Business Tax Ireland

Taxes on Corporate Income – Pillar Two – Ireland

 

Ireland has legislated for the Pillar Two rules with effect from:

  • 1st January 2024 for the Income Inclusion Rule and
  • 1st January 2025 for the Under Taxed Profits Rule

 

The Pillar Two rules provide that income of large groups is taxed at a minimum effective tax rate of 15% on a jurisdictional basis.

 

These rules apply where the annual global turnover of the group exceeds €750m in two of the previous four fiscal years.

 

Ireland signed up to the OECD Two Pillar agreement in October 2021.

 

The new minimum tax rate, which is effective from the 1st of January 2024, sees an increase from the previous corporate tax rate of 12.5% to 15%, for certain large companies.

 

Ireland will continue to apply the 12½% corporation tax rate for businesses outside the scope of the agreement, i.e. businesses with revenues of less than €750 million.

 

There are special rules for intermediate parent entities and partially owned parent entities as well as certain exclusions.

 

It is understood that Revenue estimates approximately 1,600 multinational entity groups with a presence in Ireland will come in scope of Pillar 2.

 

In addition, the EU Minimum Tax Directive (2022/2523) provides the option for Member States to implement a Qualified Domestic Top-up Tax (QDMTT).

 

A domestic top-up tax, introduced in Ireland from 1st January 2024, allows the Irish Exchequer to collect any top-up tax due from domestic entities before the application of IIR or UTPR top up tax.

 

The QDTT paid in Ireland is creditable against any IIR or UTPR top up tax liability arising elsewhere within the group.

 

It is important to keep in mind that IIR or UTPR top up tax may not apply in relation to domestic entities in circumstances where the domestic top-up tax has been granted Safe Harbour status by the OECD.

 

As there will be separate pay and file obligations and standalone returns for IIR, UTPR and QDTT, Revenue guidance material will be provided, in due course, in relation to all administrative requirements.

 

 

 

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

 

CORPORATION TAX– ACCELERATED CAPITAL ALLOWANCES – IRELAND

 

For taxation purposes, Capital Allowances are deemed to be amounts a business can deduct from its profits in respect of “qualifying Capital Expenditure” which was incurred on the provision of certain assets (i.e. plant and machinery) used for the purposes of the trade.

 

As depreciation is not allowable for the purposes of calculating tax, Capital Allowances allow the taxpayer to write off the cost of the asset over a certain period of time.

 

The 2018 Finance Act introduced the following amendments to Capital Allowances as follows:

 

 

 

Accelerated Capital Allowances for Energy-Efficient Equipment

 

Section 285A TCA 1997 came into effect on 9th October 2008 to provide relief to companies purchasing energy efficient equipment for the purposes of their trade.

 

This Capital Allowance Relief was provided in the form of a deduction which equalled 100% of the value of the equipment in the year of purchase provided certain conditions were met (see Schedule 4A TCA 1997).  In other words, this relief reduces the taxable profits, in year one, by the full amount incurred on the purchase of the equipment.

 

Finance Act 2017 amended the definition of “relevant period.”  As a result, the qualifying period was extended until 31st December 2020.

 

On 14th February 2018, Revenue issued eBrief No. 22/2018 confirming that the Tax and Duty Manual has been updated to reflect the extension of the relief to 31st December 2020.

 

Section 17 FA 2018 contains further amendments to the scheme.

 

It sets out criteria as to which products qualify for accelerated wear and tear allowances.

 

To qualify for the relief, the equipment must be new.

 

Section 17 FA 2018 makes reference to the Sustainable Energy Authority of Ireland (SEAI) being allowed to establish and maintain a list of energy-efficient equipment under the scheme.  In summary, in order for energy equipment to qualify for the accelerated capital allowances, it must appear on the SEAI list.  These amendments remove the requirement for government to issue Statutory Instruments, on a regular basis, setting out the criteria for “qualifying assets.”

 

This section of legislation comes into operation on 1st January 2019.

 

Energy-efficient equipment that has not been approved but is deemed to be plant and machinery can of the normal wear and tear allowances being 12½% over an eight year period.

 

 

 

 

Capital allowances on childcare and fitness centre equipment and buildings

 

Section 12 Finance Act 2017 introduced a new accelerated capital allowances regime for capital expenditure incurred on the purchase of equipment and buildings used for the purposes of providing childcare services or fitness centre facilities to employees.

 

The section amended the Taxes Consolidation Acts 1997 to include two new sections: s285B TCA 1997 and s843B TCA 1997.

 

The Relief was subject to a Commencement Order which was never issued.

 

Section 19 of Finance Act 2018 amends Parts 9 and 36 as well as Schedule 25B of the TCA 1997.

 

The scheme commences from 1st January 2019.

 

Finance Act 2018 amends the definition of “qualifying expenditure” making the relief available to all employers, as opposed to just those carrying on a trade which wholly/mainly involves childcare services or the provision of facilities in a fitness centre.   In other words, the relief will be available to all employers since the restriction that the relief is only available to trades consisting wholly/mainly of the provision of childcare services or fitness facilities has been removed.

