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BUDGET IRELAND 2025 – Business Taxes

Corporate Tax Advice

Business Tax Advice

 

The Minister for Finance Jack Chambers published his first Budget today  announcing a number of changes to our corporate tax regime.  A raft of tax measures and policies will be introduced to support Irish start-ups, small and medium-sized enterprises (SMEs) and multinational businesses.  Budget 2025 provided for a total budget package of €10.5b

 

Our focus in this article is purely on Business Taxes under Capital Gains Tax, Corporation Tax, VAT and Employer/Employee Taxes.

 

 

SUMMARY OF BUSINESS TAX MEASURES:

 

  1. There will be an increase in the VAT registration thresholds

 

  1. There will be an extension of the temporary 9% VAT rate in relation to supplies of gas and electricity for an additional six months.

 

  1. There will be an increase in the farmer’s flat rate addition from 1st January 2025.

 

  1. A new 9% VAT rate on heat pumps has been introduced.

 

  1. Employer/Employee Tax Changes – Amendments to Benefit-in-Kind (BIK) on cars

 

  1. Employer/Employee Tax Changes – There will be an increase in the annual employee Small Benefit Exemption from €1,000 to €1,500. A business will also be able to give five non-cash benefits to their employees in a single year.

 

  1. CGT Changes – Amendments to Retirement Relief.

 

  1. CGT Changes – Amendment to Relief for Angel Investors.

 

  1. Corporation Tax Changes

 

  1. Participation Exemption – Exemption for companies in receipt of Foreign Dividends

 

 

 

VALUE ADDED TAX (VAT)

 

  • With effect from 1st January 2025, the VAT registration thresholds will be increased from €40,000 to €42,500 for services.

 

  • The VAT registration thresholds will be increased from €80,000 to €85,000 for goods with effect from 1st January 2025.

 

  • The unregistered farmers flat rate scheme will be increased from 4.8% to 5.1%.

 

  • There will be an extension of the reduced 9% VAT rate on electricity and gas up to 30th April 2025.

 

  • From 1st January 2025, the 9% VAT rate will also apply to heat pump installations. This will have the effect of reducing the cost of replacing inefficient boilers.

 

 

 

EMPLOYER / EMPLOYEE TAXES

 

SMALL BENEFIT EXEMPTION

 

  • There will be an increase in the annual limit of the small benefit exemption from €1,000 to €1,500.

 

  • It has also been amended to allow five non-cash benefits, up from two, to be granted by an employer in a single year. The cumulative total of the first five benefits in a calendar year cannot exceed €1,500.

 

  • From 1st January 2024 an employer is required to return details of all qualifying incentives provided to employees where the small benefit exemption applies.

 

  • This benefit can be given to any employee of the company, including directors and shareholders, providing they are on the payroll.

 

 

BENFIT-IN-KIND

 

  • Budget 2025 introduced a BIK exemption for home car chargers provided by employers. It provides for an exemption from Benefit-in-Kind where it is the employer who incurs the cost of providing a facility for electric charging of vehicles at the home of an employee or director.

 

 

  • The proposed tapering of Benefit-in-Kind Relief for electric vehicles has been deferred. The universal relief of €10,000 which applied to the Original Market Value of a vehicle in Category A – D is being extended to 31st December 2025.  The amendment to the lower limit of the highest mileage band has also been extended until 31st December 2025.   Therefore, the highest mileage band is entered into at 48,001km.

 

 

CAPITAL GAINS TAX

 

Retirement Relief

 

Retirement Relief (CGT) supports the cost effective / tax efficient transfer of businesses and farms from one generation to the next.

 

Finance Act 2023 introduced a number of amendments to the Retirement Relief regime which included:

 

  1. an increase in the upper age limit from 66 years old to 70 years old.

 

  1. A cap of €10 million of proceeds / market value where the individual disposing of the assets to a child is aged from 55 to 69 years.

 

  1. The current limit of €3million will continue to apply but only from age seventy.

 

These changes were to come into effect on 1st January 2025.

 

Budget 2025 will retain the increased upper age limit. It also introduced a clawback period of twelve years on the Relief.

 

This means that any tax arising due to the cap of €10 million will be abated provided the assets are retained for twelve years.

 

In other words, the €10 million cap, due to be introduced on 1st January 2025, will only apply in circumstances where the child disposes of the assets within twelve years.

 

 

Angel Investor Relief

 

Angel Investor Relief, introduced in Budget 2024, was aimed at encouraging business angel investment in innovative start-ups.

 

Finance Act 2023 introduced a reduction on this rate for angel investors, bringing it down from 33% to 16% or 18%.

 

Budget 2025 provides Capital Gains Tax Relief for a third party individual who takes a significant minority shareholding (i.e. between 5% and 49% of the ordinary issued share capital of the company) for a period of at least three years,  in a certified innovative start-up small and medium enterprise (SME) company which is less than seven years old.   The investment by the individual must be in the form of fully paid-up newly issued shares costing at least €20,000 or €10,000 if acquiring between 5% and 49% of the ordinary issued share capital of the company.

 

Qualifying investors will be able to avail of an effective reduced rate of CGT of 16%, or 18% if through a partnership, on a gain up to twice the value of their initial investment.

 

There was previously a lifetime limit of €3 million on gains to which the reduced rate of CGT will apply.  Budget 2025 has increased this limit to lifetime gains of up to €10 million.

 

 Therefore, the amount on which the reduced CGT rates of 16% or 18% will apply is the lowest of the following:

  1. The actual chargeable gain.
  2. Twice the amount of the investment.
  3. €10 million less the total of all/any other chargeable gains that may qualify under this Relief.

 

 

 

CORPORATION TAX 

The following will be extended for a further two years until 31st December 2025:

 

  1. Employment Investment Incentive (EII),
  2. Start-Up Relief for Entrepreneurs (SURE) and
  3. the Start-Up Capital Incentive (SCI)

 

In addition, the EII limit on the amount that an investor can claim relief on will be doubled i.e. increasing from €500,000 to €1,000,000.

 

It is proposed to increase the SURE relief available to a maximum of €140,000 per year or a total of €980,000 over seven years.

 

 

Research and Development (R&D) Tax Credit

As you’re aware, the existing Research and Development (R&D) Tax Credit provides a 30% tax credit for all qualifying R&D expenditure.

 

The first year payment threshold will now increase from €50,000 to €75,000.

Companies with claims of between €75,000 and €150,000 will benefit from a €25,000 increase in the first instalment of their claim.

 

Companies with claims of in excess of €150,000 will continue to receive a first instalment amount based on 50% of the Research & Development Tax Credit claim.

 

 

Two new Audio-visual incentives

 

  1. Tax Credit for Unscripted Productions

 

A new tax credit will be introduced for the unscripted film production sector.

 

The relief will take the form of a 20% Corporation Tax Credit for certain production expenditure up to a maximum limit of €15 million per project.

 

The commencement will be subject to State Aid approval from the European Commission.

 

A cultural test will be introduced.

 

 

  1. Scéal Uplift

 

The second incentive is an 8% uplift referred to as the “Scéal Uplift”.

 

This involves an uplift of 8% to the existing film credit in respect of certain feature film productions.

 

It will be applied to the existing film credit and will result in a tax credit rate of 40% for projects with a maximum qualifying expenditure of up to €20 million.

 

This incentive is for small to medium budget productions under the Section 481 film tax credit.

 

As with the Tax Credit for Unscripted Productions, the Scéal Uplift is subject to State Aid approval.

 

  

FOREIGN DIVIDENDS

A new Participation exemption for foreign sourced dividends from subsidiaries in EU/EEA and tax treaty jurisdictions will be introduced with effect from 1st January 2025.  The aim is to simplify existing Double Taxation Relief provisions.

 

Currently, Ireland operates a worldwide corporate tax regime.  This means that all the profits (both domestic and foreign) earned by an Irish resident company are subject to Irish tax with Relief for any foreign taxes deducted under, a ‘tax and credit’ regime.

 

Under the new rules, a company will have the option of either (a) claiming the participation exemption or (b) continuing to use existing tax-and-credit relief.

 

To do this, an election will have to be made in the company’s annual corporation tax return. It will apply to all qualifying dividends in that particular period.

