Corporation Tax Capital Allowances

Spanish Taxes. International and EU Taxes. VAT, Corporate Taxes, Capital Gains Tax

There are a number of alternatives open to individuals wishing to invest in Spain.  These include setting up a limited company or forming a branch / permanent establishment.  Due to the number of Irish clients with trading companies in Spain, we have prepared a general summary of the taxes arising. This is not a full and comprehensive guide to Spanish taxes.  It does not provide detail on the local operation of taxes.  As a result, we would always advise anyone with Spanish interests to seek the advice and expertise of a local tax professional.

RESIDENCE

Corporate tax is levied on the income of companies and other separate legal entities.  Spanish resident entities are liable to tax on their worldwide income, not just on profits from activities carried on in Spain.

What is a Spanish resident entity?

1. A company which is incorporated in Spain shall be regarded for the purposes of Spanish Corporate Tax as being resident in Spain under Spanish law.

2.  The location of central management and control in Spain may bring the entity into the Spanish Corporate Tax regime.  For example, if the legal headquarters/registered offices of the company are located in Spain, or if it is effectively managed from Spain, then the corporate entity is deemed to be Spanish resident.

3.  In the event of the legal entity being resident in a country where no taxation is levied on its profits or gains (i.e. a tax haven) then that entity is deemed to be Spanish tax resident if the following arise:

a)      The majority of the entity’s main assets are located in Spain.

b)      The entity’s principal business activity is carried out in Spain.

c)      The strategic control is exercised in Spain

It is important to keep in mind that the above point (i.e. number 3) will not apply if the entity exercises its management and control in another country.  This is  provided it does so for bona fide commercial reasons and not for the purposes of managing securities or other assets.

NON-RESIDENCE

Non-resident companies and entities are only liable to Corporate Tax on their Spanish income arising from business operations carried out by a Permanent Establishment within the jurisdiction.  Please consult Article 5 of the Ireland/Spain Double Taxation Agreement for a definition of Permanent Establishment.

Please be aware that a “Fiscal Representative” must be appointed by a non-resident individual or company, to correctly handle all tax affairs, when carrying out commercial activities in Spain.

TAX RATES

Corporate Tax

25% is the general tax rate for residents as well as non-residents carrying out commercial activities in Spain through a “Permanent Establishment.” Other tax rates may apply, however, depending on the type of company and the type of business carried out.

Where foreign companies have permanent establishments in Spain, Non-Resident Income Tax of 25% is chargeable on the income arising to the Permanent Establishment.

A reduced rate of 15% applies to newly incorporated entities set up on or after 1^st January 2015.  This preferential rate applies to the first two years of operation, providing a taxable profit arose in the first tax period.

This start up rate of 15% does not apply in the following situations:

1. Where the trade/business was carried on previously by a related entity.

2.  if the newly created company belongs to a Group of Companies.

3.  Where the company is considered, by law, to be an equity company.

For new companies set up prior to 1^st January 2015 they will be taxed at 15% on their tax base up to €300,000 with 20% tax being levied on any excess amounts.  This will apply for the first two tax periods.

Without a Permanent Establishment

When dealing with non-residents operating in Spain without a permanent establishment, but who are resident in another EU or EEA state with which there is an Information Exchange Agreement in place, a distinction should be made between an individual and a corporate entity.

The tax rate applicable in the above situation is 19% and the tax deductible expenses are calculated in line with Personal Income Tax and Corporate Income Tax legislation.

In all other situations, the general rule is that non-residents operating in Spain without a permanent establishment are taxable at a rate of 24%.

Capital Duty

A 1% Capital Duty is payable by the shareholders on the dissolution of a company or on a reduction in its share capital.

Dividends, Interest and Royalties

 Dividends paid to non-residents are liable to a 19% Withholding Tax unless a lower rate applies under a relevant Double Taxation Agreement.

It is also possible for an exemption to apply under the EU Parent Subsidiary Directive.  Distributions paid to E.U. parent companies by Spanish subsidiaries are exempt from withholding tax provided the parent company held, either directly or indirectly, at least a 5% holding in the subsidiary company for a continuous period of twelve months in addition to satisfying other conditions.

Anti-Avoidance legislation exists where the ultimate shareholder in not E.U. resident.

Following an amendment in the Spanish Personal Income Tax Legislation, a share premium distribution paid to a non-resident shareholder may now be treated as a dividend distribution liable to withholding tax under the general rules.

Interest paid to a non-resident including a non-resident individual is liable to 19% withholding tax unless a lower rate applies under the relevant Double Taxation Treaty.

Interest income is exempt from tax if the recipient is a resident of an E.U. member state or an E.U. Permanent Establishment of an E.U. resident company which is not deemed to be a tax haven.

Royalties paid to non-residents including a non-resident individual are liable to withholding tax of 24% or 19% if the recipient is resident in an EU or EEA member state where an Information Exchange Agreement exists.