 

 

Where a person has incurred “qualifying expenditure” on “qualifying plant or machinery” a 100% wear and tear allowance is allowed in the year in which the equipment is first used in the business under Section 285B TCA 1997.

 

 

Section 843B TCA 1997 allows employers to claim accelerated industrial buildings allowances of 15% for six years and 10% for the seventh year in relation to capital expenditure incurred on the construction of “qualifying premises” i.e. qualifying expenditure on a building or structure in use for the purpose of providing childcare services or fitness centre facilities to employees of the company.

 

 

The facilities must be for the exclusive use of the employees and can be neither accessible nor available for use by the general public.

 

 

The relief will not be available to commercial childcare or fitness businesses nor will it be available to investors.

 

 

 

 

 

Accelerated Capital Allowances for gas vehicles and refuelling equipment

Section 18 Finance Act 2018 introduced accelerated allowances for gas vehicles and refuelling equipment which provides for an accelerated capital allowances rate of 100% on “qualifying expenditure” incurred between 1st January 2019 and 31st December 2021.  This section amends the Tax Consolidation Act of 1997 by inserting Section 285C.

 

Qualifying expenditure is defined as capital expenditure incurred during the relevant period on the provision of “qualifying refuelling equipment” or “qualifying vehicles” used for the purposes of carrying on a trade.

 

 

“Qualifying refuelling equipment” includes the following:

  • a storage tank for gaseous fuel
  • a compressor, pump, control or meter used for the purposes of refuelling gas vehicles or
  • equipment for supplying gaseous fuel to the fuel tank of a gas vehicle.

 

The equipment in question must be new and installed at a gas refuelling station

 

 

“Qualifying vehicle” is defined as a gas vehicle, which is constructed or adapted for:

  • the conveyance of goods or burden of any description
  • the haulage by road of other vehicles or
  • the carriage of passengers.

 

 

The vehicles in question must be new and do not include private passenger cars.

 

 

This section comes into operation on 1st January 2019.

 

 

 

 

Disclaimer This article is for guidance purposes only. Please be aware that it does not constitute professional advice. No liability is accepted by Accounts Advice Centre for any action taken or not taken based on the information contained in this article. Specific, independent professional advice, should always be obtained in line with the full, complete and unambiguous facts of each individual situation before any action is taken or not taken.  Any and all information is subject to change.

 

 

Working in Ireland – Part 1

Introduction

Your residency affects your tax treatment in Ireland.

As an Irish resident, ordinarily resident and Irish domiciled individual you will be taxed on your worldwide income wherever it arises.

You will be taxed on all Irish and foreign source income in full and where possible you will be entitled to a tax credit for any foreign tax paid on foreign source income.

Residence

You will be considered to be Irish resident if you are present in the state for:

a) 183 days during the tax year in question or

b) 280 days or more over a period of two consecutive tax years.

Notwithstanding b), if you are present in Ireland for 30 days or less in a tax year you will not be treated as resident for that year unless you elect to be resident.

If you are not tax resident in the year of arrival under the above rules, you may elect to be tax resident for the year of arrival.

If you have any queries relating to whether or not you should elect to become Irish resident, please contact us on 01 872 8561

Ordinarily Resident

You will be considered ordinarily resident if you have been resident in the state for the previous three consecutive years.

Regardless of whether or not you are actually resident in the state in the fourth year, you will be considered ordinarily resident for the fourth year.

If you leave Ireland, you will cease to be ordinarily resident when you have been non resident for three consecutive years. You will not be considered to be ordinarily resident from the fourth year.

Domicile

Domicile is a general legal concept.

It is relevant to you in relation to how certain foreign source income will be taxed in Ireland.

Under Irish law, every person acquires a domicile of origin at birth. In most cases this is the father’s domicile, however, in situations where the parents are unmarried or the father has died prior to the individual’s birth, the domicile of the mother is taken.

Your domicile can change if you acquire a domicile of choice.

For more information, please contact us on 01 872 8561

Tax Treatment

As a non resident, but ordinarily resident and Irish domiciled individual you will be taxed on all Irish and foreign sourced income in full.

The following income is exempt:

a) Income from a trade or profession, all duties of which are exercised outside Ireland.

b) Income from an office or employment, all duties of which are performed outside the state.

c) Foreign income providing it does not exceed a threshold amount of €3,810 in a tax year.

As a non resident, non Irish domiciled but ordinarily resident individual, you will be taxed on all Irish source income in full and foreign source income to the extent that it has been remitted into Ireland.

Again, the following income is exempt:

a) Income from a trade or profession, all duties of which are exercised outside Ireland.

b) Income from an office or employment, all duties of which are performed outside the state.

c) Foreign income providing it does not exceed a threshold amount of €3,810 in a tax year.

As non resident, non domiciled and non ordinarily resident, you will be taxed on Irish source income in full and on foreign source income in respect of a trade, profession, employment or office where the duties are exercised in Ireland.

As an Irish resident and ordinarily resident but non Irish domiciled individual, you will be taxed on Irish source income in full and on remittances of foreign source income.

Should you have any queries in relation to residency, ordinary residency or domicile, we would be delighted to discuss them with you.