 

For non-qualifying jurisdictions, the existing method of claiming double taxation relief should continue.

 

The new participation exemption for foreign source dividends will come into effect from 1st January 2025.

 

 

 

For full information on Budget 2025, please click https://www.gov.ie/en/publication/e8315-budget-2025/

 

 

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.

 

BUDGET IRELAND 2025 – Taxes in relation to Property

Advice on Property Taxes

Property Taxes Ireland

 

Understand the Tax measures of Budget 2025 which relate to property transactions, at a glance.

 

 

Today, the Minister for Finance and the Minister for Public Expenditure, NDP Delivery and Reform, announced the details of Budget 2025.

 

 

As anticipated, Budget 2025 introduced several tax measures in relation to property.

 

 

This article will focus on the property related tax measures introduced by Budget 2025, under Income Tax/Personal Tax, Residential Zoned Land Tax (RZLT), Stamp Duty, Vacant Homes Tax (VHT) and Value Added Tax (VAT).

 

 

 

 

INCOME TAX / PERSONAL TAX

 

 

 Rent Tax Credit

 

  • Budget 2025 raised the Rent Tax Credit

 

  • The Rent Tax Credit has been increased to €1,000 for individual renters, or €2,000 per year for jointly assessed married couples/civil partners.

 

  • This applies to the tax years 2024 and 2025.

 

  • Prior to this, the Rent Tax Credit for 2024 was worth €750 for a single individual and €1,500 for a jointly assessed married couple/civil partners.

 

  • As a result of Budget 2025, these new rates have been backdated to cover the 2024 tax year as well as the 2025 year of assessment.

 

 

 

 

 Mortgage Interest Relief

 

  • Mortgage Interest Relief has been extended.

 

  • There has been no change to the qualifying criteria.

 

  • Homeowners must have an outstanding mortgage balance on their principal private residence of between €80,000 and €500,000 as of 31st December 2022.

 

  • Qualifying homeowners will be eligible for this tax relief in respect of the increased interest paid on their mortgage in 2024 as compared with 2022.

 

  • Tax Relief is at the standard Income Tax rate of 20%.  The Tax Credit is capped at €1,250 per property.

 

  • To claim Mortgage Interest Relief, the taxpayer must file a Tax Return and the taxpayer must be compliant with Local Property Tax (LPT) requirements.

 

 

 

 

Help to Buy Scheme

 

  • The Help to Buy Scheme has been extended for a further four years at the current rates until the end of 2029.

 

  • The aim of the scheme is to provide certainty for future homebuyers as well as the Irish property market.

 

  • The Help to Buy Scheme is a tax rebate available to first-time buyers to enable them to buy a newly built or self-built house or apartment provided the cost of that purchase is €500,000 or less.

 

  • With the extension of this scheme, first-time buyers of residential property will be able to continue to avail of (i) Income Tax and (ii) Deposit Interest Retention Tax refunds to help them purchase their home.

 

  • The scheme offers a tax refund to first-time buyers, with a maximum value of €30,000 or 10% of the property price, whichever is less.

 

  • The refund will be from the four tax years prior to when the application is made.

 

  • The refund will not include any refunds already claimed.

 

 

 

 

Pre-Letting Expenses Relief

 

  • Under Pre-Letting Expenses Relief, the current tax relief, capped at €10,000 per premises, for certain pre-letting expenditure will be extended for a further three years to 31st December 2027.

 

  • Section 97A TCA ‘97, which deals with rental expenses, provides that certain expenses incurred on a vacant residential property before its first letting following a period of non-occupancy are allowable as a deduction against rental income from that specific premises.

 

  • To be allowable, the pre-letting expenses (capped at €10,000 per property) must be incurred on a property that was vacant for a minimum of six months and is then let as a residential property on/before 31st December 2027.

 

  • These provisions allow for a deduction for certain pre-letting expenses which, otherwise wouldn’t be allowable.

 

 

 

 

 

RESIDENTIAL ZONED LAND TAX (RZLT)

 

  • As part of its strategy to meet an increased demand for housing, the Irish Government introduced the Residential Zoned Land Tax (RZLT), which is a new tax on land which is zoned for residential development and which has, in place, all the necessary services to develop housing.

 

  • It was originally introduced in Finance Act 2021 and stated that owners of lands which are zoned under the RZLT were to be taxed at a rate of 3% of the site’s market value from 1st February each year commencing in 2025.

 

 

  • Owners whose properties are subject to Local Property Tax and have a garden exceeding one acre will not be obliged to pay Residential Zoned Land Tax. They will, however, be required to complete and file a Tax Return containing details of the property.

 

 

  • Budget 2025 has provided landowners with an option to re-zone their land, based on the economic activity carried out on their land and to seek changes to the zoning maps in advance of the final maps being published on 31st January 2025.

 

 

  • In summary, Budget 2025 has announced a new process available to certain landowners to obtain an exemption from the tax in 2025 where their land should not be subject to the tax.

 

 

  • Budget 2025 has also introduced a twelve month deferral of the liability between the date planning permission was granted and the commencement date of the development

 

 

 

 

 

 

STAMP DUTY

 

 

New 6% Residential Rate

 

A new 6% rate of Stamp Duty has been introduced on residential properties from 2nd October 2024.

 

The stamp duty rates for residential properties will now be as follows:

 

  • 1% on consideration up to and including €1m

 

  • 2% on consideration over €1m and up to and including €1.5m

 

  • 6% on consideration over €1.5m

 

The existing stamp duty rates will continue to apply to instruments executed before 1st January 2025 on foot of a binding contract in place before 2nd October 2024.

 

 

 

 

10% rate for Bulk Purchases increased to 15%

 

  • Where a person acquires at least ten residential units during any twelve month period, the higher rate of stamp duty is being increased from 10% to 15%, with immediate effect.

 

 

  • The existing 10% rate will continue to apply to instruments executed before 1st January 2025 where a binding contract was in place before 2nd October 2024.

 

 

 

 

 

 

VACANT HOMES TAX (VHT)

 

  • A Vacant Homes Tax (VHT) was introduced by the Irish Government in Finance Act 2022 to encourage an increase in the supply of residential properties available for rent or purchase. As a further incentive, Budget 2025 has increased the rate of the VHT from five to seven times a property’s existing base Local Property Tax (LPT) liability.

 

 

  • This will take effect from 1st November 2024 i.e. the next chargeable period for Vacant Homes Tax.

 

 

  • VHT applies to any residential property which is occupied for less than 30 days in a twelve month period between 1st November and 31st October of the following year.

 

 

 

 

 

VALUE ADDED TAX (VAT)

 

 

VAT Rate on Heat Pumps

 

  • A reduction in the VAT rate for heat pumps to 9% is effective from 1st January 2025.

 

  • This applies to the supply and installation of heat pumps.

 

  • The heat pumps must meet specific technical standards, as outlined in the EU Directive.

 

  • The aim is to encourage homeowners to install heat pumps to support climate action.

 

 

 

 

VAT Rate for Gas & Electricity

 

  • The 9% rate of VAT on gas and electricity is to be extended until 30th April 2025.

 

  • The rate had been due to revert to 13½% on 1st November 2024.

 

  • The aim of this extension is to reduce the cost of living.

 

 

 

 

 

For full information on Budget 2025, please click https://www.gov.ie/en/publication/e8315-budget-2025/

 

 

 

 

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.

 

BUDGET 2024 – IRELAND

Best Irish Tax Advisors

Personal Tax, Business Taxes, Capital Gains Tax, VAT

 

Today, 10th October 2023, the Minister for Finance, Michael McGrath and Minister for Public Expenditure, NDP Delivery and Reform, Paschal Donohoe presented the 2024 Budget.  This article will summarise the main points under Personal Tax, Business Tax, VAT, Capital Gains Tax, Property Taxes, etc.

 

 

Budget 2024 tax measures feature a range of supports for individual and business taxpayers under the following headings:

 

 

PERSONAL TAX

 

  • All PRSI contribution rates will increase by 0.1% from 1st October 2024. There will be an increase of 0.1% in Employee and Employer’s PRSI contributions from 1st October 2024. Class A1 Employee PRSI will rise from 4% to 4.1%.  Employer’s PRSI will rise from 11.05% to 11.15% and the reduced rate of Employer’s PRSI for earnings of €441 per week or less will rise from 8.8% to 8.9%.