This rate can be reduced by the provisions of a relevant Tax Treaty.

Royalties paid to associated EU resident companies or permanent establishments are exempt from tax in Spain providing certain conditions are satisfied.

Capital Gains

Under Spanish law capital gains are treated as ordinary business income taxable at the 25% corporate tax rate.

Capital gains on disposals by non-residents without a permanent establishment in Spain are taxed at a reduced rate of 19%.

Where non-residents without a permanent establishment dispose of real estate situated in Spain, a tax of 3% will be withheld from the sales price by the purchaser and paid over to the Spanish Tax Authorities to be offset against the vendor’s tax liability.

Capital Gains from the transfer of shareholdings/ownership interests in Spanish companies and foreign subsidiaries by corporate entities are exempt from tax if the conditions of Participation Exemption are satisfied.

For an E.U. corporate shareholder, ownership of at least 5% must be held directly or indirectly or the shareholding must be valued at over €20 million and it must be held for at least a twelve month period.

In situations where the company is non-resident, a foreign tax which is similar to Spanish Corporate Income Tax of 10% will apply providing the corporate entity is resident in a country with which Spain has concluded a Double Taxation Agreement.

VAT

Spanish VAT or IVA is charged on the supplies of goods and services within the Spanish VAT territory as well as on imports and intra-EU acquisitions of goods and services.

IVA is charged at 21% on the majority of goods and services in Spain.

There is a reduced rate of 10% which applies to certain goods and services such as the purchase of a newly built property, passenger travel, health products and equipment, toll roads, refuse collection and treatment, entrance to cultural buildings and events, some foodstuffs, water supplies, renovation and repair of private dwellings, agricultural supplies, hotel accommodation, restaurant services, etc.

There is a super reduced rate of 4% which applies to the basic necessities other than those classified under the 10% rate and these include human medicine, basic foodstuffs (i.e. bread, milk, cheese, eggs, fruit, vegetables, cereals, potatoes, etc.), books, newspapers and magazines except the electronic equivalents.

Sales Tax is applied in Ceuta and Melilla instead of VAT.

The Canary Island Indirect Tax or IGIC applies in the Canary Island instead of VAT.

The ordinary rate of IGIC is 7% but there are a range of other rates: 0%, 3%, 9½%, 13½% and 20%.

CHANGES TO VAT RULES

On 1^st July 2017 a new “Immediate Supply of Information” system took effect in Spain.

This new VAT management system now requires taxpayers to maintain their VAT books and records through the Spanish Tax Authorities website on a near real-time basis.

This new system is mandatory for all taxpayers who file their VAT Returns on a monthly basis including:

• Companies included in the VAT Grouping Special Regime.

• Large organisations whose annual turnover exceeds €6 million.

• Taxpayers registered on the VAT Monthly Refund  Registry (REDEME)

This new system, however, also enables Taxpayers to elect to use the S.I.I.  If they voluntarily choose to use this system then they must declare their intention on Form 036.

For further information, please click: https://sede.agenciatributaria.gob.es/Sede/en_gb/estadisticas/estadisticas-impuesto/declaracion-pais-pais-multinacionales-matriz-espanola/informe-pais-pais-2017.html

To speak with a Chartered Tax Advisor, specialising in Spanish Taxes, please contact us at queries@accountsadvicecentre.ie

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Income Tax, Corporation Tax, Capital Gains Tax, Revenue Compliance Interventions, Capital Acquisitions Tax, VAT.

Are you aware of how much has changed since 1st January 2017 in terms of Tax compliance, Tax Credits, Employee Subsistence Expenses, Personal/Income Tax, Corporation Tax, Capital Acquisitions Tax, Capital Gains Tax, Value Added Tax, PAYE, Stamp Duty, Transfer Pricing, Local Property Tax, Revenue Audit Procedures, etc.?

Here are a list of the Revenue eBriefs published so far this year:

