On 12th October 2021 the Irish Government announced the introduction of a Digital Games Tax Credit, i.e. a refundable Corporation Tax Credit available to digital games development companies.
On 21st October, Section 33 of the Finance Bill introduced section 481A TCA 1997 in relation to the new tax credit for the digital gaming sector which provides relief at a rate of 32% of the qualifying expenditure incurred in the development of digital games (i.e. the design, production and testing of a digital game) up to €25 million.
In other words, the credit of 32% will be on the lower of:
In order to qualify for the relief, the minimum expenditure per project is €100,000.
The digital gaming corporation tax credit will be available up to 31st December 2025.
This tax credit is available to companies who are resident in Ireland, or who are EEA resident and operate in Ireland through a branch or an agency.
To qualify for this tax credit, the digital game must be issued with one of two types of Certificate from the Minister for Tourism, Culture, Arts, Gaeltacht, Sport and Media:
A digital games development company may not make a claim for the tax credit unless it has been issued with either an interim or a final certificate.
If a company has been issued with an interim certificate, it can claim the tax credit within twelve months of the end of the accounting period in which the qualifying expenditure is incurred.
Relief will not be available for digital games produced mainly for the purposes of advertising or gambling.
A digital game development company will be required to sign an undertaking in respect of “quality employment” which is similar to the requirements contained in section 481 TCA 1997 for tax relief for investment in films.
A claimant company will not be allowed to qualify for any additional tax relief under Section 481 Film Relief or the R&D tax credit.
As the credit will require EU state aid approval, it is to be introduced subject to a commencement order.
The Finance (Covid-19 and Miscellaneous Provisions) Bill 2021 has extended the Employment Wage Subsidy Scheme (EWSS) until 31st December 2021.
It also amended the comparison periods for determining eligibility for EWSS for pay dates from 1st July 2021.
The main criterion for eligibility is that employers must be able to prove that they were operating at no more than 70% of either (a) turnover or (b) customer orders received for the period 1st January to 30th June 2021 as compared with 1st January to 30th June 2019. It must also be able to clearly demonstrate that this disruption was caused by Covid19.
In other words, an employer must be able to show, to the satisfaction of Revenue Commissioners, that their business is expected to suffer a 30% reduction in turnover or customer orders, which was due to Covid19.
Simultaneously, Revenue introduced a new requirement for employers to submit a monthly Eligibility Review Form (ERF) on ROS. The ERF requires (a) data relating to actual monthly VAT exclusive turnover or customers order values for 2019 in addition to actual and projected figures for 2021 for all relevant businesses as well as (b) a declaration.
The initial submission should be made between 21st and 30th July 2021 and by 15th of every month from August onwards.
On 15th of every month during the operation of this scheme, employers will be required to provide the actual results for the previous month, together with a review of the original projections they provided so as to ensure they continue to remain valid.
The eligibility for EWSS must be reviewed on the last day of each month. If the business is deemed ineligible, then that business must de-register for EWSS from the following day.
If, however, the situation changes, then the business can re-register again.
The following subsidy rates, based on employee’s gross pay per week, will continue to apply for the months of July, August and September 2021 as follows:
For further information please visit: https://www.revenue.ie/en/employing-people/ewss/how-to-claim-for-employees-and-subsidy-rates.aspx
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.
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:
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:
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.
Please be aware:
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:
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:
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.
For full and complete information, please follow the link: https://data.oireachtas.ie/ie/oireachtas/bill/2021/89/eng/initiated/b8921d.pdf
The Registrar of Companies has decided to extend the filing deadline for companies with an Annual Return Date falling on 30th September 2020 or later until Friday, 11 June 2021.
The extension of the deadline from 28th May 2021 was in recognition of difficulties being experienced when trying to file Annual Returns in the run-up to the filing deadline, which the CRO are currently working to resolve.
For further information, please click the link: https://www.cro.ie/en-ie/About-CRO/Latest-News/filing-extension?
From 21st May 2021 Revenue will recommence their assessment of the tax clearance status of businesses.
Please be aware that this may result in the rescinding of the tax clearance status of businesses that are currently in receipt of the EWSS and/or the CRSS. It is essential to check the status of your tax clearance as your business may becoming ineligible to receive further payments under these schemes until the compliance issues concerned are fully resolved.
If Revenue have contacted you to remind you of your requirement to file outstanding returns or to address other compliance issues in order to retain your tax clearance status, please make sure you do so as a matter of urgency.
In summary, businesses which are reliant on the EWSS and/or the CRSS should take immediate action by contacting Revenue and addressing the outstanding issues.
Revenue has confirmed that the extended ROS Pay and File deadline is Wednesday, 17th November 2021.