 

  • The standard rate band for Income Tax (i.e. the amount of income subject to tax at the 20% rate) will be increased by €2,000, meaning that the first €42,000 of a single individual’s income and the first €51,000 for married couples, with one earner, will be taxed at the 20% Income Tax rate.

 

  • The ceiling for the 2% USC rate will be increased from €22,920 to €25,760. The 4.5% rate of USC will be reduced to 4% and the reduced rate of 2% USC currently applying to full medical card holders as well as those individuals aged over seventy, whose total income does not exceed €60,000, will be extended to the end of 2025.

 

  • The Personal Tax Credit, the Employee Tax Credit and the Earned Income Tax Credit will each be increased from €1,775 to €1,875 for the tax year 2024 onwards.

 

  • The Home Carer tax credit will be Increased by €100, from €1,700 to €1,800.

 

  • The Single person child Carer tax credit will be increased from €1,650 to €1,750.

 

  • The Incapacitated Child Tax credit will be increased from €3,300 to €3,500.

 

  • The Sea-going Naval Personnel Tax Credit has been extended for a further year to 31st  December 2024.

 

  • The Rental Tax credit for principal private residence has been increased from €500 to €750 per year for 2024 or from €1,000 to €1,500 per jointly assessed couple (i.e. married couples or civil partners). Parents who pay for their student children in Rent-a-Room or digs accommodation can now claim relief for rent paid. This change has been backdated and will apply retrospectively to the years 2022 and 2023.  In order to qualify for this tax credit, the children must attend an approved course.

 

  • A temporary one year tax credit in relation to mortgage interest has been introduced for 2024.  It will apply at the standard Income Tax rate of 20%, subject to a maximum tax credit of €1,250 per property, on an outstanding mortgage balance on the taxpayer’s Principal Private Residence of between €80,000 and €500,000, as of 31st December 2022.  To claim the tax credit, the taxpayer must be compliant with Local Property Tax requirements and file a Tax Return.  The tax credit will be available for offset against the taxpayer’s Income Tax liability for the 2023 year of assessment.  Prorating of the relief will apply where the interest paid is less than twelve months.

 

  • The Company car Benefit-in-Kind relief introduced in Finance Act 2019 to apply from 1st January 2023 have been extended to 2024.  With effect from 1st January 2023, BIK on employer provided cars is calculated based the vehicle’s CO2 emissions.  The amount liable to tax as BIK is determined by (a) the original market value of the car, (b) the annual business kilometres driven and (c) the CO2 emission rate of the vehicle.  In March 2023, a temporary change was introduced to combat the negative impact of this new BIK rule on the employee’s net or take-home pay.  It provided for a reduction of €10,000 to the original market value of vehicles in categories A to D.  There is no reduction to Open Market Values for cars in the E category.  In addition, the highest business mileage band was reduced from 52,001 Kms to 48,001 Kms as part of that amendment.  These temporary universal measures have been extended to 31st  December 2024.

 

  • The Temporary Universal Relief of €10,000 applied to the Original Market Value of a company car, including vans, for vehicles in Category A-D is being extended to 31st December 2024.

 

  • The special Benefit-in-Kind rule on Electric Vehicles is being enhanced and extended. The current Original Market Value deduction of €35,000 will be extended until 31st December 2025. Along with the additional €10,000 introduced in Budget 2024, Electric Vehicles will see a deduction of up to €45,000 on the open market value.  The tapering of this discount will, therefore, be deferred by two years.  In summary, the current reduction of €35,000 in OMV will continue to apply for all EVs until the end of 2025, and will taper to €20,000 for 2026 and €10,000 for 2027.

 

  • The Department of Finance will be launching a public consultation on modernising share based remuneration.

 

  • It was confirmed that EU State aid approval to deliver the Finance Act 2022 amendments to the Key Employee Engagement Programme (KEEP) has been received and will be commenced by Ministerial order shortly. This will include an extension of the scheme until 31st December 2025 as well as doubling the lifetime company limit for KEEP shares to €6 million.  It will also enable the Capital Gains Tax treatment to apply to the buy back of KEEP shares by the company from a relevant employee, provided all the conditions are met.

 

 

 

BUSINESS TAX

 

  • In his Budget 2024 Statement, Minister McGrath reaffirmed Ireland’s commitment to the OECD’s Two Pillar Agreement to address the tax challenges arising from the digitalisation of the economy. The legislation to implement the 15% minimum tax rate under the OECD’s Pillar Two agreement will be published in the Finance Bill next week.  Under the BEPS 2.0 initiative, these rules require EU Member States to introduce a global minimum effective tax rate (ETR) of 15% for corporate/multinational groups with annual global turnover of in excess of €750 million. This minimum rate will apply in each jurisdiction in which the group operates.  The ETR will be calculated on adjusted financial accounting profits less tax expenses.

 

  • Minister McGrath also reaffirmed his commitment to introducing a participation exemption for foreign sourced dividends in Finance Bill 2024.

 

  • In his speech, the Minister confirmed that the R&D Tax Credit will be increased from 25% to 30% in respect of qualifying expenditure incurred in 2024. The first claims will be filed in 2025. There is a payment limit on the amount that can be paid to a claimant in the initial year of a claim. The Minister announced an increase in the payment threshold from €25,000 to €50,000 thereby doubling the amount of the R&D Tax Credit available for refund to the company, as part of its first year R&D Tax credit instalment.

 

  • The Accelerated Capital Allowances Scheme for Energy Efficient Equipment, which is available to companies and unincorporated businesses, will be extended for a further two years until 31st December 2025. The scheme allows for 100% Accelerated Capital Allowances to be claimed in year one, on capital expenditure on certain energy efficient equipment, used for the purposes of its trade, provided the qualifying conditions are met.

 

  • As you may remember Finance Act 2022 extended film relief to 31st December 2028. The Section 481 Film Corporation Tax Credit is a corporation tax credit of 32% of the qualifying costs of certain audiovisual productions. Budget 2024 increased in the current project cap for the film credit from €70 million to €125 million.  This is subject to EU State Aid approval.

 

  • Employment Investment Incentive Scheme (EIIS) provides Income Tax Relief for investment in qualifying small and medium sized businesses, provided qualifying conditions are satisfied. Budget 2024 standardised the minimum holding period required to obtain relief to 4 years and it doubled the limit on the amount on which an investor can claim such relief to €500,000.  It is expected that further changes to EIIS will be made in the Finance Bill to take into account amendments to the EU General Block Exemption Regulation (GBER).

 

  • Capital Gains Tax Retirement Relief applies on the disposal of business assets, farming assets and/or shares in certain family companies by an individual, aged fifty five years or over, provided certain qualifying conditions are met. A reduced Capital Gains Tax Relief is available where the individual is aged sixty six years and over. From 1st January 2025, that upper age limit for Capital Gains Tax Retirement Relief is to be extended to the age of seventy years.  In summary, the reduced relief which is available on disposals from age 66 onwards will now apply from age 70. There will also be a new limit of €10 million on the relief available for disposals to a child up until the age of 70 provided all the qualifying conditions are satisfied.

 

  • No changes to Revised Entrepreneur Relief were announced in the Budget.

 

  • A targeted new capital gains tax relief for individual angel investors in innovative start-ups, in line with the recommendation from the Commission on Taxation and Welfare, was announced today. The relief will be available to an individual who invests in an innovative start-up small and medium enterprise for a period of at least 3 years.  The investment by the individual must be in the form of fully paid-up newly issued shares costing at least €10,000 and constituting between 5 percent and 49 percent of the ordinary issued share capital of the company.  This relief will consist of a 16% rate of Capital Gains Tax (18% if invested through a partnership) on the disposal of qualifying investments, capped at twice the level of investment.  In other words, the gain to which this reduced CGT rate can apply is capped at 200% of the investment made.  Any gain above that will be liable to CGT at the standard rate of 33%. A lifetime gains limit of €3m will apply.   Further details will be available in the upcoming Finance Bill.  The scheme will include a certification process, carried out by Enterprise Ireland, to ensure the relief is targeted at innovative SMEs that can demonstrate financial viability and compliance with the requirements of the EU General Block Exemption Regulation (GBER).