1. Revenue eBrief No. 01/17  Finance Act 2016 – VAT Notes for Guidance
2. Revenue eBrief No. 02/17 Improved online services for PAYE customers
3. Revenue eBrief No. 03/17 Stamp duty levies – changes made by Finance Act 2016 and Health Insurance Amendment Act 2016
4. Revenue eBrief No. 04/17  Finance Act 2016 changes to Capital Acquisitions Tax Consolidation Act 2003 – Changes to section 86 (Dwelling House Exemption) and Schedule 2 (Group Thresholds) CATCA 2003 
5. Revenue eBrief No. 05/17  Fisher Tax Credit 
6. Revenue eBrief No. 06/17  Special Assignee Relief Programme
7. Revenue eBrief No. 07/17  Deduction for statutory registration fees paid to the Health and Social Care Professionals Council
8. Revenue eBrief No. 08/17  Revenue Opinions and Confirmations 
9. Revenue eBrief No. 09/17  Tax Relief on Retirement for Certain Income of Certain Sportspersons 
10. Revenue eBrief No. 10/17  Irish Real Estate Fund declarations
11. Revenue eBrief No. 11/17  Average Market Mid-Closing Exchange Rates v Euro – Lloyds Conversion Rate
12. Revenue eBrief No. 12/17  Revenue Arrangements for Implementing EU and OECD Exchange of Information Requirements In Respect of Tax Rulings
13. Revenue eBrief No. 13/17  PAYE – Exclusion Orders
14. Revenue eBrief No. 14/17 –  Taxation of Paternity Benefit
15. Revenue eBrief No. 15/17  Deduction for income earned in certain foreign states (Foreign Earnings Deduction) 
16. Revenue eBrief No. 16/17  Revenue Technical Service – Solicitor Access to the MyEnquiries online contact facility 
17. Revenue eBrief No. 17/17  R and D tax credit claims in respect of projects supported by Enterprise Ireland R and D grants
18. Revenue eBrief No. 18/17  Updates to the Electronic Relevant Contracts Tax (eRCT) System – Look up Payment Notifications
19. Revenue eBrief No. 19/17  Revenue seeks applications for independent Research & Development (R&D) experts
20. Revenue eBrief No. 20/17  Solvency II – EU (Insurance and Reinsurance) Regulations 2015 
21. Revenue eBrief No. 21/17  Opticians in employment 
22. Revenue eBrief No. 22/17  Securitisation: Notification of “Qualifying Company” Section 110 Taxes Consolidation Act, 1997.
23. Revenue eBrief No. 23/17  Code of Practice for Revenue Audit and other Compliance Interventions
24. Revenue eBrief No. 24/17  Health Expenses / Assistance Dogs
25. Revenue eBrief No. 25/17  Non Principal Private Residence (NPPR) Charge
26. Revenue eBrief No. 26/17  Irish Real Estate Fund declarations
27. Revenue eBrief No. 27/17  Certification of Residence for Individuals/Companies/Funds
28. Revenue eBrief No. 28/17  CGT implications for individuals of takeover of Fyffes plc by Sumitomo Corporation
29. Revenue eBrief No. 29/17  PAYE Modernisation – Report on Public Consultation Process
30. Revenue eBrief No. 30/17  Non Principal Private Residence charge notification facility
31. Revenue eBrief No. 31/17  Home Renovation Incentive (HRI)
32. Revenue eBrief No. 32/17  Help To Buy Scheme
33. Revenue eBrief No. 33/17  Section 900 Taxes Consolidation Act 1997 – Power to call for the production of books, information etc.
34. Revenue eBrief No. 34/17  Charitable Donations Scheme
35. Revenue eBrief No. 35/17  Revenue Technical Service (RTS) for Agents and Taxpayers
36. Revenue eBrief No. 36/17  Large Cases Division: Opinions/Confirmation on Tax/Duty Consequences of a Proposed Course of Action
37. Revenue eBrief No. 37/17  VAT treatment of education and vocational training
38. Revenue eBrief No. 38/17  ROS – Extension of Pay & File Deadline for ROS Customers for 2017
39. Revenue eBrief No. 39/17  Corporation Tax (CT1) Returns for 2016 and 2017, Forms 46G (Company)
40. Revenue eBrief No. 40/17  Offshore funds regime
41. Revenue eBrief No. 41/17 Incapacitated Child Tax Credit
42. Revenue eBrief No. 42/17  MyEnquiries enhancements
43. Revenue eBrief No. 43/17  Exemption in respect of certain expense payments for resident relevant directors
44. Revenue eBrief No. 44/17  Definition of ‘chargeable person’ – Self Assessment
45. Revenue eBrief No. 45/17  Employees’ Subsistence Expenses and Motoring and Bicycle Expenses
46. Revenue eBrief No. 46/17  Underpayment of Preliminary Corporation Tax: waiver of interest where the underpayment arises solely due to movements in the exchange rate of the functional currency
47. Revenue eBrief No. 47/2017  Pre self-assessment – stamp duty manual
48. Revenue eBrief No. 48/17  Taxation of exam setters, exam correctors, invigilators, etc.
49. Revenue eBrief No. 49/17  Tax treatment of the reimbursement of Expenses and Travel and Subsistence to Office Holders and Employees
50. Revenue eBrief No. 50/17  Returns Compliance Income Tax and Corporation Tax
51. Revenue eBrief No. 51/17  Local property tax appeals
52. Revenue eBrief No. 52/17  Company reconstructions without change of ownership (Section 400 TCA 1997)
53. Revenue eBrief No. 53/17  Restructured VAT Tax and Duty Manual
54. Revenue eBrief No. 54/17  Full self-assessment: Time limits for making enquiries and making or amending assessments
55. Revenue eBrief No. 55/17  Surcharge on certain undistributed income of close companies
56. Revenue eBrief No. 56/17  Charges on income for Corporation Tax purposes
57. Revenue eBrief No. 57/17 Time limits for raising assessments and making enquiries – section 955 TCA 1997
58. Revenue eBrief No. 58/17  Filing and paying Stamp Duty on Instruments
59. Revenue eBrief No. 59/17  Capital Acquisitions Tax – Business Relief
60. Revenue eBrief No. 60/17  Pensions Manual Amended
61. Revenue eBrief No. 61/17  PAYE Taxpayers and Self-Assessment – Interaction of PAYE and Self-Assessment Procedures: Income Tax
62. Revenue eBrief No. 62/17  Company Incorporation – Economic Activity
63. Revenue eBrief No. 63/17  Tax-Geared Penalties for Non-Submission of Returns
64. Revenue eBrief No. 64/17  Tax treatment of certain dividends
65. Revenue eBrief No. 65/17  Full self-assessment – Revenue assessment in the absence of a return
66. Revenue eBrief No. 66/17  New PAYE Services and ROS registration changes
67. Revenue eBrief No. 67/17  Data Retention Policy for Compliance Interventions
68. Revenue eBrief No. 68/17  Provisions Relating to Residence of Individuals
69. Revenue eBrief No. 69/17  Guidelines on tax consequences of receivership and mortgagee in possession (MIP)
70. Revenue eBrief No. 70/17  Irish Real Estate Funds
71. Revenue eBrief No. 71/17  ROS Form 11 – 2016 income tax return
72. Revenue eBrief No. 72/17  Guide to Exchange of Information under Council Directive 2011/16/EU, Ireland’s Double Taxation Agreements and Tax Information Exchange Agreements and the OECD/Council of Europe Convention on Mutual Administrative Assistance in Tax Matters.
73. eBrief No. 73/17  Guidelines for requesting Mutual Agreement Procedure (MAP) assistance in Ireland
74. Revenue eBrief No. 74/17  Transfer Pricing Documentation Obligations
75. Revenue eBrief No. 75/17  Tax Treatment of Members of the European Parliament
76. Revenue eBrief No. 76/17  ROS – Digital Certificate Renewal reminder notices
77. Revenue eBrief No. 77/17  Corporation Tax Statement of Particulars – Section 882 TCA 1997
78. Revenue eBrief No. 78/17  Accessing Schedule E information – 2016 Income Tax Return