For self assessment Income Taxpayers who file their 2020 Form 11 Tax Return and make the appropriate payment through the Revenue Online System in relation to (i) Preliminary Tax for 2021 and/or (ii) the balance of Income Tax due for 2020, the filing date has been extended to Wednesday, 17th November 2021.
This extended deadline will also apply to CAT returns and appropriate payments made through ROS for beneficiaries who receive gifts and/or inheritances with valuation dates in the year ended 31st August 2021.
To qualify for the extension, taxpayers must pay and file through the ROS system.
In situations where only one of these actions is completed through the Revenue Online System, the extension will not apply. As a result, both the submission of tax returns and relevant payments must be made on or before 31st October 2021.
Revenue published Tax and Duty Manual Part 29-02-03 – Research and Development (R&D) Tax Credit today.
These updated guidelines clarify Revenue’s treatment of rental expenditure as well as including information on the treatment of subsidies received under (i) the Temporary Wage Subsidy Scheme (TWSS) and (ii) the Employment Wage Subsidy Scheme (EWSS).
According to previous guidance material on this matter issued on 1st July 2020 Revenue’s position was that “rent is expenditure on a building or structure and is excluded from being expenditure on research and development by section 766(1)(a) TCA 1997”.
Since then, Revenue’s position has been the source of continuous discussion and debate with many disagreeing with Revenue’s interpretation of the treatment of rent in relation to R&D claims.
Clarity had been sought from Revenue with regards to their position on rent in relation to both historic and new claims for Research and Development tax relief.
In this latest update, Revenue has clarified that rent will qualify in such circumstances where “the expenditure is incurred wholly and exclusively in the carrying on of the R&D activities.”
According to Paragraph 4.2 of the updated Revenue Guidance Manual:
“In many cases expenditure incurred on renting a space or facility, which is used by a company to carry on an R&D activity, may be expenditure that is incurred “for the purposes of”, or “in connection with”, the R&D activity but will not constitute expenditure incurred wholly and exclusively in the carrying on of the R&D activity. The eligibility of rental expenditure incurred by a company will relate to the extent to which it is incurred wholly and exclusively in the carrying on of the R&D activities. Where the nature of the rented space or facility is such that it is integral to the carrying on of the R&D activity itself then it is likely that the rent can be shown to be more than merely “for the purposes of” or “in connection with” the R&D activity.”
Therefore, it is possible for rental expenditure to be included as part of an R&D tax relief claim but only where that rented building is deemed to be integral to the carrying on of R&D activities. According to Revenue’s guidance material, an example of a rental expense that may be considered qualifying expenditure might relate to the rental of a specialized laboratory used solely for the purposes of carrying out R&D activities. This is contrasted with the rental of office space necessary to house an R&D team, but which is not deemed to be integral to the actual R&D activity. In this case, this rent would not be treated as eligible expenditure.
Revenue have confirmed that this position will only apply for accounting periods commencing on or after 1st July 2020.
Revenue’s Manual has also been updated to include:
For further information, please follow the link: https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-29/29-02-03.pdf
As part of the Budget 2021, the Chancellor, Rishi Sunak, has provided for two temporary first-year capital allowances: (i) the Super Deduction and (ii) the Special Rate allowance, to apply over the next two years to boost investment and productivity levels in the UK economy.
For expenditure incurred between 1st April 2021 and 31st March 2023, companies can claim a Super Deduction in the form of a first-year relief of 130% on new plant and machinery fixed assets. This Super Deduction will apply to capital expenditure on “main pool” plant and machinery incurred by companies between 1st April 2021 and 31st March 2023, i.e. on plant and machinery that would usually qualify for 18% writing down allowances on a reducing balance basis. Remember, the Super Deduction is only for companies and cannot be claimed by sole traders or in professional partnerships.
Also, it is not available for items with a long life i.e. more than 25 years, or integral features within a building, or solar panels otherwise known as special rate pool items.
In summary, if a company spends £10,000 on qualifying items of plant and machinery within the specified timeframe, it will be able to reduce its taxable profits by £13,000. It is important to keep in mind that currently the company may be in a position to claim a 100% deduction using the Annual Investment Allowance, therefore, by availing of the Super Deduction Allowance the company will receive an additional benefit of 30% of the qualifying expenditure.
Examples of what might qualify include:
The Special Rate allowance provides relief at 50% of the qualifying cost in the first year. The balance then returns to the normal special rate pool to be written down at the usual 6% rate on a reducing balance basis in future years.
The ‘SR allowance’ covers new plant and machinery including integral features in a building and long life assets. Special rate expenditure broadly includes the following:
The following restrictions, however, apply:
The £1 million rate of the Annual Investment Allowance will be extended to 31st December 2021. From 1st January 2022, however, it is expected to revert to the previous limit of £200,000. This allowance provides relief of 100% on expenditure qualifying for capital allowances in the tax year of assessment in which the expenditure is actually incurred.