 

 

PROPERTY

 

  • As you’re aware, Finance Act 2022 introduced a Vacant Homes Tax which applies to residential properties which are in use as a dwelling for less than thirty days in a twelve-month chargeable period. With effect from 1st November 2023, the rate will increase from three to five times a property’s existing base Local Property Tax liability.

 

  • The Minister announced a one year extension to the liability date for Residential Zoned Land Tax (RZLT) to facilitate engagement with the mapping process by affected landowners. RZLT was previously intended to be charged and levied from 1st February 2024 onwards. This has been deferred and will now apply from 1st February 2025.

 

  • A new temporary tax relief for small landlords will apply from 2024 to 2027. This Rented Residential Relief will provide relief at the standard rate of tax on a portion of the landlord’s rental income from residential properties.  Subject to certain conditions, €3,000 will be disregarded at the standard rate of tax in 2024.  The new relief will rise to €4,000 in 2025 and €5,000 in 2026 and 2027.  This will be equivalent to a tax credit of €600 in 2024, €800 in 2025 and €1,000 in 2026 and 2027.  The relief will be clawed back if the landlord removes the property from the rental market within four years of the initial claim.  To avail of the relief, the tenancies must be registered with the Residential Tenancies Board or with the public authority, where relevant.  In situations where the landlord owns multiple properties, the relief will be apportioned.  Where the property is jointly owned, the relief will be divided based on the percentage to which each owner is entitled.  Further information will be provided in the Finance Bill.

 

  • The Help-to-Buy Scheme is being extended until 31st December 2025. The relief takes the form of a repayment of Income Tax paid for the four years of assessment prior to making the application.  The scheme will be amended to make it more accessible to those purchasing properties through the Local Authority Affordable Purchase Scheme.  The affordable dwelling contribution received under the LAAP scheme can be used for the purpose of computing the 70% loan to value requirement of the Help to Buy Scheme.  This change will be implemented tomorrow, 11th October 2023.

 

  • The Defective Concrete Products Levy is being amended so that it will no longer apply to the pouring of concrete used to manufacture precast concrete products. A refund scheme will be introduced for those who paid the levy between 1st September and 31st December 2023.

 

 

 

AGRICULTURE

 

  • The flat rate VAT compensation rate for unregistered farmers will be reduced from 5% to 4.8% from 1st January 2024. This is a measure introduced to compensate unregistered farmers for the VAT they cannot claim on their farming purchases.

 

  • Consanguinity Relief (Stamp Duty) will be extended for a further five years to 31st December 2028. This reduced Stamp Duty rate of 1% applies to transfers of farmland between certain blood relatives.

 

  • The scheme of accelerated capital allowances, at 50% per annum over two years, for capital expenditure incurred by farmers on certain farm safety equipment will be extended for a further three years, to 31st December 2026. The expenditure must be certified by the Minister for Agriculture, Food and the Marine.

 

  • The Minister announced that the Income Tax Relief for leased land will be amended so that it only applies to land which has been owned for seven years. Currently, no ownership period condition exists for the relief to apply. This amendment is targeted at active farmers and will apply to lessors who acquire farmland from 1st January 2024. The change will require a lessor who purchases the farmland for market value on/after 1st January 2024 to have owned the land for a minimum of seven years before they are eligible to make a claim for Land Leasing Income Tax Relief.

 

  • From 1st January 2024, the aggregate lifetime limits have been increased from €70,000 to €100,000 for the following Agricultural Reliefs: Stock Relief for Young Trained Farmers, Relief for Succession Farm Partnerships and Young Trained Farmers’ Stamp Duty Relief.

 

  • The maximum Stock Relief for Registered Farm Partnerships will be increased from €15,000 to €20,000 for qualifying periods commencing on/after 1st January 2024.

 

 

VAT

 

  • With effect from 1st January 2024, the current VAT business registration thresholds will increase from €37,500 to €40,000 for services and from €75,000 to €80,000 for goods.

 

  • The 9% VAT rate for gas and electricity has been extended for an additional twelve months until 31st October 2024. It had been due to end on 31st October 2023.

 

  • The Minister announced that a public consultation will be launched by the Revenue Commissioners shortly on the modernisation of the VAT invoicing and reporting system. The digitisation of the VAT system is expected to be introduced in line with EU tax digitisation measures.

 

  • From 1st January 2024, the zero rate of VAT will apply to e-books and audiobooks.

 

  • From 1st January 2024, the zero rate of VAT will apply to the supply and installation of solar panels in schools.

 

  • From 1st January 2024, the total annual capped fund for the Charities VAT Compensation Scheme will be double to €10 million.

 

 

 

MISCELLANEOUS

 

  • No changes were announced in relation to the Capital Gains Tax rate, Capital Acquisitions Tax rate or the amount of the Capital Acquisitions Tax thresholds.

 

  • In accordance with the recommendation of the Commission on Taxation and Welfare, foster children will now be able to avail of the Group B Capital Acquisitions Tax lifetime tax free threshold (currently €32,500) based on their relationship to their foster parent. This amendment will be introduced in the Finance Bill.

 

  • The VRT relief for battery Electric Vehicles has been extended for a further two years to 31st December 2025. This applies to EVs valued up to €50,000.

 

  • The review of the Funds sector is ongoing.

 

  • Tax Relief available to taxpayers who donate items under the Heritage Item Donation Scheme in any one year will be amended to take into account an increase in the aggregate value of such items from €6 million to €8 million. The tax relief available is a credit of 80% of the market value of the heritage item donated.

 

 

 

For details of last year’s Budget, please click the link: BUDGET 2023 – Ireland – Accounts Advice Centre

 

 

 

 

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.

VAT on Emergency accommodation and Ancillary Services

VAT on Property Ireland

VAT Exemption – VAT Capital Goods Scheme

 

 

Today the Irish Revenue Commissioners published eBrief No. 197/22 in relation to emergency accommodation and ancillary services.  For full information, please click: https://www.revenue.ie/en/tax-professionals/tdm/value-added-tax/part03-taxable-transactions-goods-ica-services/Services/services-emergency-accommodation-and-ancillary-services.pdf

 

 

If you are providing Emergency Accommodation it is essential for you to consider the VAT implications.

 

 

The most important points are as follows:

 

  • The use of State owned property for emergency accommodation is outside the scope of VAT.

 

  • The supply of emergency accommodation in all/part of a house, apartment, bedsit or other similar establishment is exempt from VAT.

 

  • Accommodation in a hotel or guesthouse which is contracted to a State agency is considered to be an exempt supply of emergency accommodation provided the following two conditions are met: (i) it is provided exclusively as emergency accommodation and (ii) it must not available to the general public as guest or hotel accommodation.

 

  • The supply of accommodation in direct provision centres is also exempt from VAT as a supply of emergency accommodation.

 

  • Ancillary supplies relating to the supply of emergency accommodation will be treated as exempt from VAT. These include laundry, security, reception and administration services.

 

  • The Revenue Commissioners do not consider catering services to be ancillary to the supply of emergency accommodation. Therefore, catering services are liable to VAT at the appropriate VAT rate once the turnover from catering services exceeds, or is likely to exceed, €37,500 in any twelve month period.

 

  • Where there is a supply of emergency accommodation and catering services, the consideration payable must be apportioned between (a) the exempt emergency accommodation service and (b) the taxable catering service. This will ensure that the correct amount of VAT is calculated on the taxable supplies.  It is also important for accurately computing VAT deductibility on costs.

 

  • The business overheads should be apportioned between (i) taxable and (ii) exempt business activities. The VAT on costs associated with the exempt supply of emergency accommodation and ancillary services cannot be recovered. The VAT incurred on the costs of providing taxable catering services, however, are deductible in full.

 

  • If the person providing the accommodation has waived their exemption from VAT in relation to residential property acquired before 2nd April 2007 (i.e. apartments, houses, etc.) which are now used for the purposes of emergency accommodation then VAT at 23% (i.e. the current standard rate) will apply to such supplies.

 

  • For residential properties including houses, apartments, etc, that have already been used for VAT exempt residential lettings, no Capital Goods Scheme adjustment will arise if the property is then used as emergency accommodation. The reason being that the property was already used for VAT exempt purposes.