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Landlord Taxes, Rental Expenses, Property Tax Deductions

The High Court decision in Revenue Commissioners v Thomas Collins has just been published.  It states that contrary to Revenue’s position, the NPPR (Non Principal Private Residence) charge was in fact an “allowable” expense against rental profits under Section 97(2) TCA 1997.

What was the NPPR Charge?

The NPPR (Non Principal Private Residence) charge was an annual charge of €200.  It was implemented by the Local Government (Charges) Act 2009, as amended by the Local Government (Household Charge) Act 2011.

What does it relate to?

It related to all residential property situated in Ireland which was not used as the owner’s sole or principal residence from 2009 to 2013.

Examples of the type of residential properties liable for the NPPR charge were:

• private rented properties including houses, maisonettes, flats, apartments or bedsits.

• vacant properties – This definition excluded new but unsold residences in situations where they had never been used as a dwelling houses but instead were deemed to be part of the trading stock of a business.

• holiday homes or second homes.

Previous Tax Treatment of NPPR

Irish Income Tax is calculated on the net amount of rents received or rental profits.  In other words Income Tax is charged on the gross rents received less any allowable expenses, as specified in the Taxes Consolidation Act 1997.

The main deductible expenses include:

• Interest on money borrowed to purchase, repair or improve the property,

• Any rent payable by the landlord in relation to a sub-lease,

• The cost to the landlord of providing any goods or services to the tenant,

• The cost to the landlord of insurance, repairs & maintenance, property management fees, etc.,

• Local Authority Rates where relevant.

For details of allowable rental expenses, please visit www.revenue.ie/en/tax/it/leaflets/it70.html

What was the Irish Revenue Authorities and the Department of Finance’s stance prior to this ruling?

That the payment of the NPPR charge for residential properties was NOT an allowable deduction in calculating Income Tax on the rental profits.

Effect of this Ruling

If this High Court decision is not overturned, then it could result in a repayment of taxes overpaid.

There is a time limit for claiming refunds of tax overpaid.

All claims for tax refunds must be made within four years of the end of the year to which the claim relates.

If you are a landlord of rented residential property in Ireland seeking tax advice or looking to regularise your tax affairs, and wish to deal with a Property Taxes Specialist please contact us at queries@accountsadvicecentre.ie

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Corporation Tax, Corporate Taxes, Business Tax Ireland, Capital Gains Tax, CT1 Return

The Irish corporation tax system operates on a self-assessment basis.  Therefore, it is solely the responsibility of the company to calculate and pay its corporation tax liability within deadline.  Any company liable to corporation tax must submit a CT1 Form.  This is a Tax Return containing details of profits, chargeable gains and other relevant information.  This is outlined in Section 884 TCA 1997.

