 2021 brings non Irish resident companies, in receipt of Irish rental income, within the charge to Corporation tax. Previously these companies were liable to income tax on their Irish rental profits.
Prior to the Finance Act 2021 amendment, non Irish resident companies, where no Irish branch existed, were liable to income tax at 20% on their rental income while Irish tax resident companies were, instead, liable to corporation tax at 25% on their rental income.
In circumstances where non-resident companies dispose of assets which had previously generated Irish rental income, any chargeable gains are now within the charge to corporation tax at 33% as opposed to capital gains tax, which is also at 33%. In other words, this amendment does not give rise to any additional tax as the effective rate of tax is 33% but the Corporate Tax rules now apply as opposed to the Capital Gains Tax rules.
There are no restrictions on the carry forward of rental losses and capital allowances in the change from the income tax regime to the corporation tax rules.
The payment date for certain affected companies’ preliminary corporation tax for 2022 has been adjusted. Those companies whose accounting period ends between 1st January 2022 and 30th June 2022 have until 23rd June 2022 to pay preliminary corporation tax in a further measure to ease the transition from the Income Tax to the Corporation Tax regime.
From today, non-resident corporate landlords will now also be subject to the new interest limitation rules which have been introduced to comply with the EU’s Anti-Tax Avoidance Directives. These new rules link the taxpayer’s allowable net borrowing/financing/leverage costs directly to its level of earnings. The ILR does this by limiting the maximum tax deduction for net borrowing costs to 30% of Tax EBITDA. In other words, the ILR will cap deductions for net borrowing costs at 30% of a corporate taxpayer’s earnings before interest, tax, depreciation, and amortisation, as measured under tax principles.