 

  • If, however, a property previously providing taxable supplies of hotel and guest accommodation is used for emergency accommodation, a Capital Good Scheme adjustment will be triggered. This could have serious VAT implications for the property owner (i.e. the holder of the capital good).

 

 

 

 

If you require further information on VAT issues, please contact us to make an appointment.

 

 

 

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.

 

BUDGET 2023 – Personal Taxes, Corporate Taxes, VAT

Tax Advisors and Accountants Dublin

Budget 2023 – Corporate Tax, Personal Taxes Global Mobility, Employment Taxes, SARP, FED, KEEP

 

 

Today, Minister for Finance, Paschal Donohoe T.D., and Minister for Public Expenditure and Reform, Michael McGrath T.D. presented Budget 2023.  We have summarised the key measures included in this “cost of living” Budget including Ireland’s headline Corporate Tax rate remaining unchanged at 12½%.  A number of welcome personal tax and global mobility employment tax measures to benefit Irish employees and international assignees include an extension to the Special Assignee Relief Programme (SARP),  to the Key Employee Engagement Programme (KEEP) and the Foreign Earnings Deduction (FED).   The key Corporate Tax measures include amendments to the R&D tax credit, the extension of the KDB as well as the extension of the film tax credit, subject to a commencement order.

 

 

GLOBAL MOBILITY & EMPLOYMENT

In Budget 2023, Minister Donohoe announced an extension to a number of existing personal tax reliefs including:

  • Special Assignee Relief Programme (SARP) is to be extended to the end of 2025.  The minimum income threshold for an employee to qualify for SARP is being increased from €75,000 to €100,000 for new entrants.  Existing claimants will not be affected by this change.  In other words, this higher qualifying threshold will not apply to current claimants availing of the relief.  For associated articles, please click SARP – 2023 Update – Accounts Advice Centre

 

  • Key Employee Engagement Programme (KEEP) is to be extended to the end of 2025.  The lifetime company limit for KEEP shares will be raised from €3 million to €6 million.  KEEP is also being modified to provide for the buy-back of KEEP shares by the company from the relevant employee.

 

  • Foreign Earnings Deduction (FED) which is a personal tax relief for employees who are tax resident in Ireland and who travel out of the State to temporarily carry out employment duties in certain qualifying countries was extended for a further three years to the end of 2025. FED provides relief from income tax on up to €35,000 of income.

 

  • Another significant development was the doubling of the Small Business Exemption from €500 to €1,000 effective from 2022. Employers will also be permitted to grant an employee two vouchers/non-cash awards in a single year, provided the cumulative value of the two vouchers does not exceed €1,000.

 

 

 

PERSONAL TAX

Key measures included in Budget 2023:

  • A significant increase in the Standard Rate Cut-Off Point to €40,000 for single individuals and €49,000 for married couples with one earner. This means that a single person can now earn an additional €3,200 before paying tax at the 40% Income Tax rate.

 

  • An increase of €75 in the Personal Tax Credit, Employee Tax Credit and the Earned Income Tax Credit (all currently set at €1,700). For the tax year 2023 onwards the new tax credits be each be €1,775

 

  • An increase of €100 in the Home Carer tax credit. From 2023 it will be increased to €1,700.

 

  • A reintroduction of the rent tax credit of up to €500 for renters in the private sector for 2023 to 2025. It will be possible to claim this tax credit on a retrospective basis in relation to rent paid in 2022.  One credit per person can be claimed per year.

 

  • The Sea-going Naval Personnel Tax Credit has been extended to the end of 2023.

 

  • An increase in the ceiling of the 2% USC rate from €21,295 to €22,920.

 

  • The exemption from the top rate of USC for medical card holders, and those aged over seventy years earning under €60,000 will continue beyond 2022. In other words, the reduced rate of 2% USC will be extended until the end of 2023.

 

  • There is no increase to Employer’s PRSI rates.

 

 

ENTERPRISE – Corporate Tax

The main corporate tax measures include amendments to the Research & Development tax credit and extensions to the Knowledge Development Box and film tax credit regimes:

 

  • The Temporary Business Energy Support Scheme (TBESS) was introduced to support trading businesses. The scheme will be open to businesses carrying on a Case I trade that are tax compliant and have experienced a significant increase in their natural gas and electricity costs. Businesses carrying on trading activities will be eligible for a refund of 40% on the increase in electricity and gas prices, subject to a monthly cap of €10,000 per trade.  Detailed information on the scheme has not yet been published, however, it is believed the scheme will operate by comparing the average unit price for the relevant period in 2022 with the average unit price for the corresponding period in 2021. If the increase in average unit price is more than 50% then the business will be eligible for the scheme. Businesses will be required to register for the scheme and to make claims within the required time limits.  This scheme is subject to State Aid approval from the EU.

 

  • Amendments will be made to the R&D tax credit regime with respect to how repayments are made under the scheme which will ensure the regime is regarded as a “qualifying refundable credit” for the purposes of the Pillar Two Model Rules. Currently the R&D tax credit is firstly offset against current and prior year corporate tax liabilities followed by repayment over three instalments. The current system is being changed to a new fixed three-year payment system. A company will have an option to call for payment of their eligible R&D Tax Credit or to request for it to be offset against other tax liabilities. In other words, the changes will enable taxpayer companies to call for the payment of their R&D tax credits in cash or for these to be offset against its tax liabilities in this three-year fixed period. The existing caps on the payable element of the credit are being removed. The first €25,000 of a claim will now be payable in the first year.  Transitional measures will be introduced for one year for those that already engaged in R&D activities and claiming the credit

 

  • An extension to the Knowledge Development Box regime for a further four years to 31st December 2026. Currently the KDB provides for a 6.25% effective rate of corporation tax on profits generated from exploiting certain assets, including patents and software developed through R&D activities carried out in Ireland. In preparation for the changes under the OECD Pillar Two agreement, the effective rate under the KDB regime is to be increased from 6.25% to 10%.  The policy document released by the Department of Finance states that the commencement of this rate will be determined by reference to international progress on the implementation of the Pillar Two Agreement but it is expected in 2023.

 

  • The extension of the Film Corporation Tax Credit until December 2028. Film relief is granted at a rate of 32% of qualifying expenditure which is capped at €70 million.

 

 

 

PROPERTY

 

Help-to-Buy Scheme

The scheme will continue at current rates for another two years and will expire on 31st December 2024

 

 

Vacant Homes Tax (“VHT”)

A VHT will apply to residential properties which are occupied for less than 30 days in a 12 month period.

Exemptions will apply where the property is vacant for “genuine reasons.”

The applicable tax rate is three times the existing local property tax (“LPT”) rate

 

 

Residential Development Stamp Duty Refund Scheme

The stamp duty refund scheme will continue until the end of 2025.

The stamp duty residential land rebate scheme allows for a refund of eleven-fifteenths of the stamp duty paid on land that is subsequently developed for residential purposes. was due to expire on 31 December 2022. It has been extended to the end of 2025.

 

 

Pre-letting Expenses on Certain Vacant Residential Properties

The limit for landlords claiming allowable pre-letting expenses is to be increased from €5,000 to €10,000.

The vacancy period is to be reduced from 12 months to 6 months.

 

 

Levy on Concrete Blocks, Pouring Concrete and other Concrete Products

A 10% levy was announced in response to the significant funding required in respect of the defective blocks redress scheme. A 10% levy will be applied to concrete blocks, pouring concrete, and certain other concrete products

This levy applies from 3rd April 2023.

 

 

 

VAT

 

9% VAT rate for hospitality and tourism sector

The 9% VAT rate currently in place to support the tourism and hospitality sectors will continue until 28th February 2023.

 

 

9% VAT rate on electricity and gas supplies

The temporary reduction in the VAT rate applicable to gas and electricity supplies (from 13.5% to 9%) will be extended to 28th February 2023.

 

 

Farmers’ Flat-Rate Addition

The flat-rate addition is being reduced from 5.5% to 5% in accordance with criteria set out in the EU VAT Directive.

This change will apply from 1st January 2023.

 

 

Zero-rated supplies

From 1st January 2023 VAT on newspapers, including digital editions will be reduced from 9% to 0%.