When must the CT1  Return be filed?

(a) It must be filed within nine months of the end of the company’s accounting period but

(b) no later than the 23rd day of the month

(c) if the Tax Return along with payment of the associated tax liability is filed via the Revenue Online Service.

(d) Otherwise, the Return must be filed within eight months and twenty one days of the company’s year-end.

For Example:

A company with a 31st December 2016 year-end must file its CT1 form on or before 21st September 2017.  This is unless it files its Return and the relevant tax payment using the Revenue Online Service.  In that case the deadline date is extended to 23rd September 2017.

Can an Accounting period be longer than 12 months?

An accounting period for CT purposes cannot be longer than twelve months.

What happens if a company has two accounting periods?

If a company has an accounting period of say, 15 months for example, then it is deemed to have:

(a)   Two accounting periods for Corporation Tax purposes and

(b)   Two Preliminary Tax payment dates.

How would that work?

(a) The first accounting period would be for the first twelve months.

(b) The second accounting period would be for the remaining three months.

Consequences of filing a late or incomplete/incorrect CT Return

The following surcharges will apply:

(i) If the Corporation Tax Return is filed less than two months late, a 5% surcharge (subject to maximum of €12,695) will be calculated on the company’s CT liability for the accounting period in question.  This surcharge will apply irrespective of whether the tax had been paid within deadline because this surcharge arises in relation to the late filing of the CT1 Form.

(ii) If filed more than two months late, a 10% surcharge (subject to maximum of €63,485) will be levied on the company’s tax liability for the period in question regardless of whether or not the tax had been paid on time.

Please be aware that the surcharge also includes any Income Tax due.

Is there anything else to keep in mind?

In addition to the above surcharges, in circumstances where a company does not submit its return on time, the following restrictions on the use of certain allowances and reliefs will also apply:

(i) If filed less than two months late, the reliefs and allowances will be restricted by 25%.  This is subject to a maximum of €31,740 in each case,

(ii) If filed later than 2 months, the reliefs and allowances are restricted by 50%.  This subject to a maximum of €158,715 in each case.

What about Group Relief?

For Group Relief to apply, both the surrendering and the claimant company must have submitted their Corporation Tax Returns within the deadline date.

Interaction with Local Property Tax 

A surcharge of 10% will be levied on the final liability where the CT1 Return has been filed on time but where the LPT Return or payment is outstanding at the CT filing date.  This surcharge will also be levied if an agreed payment arrangement for LPT has not been set up.  Finally, if the company subsequently pays its LPT liability in full, bringing its tax affairs up to date, the amount of the surcharge will be capped at the amount of the LPT liability involved.

 Preliminary Tax

In Ireland, companies are required to prepay a portion of their corporation tax liability. This is known as “Preliminary Tax”.  The rules for calculating Preliminary Tax depends on whether a company is considered to be a “small company” or a “non-small company”.

What’s a “small company”?

For preliminary tax purposes it’s a company whose corporation tax liability for the previous twelve month accounting period did not exceed €200,000.

How is it’s Preliminary Corporation Tax calculated?

A company which qualifies as a “small company” has the option of computing its preliminary CT payment on the lower of:

(a) 90% of the total estimated corporation tax liability for the current period, or

(b) 100% of the final corporation tax liability for the previous period.

When can a “small company” pay it’s Preliminary Tax?

It has the option of paying its Preliminary Tax one month before the end of its accounting period.  This is provided it’s on a date no later than the 23rd day of the month.

What about the balance of outstanding tax?

It must be paid on or before the company’s tax return filing date.  In other words, on the 23^rd day of the ninth month following the end of the accounting period.

Example:

If the accounting period ended on 31^st December 2016, the balance of the tax would be payable by 23^rd September 2017.  This is provided the Return and payment were made via ROS.  Otherwise, it would be on or before 21^st September 2017.

Which is the most advisable option to choose?

It is advisable to choose the second option.   By paying 100% of the previous year’s CT liability, this ensures that no underpayment will have been made by the Company thereby avoiding exposure to interest penalties.

What happens if sufficient Preliminary CT isn’t paid or is not paid on time?

Please be aware that if the company doesn’t pay sufficient preliminary corporation tax or if the preliminary tax is not paid on time, an interest charge will be levied.   A daily simple interest rate of 0.0219% will arise on the difference between:

(a) 100% of the final CT liability and

(b) The amounts paid over to the Irish Revenue Authorities.

What about companies not deemed to be “small Companies”?

For companies which are not deemed to be “small companies” the following rules will apply:

The first preliminary tax payment or “Initial Instalment” falls due no later than the 23rd day of the sixth month from the commencement of the chargeable period. The payment due is the lower of:

(a)   50% of the previous periods corporation tax liability or

(b)   45% of the current year’s liability.