It is important to keep in mind that a company cannot claim the Annual Investment Allowance as well as the Super Deduction on the same amount of qualifying expenditure. The Annual Investment Allowance should be considered in situations where the Super Deduction is not available including the following three scenarios:
For all companies in a position to claim it, the Super Deduction will be more financially beneficial than claiming the Annual Investment Allowance with regard to main pool asset purchases.
For smaller companies it may be beneficial to claim the Annual Investment Allowance rather than the Special Rate Allowance on relevant assets, except where the total expenditure incurred on special rate pool assets exceeds the threshold amount of £1m.
Unlike the Annual Investment Allowance, there is no limit on the amount of capital investment that can qualify for either (i) the Super Deduction or (ii) the Special Rate allowance. Therefore, there are clear incentives for businesses to bring forward their investment plans to take advantage of these first year allowances.
When an asset on which a Super Deduction or Special Rate Allowance was claimed is disposed of, the consideration will be subject to a balancing charge. In other words, as the first year allowances are not pooled for capital allowances purposes, the proceeds from the disposal of relevant qualifying assets will be treated as taxable income.
If the disposal of the assets, on which a Super Deduction was previously claimed, occurs in a chargeable period that ends on or before 31st March 2023, the balancing charge will be equal to the disposal value multiplied by the relevant factor of 1.3 i.e. 130% of the sales proceeds. If, however, the disposal occurs on or after 1st April 2023 then the balancing charge will equal the actual sales consideration.
If the chargeable period straddles 1st April 2023 (i.e. where a chargeable period commences before 1 April 2023 and the disposal takes place after 1 April 2023) then the relevant factor is apportioned based on the number of days before 1st April 2023.
Similar rules apply to the 50% Special Rate Allowance.
Finally, if the full deduction cannot be used by the business for offset against its taxable profits then an allowable loss will be generated. This can:
From 1st July 2021 there will be major changes including:
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:
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:
With regard to the appointment of an intermediary for the purposes of IOSS, please be aware that:
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.
There are two main types of director: a proprietary director who owns more than 15% of the share capital of the company and a non-proprietary director who owns less than 15% of the share capital of the company.
In general, a director is deemed to be a ‘chargeable person’ for Income Tax purposes. This means that he/she is obliged to file an Income Tax Return every year even in situations where his/her entire income has already been taxed at source through the PAYE system.
Non-proprietary directors, however, as well as unpaid directors, are excluded from the obligation to file an annual income tax return.
A Proprietary Director must also comply with the self-assessment regime which means he/she has a requirement to make payments on account to meet his/her preliminary tax obligations. In situations where these payments are not made by the due date, the director is exposed to statutory interest at a rate of approximately 8% per annum.
A late surcharge applies in circumstances where the Director’s Income Tax Return is filed after the due date. The surcharge is either (a) 5% where the tax return is delivered within two months of the filing date or (b) 10% where the tax return is not delivered within two months of the filing date. It is important to keep in mind that the surcharge will be calculated on the director’s income tax liability for the year of assessment before taking into account any PAYE deducted from his/her salary at source. It should also be remembered that the Director can only claim a credit for the PAYE deducted if the company has in fact paid over this tax in full to Revenue.
Proprietary directors are not entitled to an Employee Tax Credit. In general, this rule, subject to some exceptions, also applies in relation to a spouse or family member of a proprietary director who is in receipt of a salary from the company. Proprietary Directors and their spouse and family members may, however, be entitled to the Earned Income Credit.
The director’s salary, just like any other employee’s salary, is an allowable deduction for the purposes of calculating Corporation Tax.
According to the Social Welfare and Pensions (Miscellaneous Provisions) Act 2013, a director with a 50% shareholding in the company will be insurable under Class S for PRSI purposes. For proprietary directors with a shareholding of less than 50% of the company the PRSI treatment will be established on a case by case basis.
Where the director has a ‘controlling interest’ in the company, he/she will not be treated as ‘an employed contributor’ for PRSI purposes on any income or salary he/she receives from the company. Therefore, all amounts paid by the company to the director will be insurable under Class ‘S’ meaning that he/she will be treated as a self-employed contributor and liable to PRSI at 4%. Employers’ PRSI will not be applicable to his/her salary.
Where a Director is insured under Class A, PRSI is payable on his/her earnings at 4% and up to 10.75% Employer’s PRSI by the employer/company.
Even if you are not considered to be Irish resident by virtue of the 183 day rule or the “Look Back” rule, if you are in receipt of a salary from an Irish limited company you will be required to pay Income Tax to the Revenue Commissioners. If, however, you are resident in a country with which Ireland has a Double Taxation Agreement and your income is liable to tax in both countries, you should be able to claim relief on the tax you paid in Ireland.