 

 

 

 

For further information, please click: https://www.gov.ie/en/publication/4de03-your-guide-to-budget-2023/

and

https://www.revenue.ie/en/corporate/press-office/budget-information/previous-years/2023/budget-summary-2023.pdf

 

 

 

 

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.

Taxation of crypto-assets transactions – Remittance Basis

 

On 27th April 2022 Revenue updated its guidance material to provide clarity on the tax treatment of transactions involving crypto-assets.  This latest publication also provides worked examples.

 

The terms “cryptocurrency” and “cryptocurrencies” are not defined.

 

The Irish Central Bank places cryptocurrencies, digital currencies, and virtual currencies into the same category of digital money. It is important to bear in mind, however, that although defined in this manner, these “currencies” are unregulated and decentralised which means that no central bank either guarantees them or controls their supply.

 

Throughout Revenue’s updated document the term “crypto-asset” is used, which includes cryptocurrencies, crypto-assets, virtual currencies, digital money or any variations of these terms.  Revenue state that the information contained in their most updated guidance is for tax purposes only.

 

Under Section TCA97 Ch4 s71–5, an individual who is resident in Ireland but not Irish domiciled is liable to Irish income tax in full on his/her/their income arising in Ireland, and on “non-Irish income” only to the extent that it is remitted to Ireland.

 

This is known as the remittance basis of taxation.

 

It’s important to keep in mind that the remittance basis of taxation does not apply to income from an office or employment where that income relates to the performance of the duties of that office or employment which are carried out in Ireland.

 

Section 29 TCA 1997 is the charging section for Capital Gains Tax.

 

s29(2) TCA 1997 states that a person who is Irish resident or ordinarily resident and is Irish domiciled is chargeable to Irish CGT on gains on all disposals (on his/her/their worldwide assets) arising in the year of assessment regardless of whether the gains are remitted to Ireland or not.

 

s29(4) TCA 1997 states that an individual who is Irish resident, or ordinarily resident,  but not Irish domiciled is chargeable on gains arising on disposals of Irish assets in the year of assessment as well as on remittances to Ireland in the year of assessment in respect of gains on the disposals of foreign assets.  In other words, an Irish resident/ordinarily resident but non domiciled individual is liable to Irish CGT on remittances in respect of gains arising on the disposal of assets situated outside the state.

 

From professional experience, the location of the crypto asset is often difficult to prove.

 

According to Revenue’s most recent publication:

“… where a crypto-asset exists ‘on the cloud’, it will not actually be situated anywhere and therefore, cannot be
viewed as ‘situated outside the State’.”

 

If the crypto-asset isn’t located anywhere and isn’t, therefore, considered to be a “disposal of an asset outside the state” then the remittance basis of taxation does not apply and the gain arising will be liable to Irish Capital Gains Tax based on the residency rules of the individual.

 

As you can see, it is very much the responsibility of the taxpayer to be able to prove the location where the gain arose on the disposal of the crypto-assets.

 

Revenue have outlined their record keeping provisions in relation to all taxes as follows: https://www.revenue.ie/en/starting-a-business/starting-a-business/keeping-records.aspx

 

In situations where the records are stored in a wallet or vault on any device including a personal computer, mobile phone, tablet or similar device, please be aware that these records must be made available to Revenue, if requested.

 

As with all taxes, full and complete records must be retained for six years in accordance with legislation. It is important to keep in mind that these provisions apply to all taxpayers, including PAYE only taxpayers.

 

 

For further information, please follow the link: https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-02/02-01-03.pdf

 

 

 

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.

 

Revenue’s updated guidance on Section 56 zero-rating of goods and services

 

 

Today, Revenue published e-Brief 45/22.  In it, the Irish Revenue Commissioners updated their guidance material in relation to the operation of the Section 56 authorisation regime to provide further clarity in relation to qualifying persons, imports as well as the cancellation of authorisations.

 

The section 56 authorisation enables the holder of such to receives supplies of goods and services in Ireland at the 0% rate of VAT.  This is known as a ‘56B’ authorisation.

 

Broadly speaking, a VAT registered entity is eligible to apply for a Section 56 authorisation where over 75% of their annual turnover is derived from qualifying sales including intra-community supplies of goods, exports and certain contract work.

 

The definition of a “qualifying person” is an accountable person whose turnover from zero-rated intra-Community supplies of goods, export of goods outside the EU and supplies of certain contract work equates to 75% or more of their total annual turnover for the twelve month period preceding the making of an application for Section 56 authorisation. (Section 52 FA 2021 amended the definition of “qualifying person” in section 56 VATCA 2010).

 

 

 

Start Up Situations

Previously, a person could only apply for a section 56 authorisation where they could demonstrate that they qualified for one in the twelve month period prior to making the application.  The updated Guidance material now includes an exception to this requirement for start-up entities, on an interim basis, provided certain criteria are met:

  1. their turnover from zero-rated intra-Community supplies of goods, exports and certain supplies of contract work will exceed 75% of their total turnover in the first twelve months of trading

  2. they satisfy all other conditions as set out under Section 56 and

  3. the start up entity is a subsidiary of, or is otherwise connected to a company that is in possession of a current Section 56 authorisation.

 

The third condition will cause difficulties for many start-up companies, since in many cases they are new individual companies with no related entities. As such, it would appear the start-up would be required to wait the full twelve months before making a VAT56B application.

 

 

 

 

Renewals of existing Authorisations

e-Brief 45/22 confirms that for renewals of existing valid authorisations, the turnover figure, from audited financial statements for an accounting year end falling within the twelve month period preceding the application, may be used.

 

 

 

Interaction with postponed VAT accounting arrangements

As Section 56 Authorisation allows the importation of goods at 0% VAT rate, the holder of a section 56 authorisation is, therefore, not permitted to use postponed accounting arrangements.

 

 

 

Cancellation of an Authorisation

The cancellation of a VAT56B arises where Revenue is not satisfied that there is a continuing entitlement to such authorisation.

 

Revenue will cancel the authorisation, by notice in writing, in circumstances where:

  1. the authorised person is no longer a qualifying person

  2. the information provided, or the declarations made when applying for the authorisation were proven to be materially false, incorrect, or misleading

  3. the authorised person fails to comply with the “Post authorisation obligations” outlined.

 

Where the authorisation is cancelled, a formal written notice will be issued to the accountable person outlining the grounds for cancellation.

 

 

Revenue can request documentation and proof from the accountable person in circumstances where it has reservations regarding the entitlement of that person to a Section 56 Authorisation.

 

The cancellation may be appealed to the Tax Appeals Commission.

 

 

 

For further information, please click: Section 56 Zero Rating of Goods and Services – [Section 56 Zero Rating of Goods and Services] (revenue.ie)

 

 

 

If you wish to make an appointment to discuss this area of tax, please email us at querie@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.

VAT treatment of Cancellation Deposits

 

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:

  1. Air France–KLM C-250/14 and Hop!–Brit Air SAS C-289/14 and
  2. MEO C-295/17 and Vodafone Portugal C-43/19

 

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:

  1. the supply didn’t take place because the customer has cancelled it.
  2. the cancellation was correctly recorded in the books and records of the supplier.
  3. the deposit was not refunded to the customer.
  4. the customer wasn’t given any other consideration, benefit or supply in lieu of that amount.

 

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

 

 

 

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 (Covid-19 and Miscellaneous Provisions) Bill 2021-Income Tax, Payroll Taxes, VAT

Best Personal Tax Advisors Dublin

Finance Bill – Income Tax, Corporation Tax, VAT, Employer and Payroll Taxes

 

The Finance (COVID-19 and Miscellaneous Provisions) Bill 2021 was published today.  The provisions contained in the Bill include amendments to existing supports which were announced in the Economic Recovery Plan in addition to the introduction of the Business Resumption Support Scheme.  These tax relief measures income Income Tax, Business/Corporation Tax, Employer and Payroll Taxes and VAT.

 

 

Reduced rate of VAT (9%) for the hospitality sector

Section 6 of the Bill amends section 46 VATCA 2010 to provide for the extension of the reduced 9% VAT rate until 31st August 2022 in relation to the following services:

  • Restaurant and catering services
  • Guest and holiday accommodation
  • Entertainment services to include admissions to cinemas, theatres, museums, fairgrounds, amusement park and sporting facilities
  • Hairdressing
  • The sale of certain printed matter including brochures, maps and programmes.