The second preliminary tax payment or “Final Instalment” falls due no later than the 23rd of the month preceding the end of the chargeable period (i.e. by the 23^rd day of the eleventh month of the accounting period). This payment must bring the total preliminary tax payment submitted to the Revenue Authorities to at least 90% of the total tax payable for the current chargeable period including the tax on any chargeable gains.

The company must file its CT1 Return and pay the balance of the Corporation Tax (i.e. the remaining 10%) no later than the 23^rd day of the ninth month after the chargeable period ends.

If you are a Business Owner looking to incorporate or a Director/Shareholder seeking comprehensive tax advice or looking to regularise your tax affairs, and wish to deal with a Corporate Taxes Specialist please contact us at queries@accountsadvicecentre.ie

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

If you intend to set up a new company in Ireland in 2017, please be aware that you must register with the Irish Revenue Authorities.  Registration must be within thirty days of incorporation.  This can be done by completing the relevant sections of a TR2 Form:

http://www.revenue.ie/en/tax/vat/forms/formtr2.pdf

http://www.revenue.ie/en/tax/vat/forms/formtr2-nonresident.pdf

What information is required to register?

1. Your CRO Number – For further information you should contact the Companies Registration Office https://www.cro.ie

2. The company’s year-end.

3. The company’s trading activities.

4. The name of the company, its registered office address and the address of its principal place of business.

5. The name of the Company Secretary.

6. Details of Directors and the main shareholders of the company including their Personal Public Service (PPS) numbers.

Who must file a Form 11F CRO?

Every company which is incorporated in Ireland regardless of its residency.  This includes a foreign incorporated company commencing to carry on a trade or profession in Ireland

To file a Form 11F CRO please click: www.revenue.ie/en/tax/it/forms/11fcro.pdf

It must be filed, with the Irish Revenue Commissioners, within thirty days of commencing to trade.

Are there any additional information required?

Under Section 882(2) TCA 1997 where the company is incorporated but not tax resident in Ireland, the following is required:

1. The country in which the company is resident;

2. The name and address of the company which is trading in Ireland if the Trading Exemption in Section 23A(3) applies.

3. The names and addresses of the beneficial shareholders if the Treaty Exemption under Section 23A(2) applies. If, however, the company is controlled by a company whose shares are traded on a stock exchange in an EU or DTA country then the registered office of that company will be required.

How will the company be taxed?

If your company is deemed to be tax resident in Ireland then it will be liable to tax on its worldwide income/profits in Ireland.  In other words,  not just the profits generated in Ireland.

If it is not deemed to be Irish tax resident, then it will only be liable to Irish tax on Irish source or generated income/profits.

How can you determine the residence of your company?

The first question to ask yourself is how to determine the residence of the company.  The 2014 Finance Act, came into effect on 1st January 2015.  It amended the corporate tax residence rules contained in Section 23A TCA 1997.  The aim was to address concerns about the “double Irish” structure.

How can the legislation be summaried?

• A company incorporated in Ireland will be deemed to be Irish tax resident.

• However, to ensure it complies with how company residence is dealt with in the Double Taxation Agreements, there is an exception to this rule.

• The exception states that if, under the provisions of a Double Taxation Agreement, the Irish incorporated company is deemed to be tax resident in another jurisdiction then that company will not, in fact, be considered to be Irish tax resident.

• A company which was not incorporated in Ireland but is managed and controlled in Ireland will not be prevented from being taxed as an Irish tax resident company according to the amendments to Finance Act 2014.

Are there specific rules for companies incorporated in Ireland before 1st January 2015?

The new provisions apply only from the earlier of the following dates:

a) 1st January 2021 or

b) The date of “change” which takes place after 1st January 2015.

What is meant by the term “change”?

By “change” we mean where there is both:

(a) a change in ownership of the company and

(b) a major change in the nature or conduct of the business activities of the company.

Is there a time span for this change to have taken place?

Within one year before the date of the change or on 1st January 2015, whichever is the later date, and ending five years after that date.

What does this really mean?

It means that companies incorporated in Ireland before 1st January 2015 can use the previous company tax residence legislation until 31st December 2020.

It is essential that up to 31st December 2020, all corporate groups take into consideration the impact of the new legislative provisions on any proposed reorganisations, mergers or acquisitions where there would be:

(a) a change in the ownership and

(b) a change in the nature/conduct of the business in relation to non-resident companies which were incorporated in Ireland.

Tax Rates in Ireland

• Trading Income is taxed at 12½%

• Investment Income including Deposit Interest, Interest on Securities and Rental Income is taxed at 25%.

• Dividends or distributions paid by one Irish resident company to another Irish resident company are known as Franked Investment Income and are not liable to Irish Corporation Tax in the hands of the recipient.

• Foreign Dividends received by Irish resident companies will be subject to Irish corporation tax at 25% in most cases. However, tax at the 12½% rate will apply on dividends received from EU subsidiaries where certain conditions are met under 21B TCA 1997.

• Companies are subject to Corporation Tax on their chargeable gains. The relevant rate of Capital Gains Tax is 33% which is applied to the gain which is then adjusted to an amount which would give the same tax liability using the 12½% Corporation Tax rate. The tax adjusted chargeable gain is the figure to be included in your Corporation Tax calculation.

If you are a Company Director or a Business Owner looking to incorporate, and are looking for up-to-date tax advice or compliance services, please contact us at queries@accountsadvicecentre.ie

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Capital Gains Tax (CGT) Payments, Disposal of an asset, Investment, Shares, Property, Business Sales.

If you’ve already made or about to make a disposal of a capital asset (e.g. if you have sold certain shares, an investment property, a business, etc.) anytime  between 1^st January and 30^th November 2014 you will be obliged to pay your Capital Gains Tax by 15^th December 2014.  If you decide to wait and dispose of your asset between 1^st December and 31^st December 2014 then your Capital Gains Tax (CGT) payment will be due by 31^st January 2015.

 What happens if you miss these deadlines?

 Interest of 0.0219% per day will be applied to all late payments of Capital Gains Tax.

 What happens if you make a gain in the first part of the year and a loss in the second part?

 Even if you’ve made an overall loss for the year, you will be obliged to pay the Capital Gains Tax arising on any gain you’ve made in the first part of 2014 by the specific payment date being 15^th December 2014.

 You can then submit your claim for a tax refund in January 2015 if a loss arises in the second part of the year.

 Any tax saving tips?

 Plan the timing of your disposals so that capital gains and capital losses arise in the same period thereby enabling you to offset the losses against the gains and effectively reduce any potential tax liability.

 This can be very useful from a cash flow point of view.

 What about filing obligations?

 You must include details of all your capital acquisitions and/or disposals made in 2013 in your 2013 Income Tax Return. 

 This Return must be filed with Revenue by 31^st October 2014.

 There is an extension to 13^th November 2014 if you are using the Revenue Online System (ROS).

 What happens to individuals who are not obliged to file an Income Tax Return?

 You may file a CG1 Form which can be downloaded from the Irish Revenue website www.revenue.ie

 As with the Income Tax Return, the due date for filing is 31^st October 2014.

 Please be aware, there is no facility to file this Form online which means the 13^th November 2014 extension does not apply to the CG1 Form.

Are there any penalties for late filing?

 If you are late filing your Tax Return but manage to do before 31^st December 2014 there will be a 5% surcharge of the amount of tax payable up to a maximum of €12,695.00.

 If you file your Return after 31^st December 2014 a 10% surcharge will be levied up to a maximum amount of €63,485.00.

For further information, please click: https://www.revenue.ie/en/gains-gifts-and-inheritance/transfering-an-asset/index.aspx

For all your Capital Gains Tax advisory or compliance issues, please contact us on queries@accountsadvicecentre.ie.

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Finance Bill – Capital Gains Tax. Income Tax. Corporation Tax. Stamp Duty. VAT. Personal Tax Reliefs

On 24^th October 2013 the Finance (No. 2) Bill 2013 was published which confirmed the measures introduced by the Budget.  It includes details on new income tax reliefs (a)the Home Renovation Incentive and (b) the Start Your Own Business Relief.  There have also been changes to VAT, Capital Gains Tax (CGT), Stamp Duty and a change to Tax Residency Rules for Stateless Companies.

As the main priorities in Ireland at the moment are job creation and enterprise growth the following tax packages were introduced:

ENTERPRISE RELIEF

This is a new Capital Gains Tax relief which is aimed at entrepreneurs investing in assets used in new productive trading activities.  The purpose is to encourage individuals to reinvest the sales proceeds from the sale/disposal of a previous asset into new productive trading or a new company.  The main aspects of the relief are as follows:

(a)          It applies to an individual

(b)         who has paid Capital Gains Tax on the sale/disposal of an asset and

(c)          invests in a new business

(d)         at a cost of at least €10,000

(e)          between 1^st January 2014 and 31^st December 2018.

(f)           The investment cannot be disposed of earlier than three years after the investment date.

(g)          Once the new investment is sold the Capital Gains Tax arising with be reduced by the lower of:

• the C.G.T. paid by the individual on a previous disposal of assets from 1^st January 2010 onwards and
• 50% of the C.G.T. arising on the disposal of the new investment.

What type of assets are involved?

The assets must be chargeable business assets.  Goodwill is included in this definition as are new ordinary shares in micro, small or medium sized enterprises after 1^st January 2014.  The main conditions are:

• The investor has control of the company and is a full time working director and
• The company is carrying on a new business.

NOTE: Please be aware the commencement of this measure is subject to E.U. State Aid approval.

START YOUR OWN BUSINESS

This is an exemption from Income Tax but not from Universal Social Charge and PRSI for a long term unemployed individual who is starting up a new, unincorporated business.

What is meant by long term unemployed?

         It means some one who is continuously unemployed for the previous fifteen months.

What does this measure actually provide?