 

In summary, the reduced 9% VAT rate for the tourism sector has been extended from 31st December 2021 to 31st August 2022.

 

 

Employment Wage Subsidy Scheme (EWSS)

The Employment Wage Subsidy Scheme (EWSS) is a scheme that subsidises the cost of getting employees back to work.

The extension of the scheme should provide reassurance to businesses affected by the pandemic and enable them to plan for the months ahead.

 

Section 2 of the Bill amends the Employment Wage Subsidy Scheme (Section 28B of the Emergency Measures in the Public Interest (Covid-19) (No.2) Act 2020) to provide for the following changes:

  1. the extension of the Employment Wage Subsidy Scheme (EWSS) until 31st December 2021.
  2. the retention of the enhanced subsidy rates up to 30th September 2021.
  3. the retention of the qualifying criteria of a 30% reduction in turnover or customer orders threshold.
  4. An increase in the reference period to assess eligibility for the scheme from six to twelve months with effect from 1st July 2021.

This employer/payroll tax scheme requires that employers have valid tax clearance to enter the EWSS and that they maintain this tax clearance for the duration of the scheme.

 

 

Covid Restrictions Support Scheme (CRSS) 

The COVID-19 Restrictions Support Scheme (CRSS) was introduced by the Finance Act 2020.

It provided support for businesses which had to temporarily cease as a result of public health guidelines.

At such time as the affected businesses are allowed to re-open, those claimants will have to exit this scheme.

As some of those businesses will remain financially affected, the new measures introduced in the Finance (COVID-19 and Miscellaneous Provisions) Bill 2021 published today will extend the scheme. In addition, there will be an enhanced re-start payment for businesses exiting the scheme equal to up to three weeks at double rate of payment, subject to a €10,000 cap.

 

Sections 3 and 4 of the Bill amend the Covid Restrictions Support Scheme (CRSS) and provide for the extension of the specified period until 30th September 2021.

 

Section 4 of the Bill provides for the enhanced restart week payment scheme.  The level of payment a business may claim on reopening, following the restrictions, will depend on the actual date that business reopens.

  • For restart weeks between 29th April to 1st June 2021, the restart payment will equate to two weeks at double the normal CRSS rate subject to a cap of €5,000, being the maximum weekly amount.
  • For restart weeks between 2nd June to 31st December 2021, the restart payment will equate to three weeks at double the normal CRSS rate subject to a cap of €10,000, being the maximum weekly amount.
  • In all other cases, the standard rate of one week at the normal CRSS rate will apply, subject to a cap of €5,000, being the maximum weekly amount.

 

Please be aware:

  • According to Revenue’s guidelines, an eight week deadline applies to the submission of enhanced restart week payment claims.
  • A business can qualify for (a) the double restart week payment or (b) the triple restart week payment once.
  • The Minister for Finance has the power to extend this scheme to 31st December 2021 by order.

 

 

Business Resumption Support Scheme (BRSS)

Section 5 of the Bill includes a new section, section 485A TCA 1997, which makes provision for a new Business Resumption Support Scheme (BRSS)

 

The main features of the scheme are as follows:

 

  • BRSS is available for affected self-employed individuals and companies who carry on a trade, the profits from which are chargeable to Income Tax or Corporation Tax under Case I of Schedule D.
  • It is also available to persons who carry on a trade in partnership (Income Tax), and any trading activity carried on by charities and sporting bodies.
  • To qualify, businesses must be able to prove that their turnover is reduced by 75% in the reference period (i.e. 1st September 2020 to 31st August 2021) as compared with 2019 but it will be a later period if the business commenced trading on or after 26th December 2019.
  • Qualifying taxpayers will be able to claim an amount equal to three times the amount as derived by 10% of their average weekly turnover during the reference period (i.e. 1st September 2020 to 31st August 2021) up to a maximum of €20,000 and 5% thereafter subject to a cap of €15,000.
  • Please be aware that these payments will be treated as an advance credit for trading expenses.
  • If the business was set up before 26th December 2019 the claim will be calculated based on its actual average weekly turnover in the period starting on 1st January 2019. For example, if the business was established after 1st January 2019, then the claim will be based on the period from the actual commencement date up to 31st December 2019.
  • If the business was established between 26th December 2019 and 10th March 2020 the claim will be based on the actual average weekly turnover arising between the date of commencement and 15th March 2020.
  • If, however, the business activity commenced between 10th March 2020 and 26th August 2020 then the claim will be based on the actual average turnover generated between the date of commencement and 31st August 2020.
  • The individual, company or persons carrying on a partnership must have an up to date Tax Clearance Certificate in order to make a valid claim under this scheme.
  • They must also be VAT compliant.
  • They must not be entitled to make a claim under the CRSS Scheme in relation to any week that includes 1st September 2021 and the business must be actively trading, with the intention of continuing to do so.
  • Those making a claim must register on ROS and file a declaration that they satisfy the necessary conditions to avail of BRSS.
  • Please be aware that the names of BRSS claimants can be published on the Revenue’s website.

 

 

Stamp Duty measures for the cumulative purchase of ten or more residential properties

Section 13 of the Bill gives statutory effect to the Financial Resolution that was passed on 19th May 2021 and inserts section 31E in the SDCA 1999, thereby imposing a 10% stamp duty rate on the acquisition of certain residential properties (houses and duplexes but excluding  apartments) where an aggregate of ten or more units is acquired during a twelve month period by a single corporate entity or individual.

Section 14 of the Bill introduces a provision which provides for an exemption from the new 10% rate of stamp duty in situations where the residential units are leased to local authorities for certain social housing purposes.

 

 

Tax Debt Warehousing

Section 7 of the the Finance (COVID-19 and Miscellaneous Provisions) Bill 2021 inserts a new section 28D into the Emergency Measures in the Public Interest (Covid-19) Act 2020 which provides for the warehousing of EWSS overpayments received by employers.

Sections 8, 9 ,10, 11 and 12 of the Bill give effect to the extension of the Debt Warehousing Scheme for refunds of Temporary Wage Subsidy Scheme (TWSS) payments, Employer PAYE liabilities, Income Tax, VAT and PRSI:

 

This scheme will have three periods:

  • Period 1 (the “Covid-19 restricted trading phase”) will run from 1st July 2020 to 31st December 2021.
  • Period 2 (the “zero interest phase”) – will run from 1st January 2022 until 31st December 2022.  No interest will be levied on warehoused EWSS tax from Period 1.
  • Period 3 (the “reduced interest phase) –will run from 1st January 2023 until the relevant tax is repaid to Revenue. interest will be levied at a rate of 3% per annum on the Period 1 warehoused relevant tax, from 1st January 2023.

In circumstances where an employer does not meet the conditions for debt warehousing then (i) the zero interest and (ii) reduced interest rates will no longer apply.  Instead the 8% rate will be imposed.

 

In summary, the extension of the Debt Warehousing Scheme relates to refunds of Temporary Wage Subsidy Scheme (TWSS) payments, PAYE, Income Tax, VAT and PRSI.

 

 

 

For full and complete information, please follow the link: https://data.oireachtas.ie/ie/oireachtas/bill/2021/89/eng/initiated/b8921d.pdf

 

 

 

lease 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.

New VAT measures to be introduced on 1st July 2021

 

 

From 1st July 2021 there will be major changes including:

 

  • The current distance sales thresholds will be abolished.
  • All B2C sales of goods will be taxed in the EU Member State of destination.
  • The Mini One Stop Shop will be extended to include the B2C supply of goods in circumstances where those goods are shipped from one EU Member State to consumers in another EU Member State.  It will become the One Stop Shop.
  • Existing thresholds for intra-Community distance sales of goods will be abolished and replaced by a new EU wide threshold of €10,000.
  • The current VAT exemption at importation of small consignments up to €22 will be abolished.
  • A new special scheme for distance sales of goods imported from third countries of an intrinsic value up to a maximum of €150 will be created called the Import One Stop Shop (IOSS).
  • The IOSS will enable goods to be imported into the EU without the need for import VAT.  Instead VAT will become due in the country of the consumer. This can be paid through the monthly IOSS return and will only be applied to consignments of less than €150 in value.