         The first €40,000 of profits earned per annum will be exempt from Income Tax for two years.

ENHANCEMENT OF EMPLOYMENT & INVESTMENT INCENTIVE

The main points of this new measure are:

• The initial 30% relief available for investments under the E.I.I. has been removed from the High Earners Restriction for three years.
• A maximum of €115,000 can be invested per individual per annum.
• The aim is to encourage individuals to invest more funds in the E.I.I. Scheme which focuses on job creation and expansion.

STAMP DUTY

The transfer of shares listed on the ESM (Enterprise Securities Market) of the Irish Stock Exchange will be exempt from Stamp Duty.  The ESM is the ISE’s market for growth companies.

The current stamp duty rate is 1%.

NOTE:  Please be aware that this measure is subject to a commencement order.

RESEARCH & DEVELOPMENT TAX CREDIT

The aim of this change is to assist smaller companies to access the tax credit without reference to the base year.  The following changes have been made and will take place in the accounting periods starting on or after 1^st January 2014:

• The amount of expenditure eligible for the R&D Tax Credit (without reference to the 2003 base year) has increased from €200,000 to €300,000.
• In order to qualify for the R&D Tax Credit, the limit on the amount of expenditure on research and development outsourced to third parties has increased from 10% to 15%.
• With regard to existing clawback provisions, under Section 766(7B)(c), the Bill provides that the tax foregone can be recovered from the company instead of the employee.

VAT

There have been two major VAT changes:

• The annual threshold for VAT on a cash receipts basis has increased from €1.25m to €2m.
• This comes into effect on 1^st May 2014.
• The 9% rate for Tourism related goods and services has been retained so as to encourage growth in small businesses within the Irish Tourism Sector.

PART II

The construction and building sectors saw the introduction of welcome changes:

LIVING CITY INITIATIVE

The urban regeneration initiative has been extended to include residential properties constructed up to and including 1914 and covers the cities of Cork, Dublin, Galway and Kilkenny.

The aim is to stimulate regeneration of retail and commercial districts as well as to encourage families to return to historic buildings in Irish city centres.

HOME RENOVATION INCENTIVE

This is a new Income Tax incentive for home owners who:

1. carry out repair, renovation or improvement work on their principal private residence
2. from 25^th October 2013 to 31^st December 2015.
3. Qualifying expenditure carried between 1^st January 2016 and 31^st March 2016 can be treated as having been incurred in 2015 if planning permission was granted before 31^st December 2015.

What kind of relief is available?

Relief is available in the form of an Income Tax Credit of 13½% on qualifying expenditure between €5,000 (minimum) and €30,000 (maximum).

What does “Qualifying Work” mean?

Building extensions, window fittings, plumbing and tiling, plastering, etc. carried out by tax compliant builders.

How does the relief work?

1. The Income Tax Credit will be split over two years after the year in which the work was carried out.
2. Any grant aided compensation or tax relief received will reduce the relief available.
3. The home owner must be LPT (Local Property Tax) compliant.

Note: It is essential to keep in mind that the Revenue on-line system will track information on contractors involved and work carried out.

PART III

There were a number of other budget changes which will have a huge impact on our economy:

One Parent Family Tax Credit

• The One Parent Family Tax Credit was replace by a new Single Person Child Carer Tax Credit.
• This takes effect from 1^st January 2014.
• There is no change to the value of the credit or the additional standard rate band.
• The new credit will only be available to the principal carer of the child.

Medical Insurance Tax Relief

• The Bill restricted the Medical Insurance Tax Relief.
• The maximum amount of the Medical Insurance Premium which can qualify for relief at the standard tax rate will be €1,000 for an adult and €500 per child.
• No tax relief will be available on any excess amounts.
• This charge relates to contracts entered into or renewed on/after 16^th October 2013.

Top Slicing Relief

Top Slicing Relief has been abolished completely for all ex-gratia lump sums paid on or after 1^st January 2014.

D.I.R.T. (Deposit Interest Retention Tax)

• The standard D.I.R.T. rate has increased from 33% to 41%.
• The D.I.R.T. rate of 36% has been abolished.
• All deposit interest will be liable to tax at the 41% rate.
• These changes apply to payments made on or after 1^st January 2014.
• The exemption for interest on “Special Term Accounts” will be abolished for accounts opened after 15^th October 2013.
• Credit Union “Regular Share Accounts” will be subject to D.I.R.T. on interest and dividends paid on or after 1^st January 2014.

COMPANY TAX RESIDENCE

There were changes to the company tax residence rules.

The company will be regarded as Irish resident for tax purposes where an Irish incorporated company is managed and controlled in another E.U. member state or treaty state and is not regarded as tax resident in any territory.

This applies from 24^th October 2013 for companies incorporated after that date or 1^st January 2015 for companies incorporated before 24^th October 2013.

For further information, please click: https://www.irishstatutebook.ie/eli/2013/act/41/enacted/en/html

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.