 

 

 

1. The extension of the VAT Mini One Stop Shop (MOSS) to the One Stop Shop (OSS)

 

The Mini One Stop Shop (MOSS) has been in existence since 2015 and currently only covers the supply of telecommunications, broadcasting and electronic services from business to non-business customers (B2C) services within the EU.

 

Prior to the introduction of MOSS, it was possible for a business to have a VAT registration obligation in several jurisdictions.  By opting to use MOSS, however, that business is able to report its sales for all EU member states via one single quarterly return made to one Member State thereby notifying the Revenue Authorities in that jurisdiction of TBE sales in other EU Member States as well as facilitating the payment of VAT.  There are currently two types of MOSS scheme in existence: one for businesses established within the EU and the other for those established outside the EU.

 

From 1st July 2021, MOSS will become the One Stop Shop (OSS).

 

The scope of transactions covered by this declarative system will be extended to all types of cross-border services to the final consumers within the EU as well as to the intra-EU distance sales of goods and to certain domestic supplies which are facilitated by electronic interfaces.

 

The choice of the EU Member State in which a business can register for the One-Stop-Shop will depend on where they are established and whether they have one or more fixed establishments within the EU.

 

The use of the VAT One Stop Shop procedure will be optional.

 

Those businesses who opt for the procedure will only be required to submit a single quarterly return to the tax authorities of the country of their choice, via a dedicated OSS web portal. They will be required to apply the VAT rates applicable in the consumer’s country.

 

If the OSS is not availed of, then the supplier will be required to register in each Member State in which they make supplies to consumers.

 

Businesses will be required to follow certain rules, including the sourcing and retaining of documentary evidence in relation to where the customer is located in order to determine the country in which the VAT is due.

 

In summary, from 1st July 2021, the MOSS Scheme will become the One Stop Shop and will include the following: (i) B2C supplies of services within the EU other than TBE services, (ii) B2C Intra-EU distance sales of goods, (iii) Certain domestic supplies of goods which are facilitated by electronic platforms/interfaces and (iv) Goods imported from third countries and third territories in consignments of an intrinsic value up to a maximum value of €150.

 

 

 

 2. Current distance selling thresholds will be abolished.

 

For the intra-EU distance sales of goods, the thresholds amounts of €35,000 to €100,000 within the EU will be abolished.

 

Currently a supplier who sells to consumers from other EU member states by mail order is obliged to register for VAT in the country to which the goods are delivered once the threshold amount has been reached.

 

From 1st July, however, the current place of supply threshold of €10,000 for Telecommunications, Broadcasting and Electronic services will be extended to include intra-Community distances sales of goods.

 

This €10,000 threshold will cover cross-border supplies of TBE services as well as the intra-Community distance sales of goods but will not apply to other supplies of services.  This will result in a requirement to register for VAT in multiple jurisdictions, where the total EU supplies of goods and TBE services to consumers exceed €10,000 per annum.

 

To avoid this obligation the EU OSS scheme can be availed of.

 

In situations where the value of the sales does not exceed or is unlikely to exceed this threshold amount of €10,000, then local VAT rates may be applied instead of the VAT in the country of the consumer.  In other words, in such circumstances an Irish business can charge Irish VAT on its supplies.

 

In summary, from 1st July 2021, the individual EU Member State’s distance selling thresholds will be abolished and replaced with an aggregate threshold of €10,000 for all EU supplies.  Please be aware that this exemption threshold will not apply on a State by State basis nor will it apply to separate income streams.  It is calculated taking into account all TBE services and intra-community distance sales of goods in all EU states.

 

 

 

3. VAT exemption at importation of small consignments of a value of up to €22 will be removed

 

Currently, imports of goods valued at less than €22 into the EU are not liable to VAT on importation. From 1st January 2021 the low value consignment stock relief for goods valued at €22 or below will be abolished resulting in all goods being imported into the EU now being liable to VAT.

 

For consignments of €150 euros or below, however, a new import scheme will apply. The seller of the goods or, in the case of non-EU retailers, the agent, will only be required to charge VAT at the time of the sale by availing of the Import One Stop Shop.  If they decide not to opt for this scheme, they will be able elect to have the import VAT collected from the final customer by the postal or courier service.

 

 

 

 

4. Special provisions where online marketplaces/ platforms facilitating supplies of goods are deemed for VAT purposes to have received and supplied the goods themselves i.e. deemed supplier provision

 

Over the last number of years, there has been considerable growth in online marketplaces and platforms providing B2C supplies of goods within the EU.  Currently, however, this environment is difficult to monitor and as a result, businesses established outside the EU are slipping through the VAT net.

 

From 1st July Special provisions will be introduced whereby a business facilitating sales through the use of an online electronic interface will be deemed, for VAT purposes, to have received and supplied the goods themselves – this will be known as the “Deemed Supplier” Provision.

 

In other words, the online marketplace / platform provider will be viewed as (a) buying and (b) selling the underlying goods and will, therefore, be required to collect and pay the VAT on relevant sales.

 

Digital marketplaces will be responsible for collecting and paying VAT in relation to the following cross-border B2C sales of goods they facilitate:

  1. On the importation of goods from third countries by EU or non-EU sellers to EU consumers in consignments of an intrinsic value not exceeding €150 and/or
  2. On intra-EU sales of goods by non-EU sellers to EU consumers of any value. This also applies to domestic supplies of goods.

 

The payment and declaration of VAT due will be made by the Electronic Interface through the One Stop Shop system for Electronic Interfaces.

 

The Import One Stop Shop (IOSS) will apply to supplies made via an Electronic Interface where this online market/platform facilities the importation of goods from outside the EU.

 

The deeming provision will not apply in situations where the taxable person only provides payment processing services, advertising or listing services, or redirecting/transferring services in circumstances where the customer is redirected to another online market/platform and the supply is concluded through that other electronic interface.

 

Online Markets/Platforms will also be required to retain complete documentation, in electronic format, in relation to their sellers’ transactions for the purposes VAT audits/inspections.

 

The application of this provision is mandatory for traders/taxable persons.  The use of the other schemes, however, will be optional.

 

 

 

 

5. The introduction of the Import One Stop Shop

 

There is currently a VAT exemption in relation to the importation (from outside the EU) of consignments valued at less than €22.  From 1st July this exemption will be abolished and as a result, all goods imported into the EU will be liable to VAT.

 

The current customs duty exemption covering distance sales of goods imported from third countries or third territories to customers within the EU up to a value of €150 remains unchanged providing the trader declares and pays the VAT, at the time of the sale, using the Import One Stop-Shop.

 

For Non EU based suppliers there are two options:

  1. They must either register for IOSS through an EU established intermediary or,
  2. They can register for IOSS directly if the country where they are established has a mutual assistance agreement with the EU.

 

With regard to the appointment of an intermediary for the purposes of IOSS, please be aware that:

  1. A taxable person cannot appoint more than one intermediary at the same time.
  2. It is possible for an EU established supplier to appoint an intermediary to represent them.

 

The IOSS will facilitate traders registering and declaring import VAT due in all Member States through a single monthly return in the Member State in which they have registered for the Import One Stop Shop scheme.

 

Where the IOSS is used, the supplier will charge VAT to the customer at the time of the supply and, as a result, the goods will not be liable to VAT at the time of importation.  The VAT collected by the supplier will then be submitted through their monthly IOSS return.

 

The use of this scheme is not mandatory.

 

As the supplier/taxable person will only be required to register for IOSS in one Member State this will considerably reduce the administrative burden involved in accounting for VAT. After registration for IOSS, the supplier will be issued an IOSS identification number and this should expedite customs clearance.

 

If, however, the IOSS Scheme is not availed of, the supplier will be able to use another simplification procedure for the purposes of importing goods at a value not exceeding €150 whereby the import VAT may be collected by the postal services, courier company, shipping/customs agents, etc. from the customer, and the operator will then report and pay the VAT over to the relevant Revenue Authority on monthly basis.  This special arrangement will only apply where both conditions are met: (i) the IOSS has not been availed of and (ii) where the final destination of the goods is the Member State of importation.

 

The special arrangement allows for a deferred payment of VAT on the same basis.

 

In summary, the purpose of the IOSS is that suppliers who import goods into the EU can declare and pay the VAT due on those goods through the Import One Stop Shop in the member state where they have registered for the scheme.