Independent Tax Consultants Ireland

Business Tax Advice. Corporation Tax. Research & Development (R&D), Capital Gains Tax (CGT)

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

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

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

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

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

6. 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.

7. CGT Changes – Amendments to Retirement Relief.

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

9. Corporation Tax Changes

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

VALUE ADDED TAX (VAT)

• With effect from 1^st 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 1^st 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 30^th April 2025.

• From 1^st 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 1^st 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 31^st December 2025.  The amendment to the lower limit of the highest mileage band has also been extended until 31^st 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.

2. 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.

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

These changes were to come into effect on 1^st 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 1^st 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 31^st 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.

2. 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 1^st 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.

Personal Tax Advice – Budget Ireland 2025

Understand the Income Tax measures of Budget 2025 at a glance.

Today, the Minister for Finance, Jack Chambers T.D., and the Minister for Public Expenditure, NDP Delivery and Reform, Paschal Donohoe T.D., announced the details Budget 2025.  As anticipated, Budget 2025 introduced several tax measures affecting individuals, families and households.  This article will focus on the tax measure introduced by Budget 2025, specifically under the Income Tax or Personal Tax heading.

Standard rate band increased by €2,000

• The income tax standard rate band has been increased by €2,000 for all earners, resulting in the band for single individuals increasing from €42,000 to €44,000

• The band for Single, Widowed or Surviving civil partners, qualifying for the Single Person Child Carer Credit was raised from €46,000 to €48,000,

• The band for married couples/civil partners with one earner will be increased from €51,000 to €53,000 for the 2025 tax year onwards.

Increase in Tax Credits

• The Personal Tax Credit, Employee Tax Credit and Earned Income Credit will all be increased from €1,875 to €2,000.

• The Home Carer Tax Credit has increased from €1,800 to €1,950.

• The incapacitated child tax credit has been increased by €300 from €3,500 to €3,800.

• The Single Person Child Carer Tax Credit will be increased from €1,750 to €1,900.

• The Blind Tax Credit will be increased from €1,650 to €1,950.

• The Dependant Relative Tax Credit will rise from €245 to €305.

• The Rent Tax Credit has been increased for the tax years 2024 and 2025. It will be €1,000 per year for individuals and €2,000 per annum for a jointly assessed couple (married or civil partners).

• The Sea-going Naval Personnel Tax Credit has been extended for five years to 31^st December 2029.

Other Personal Tax Reliefs

• 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.

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

• 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 31^st 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.

• Various farming related Tax Reliefs have been extended until 31^st December 2027 including (a) Enhanced Stock Relief for Registered Farm Partnerships, (b) Stock Relief for Young Trained Farmers as well as (c) General Stock Relief.

• 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 31^st December 2025.  The amendment to the lower limit of the highest mileage band has also been extended until 31^st December 2025.   Therefore, the highest mileage band is entered into at 48,001km.

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 1^st 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.

Universal Social Charge

Various amendments to the USC system were introduced in Budget 2025.

• The 4% rate of USC will be reduced to 3%.

• The 2% USC rate band will increase by €1,622, from €25,760 to €27,382.

From 1^st January 2025, the USC Rates and Bands will be:

• €0 – €12,012 – 0.5%

• €12,013 – €27,382 – 2%

• €27,383 – €70,044 – 3%

• Balance – 8%

Self-employed income over €100,000 will be liable to a 3% surcharge i.e. 11%

PRSI

• All classes of PRSI will increase by 0.1% percentage point from 1^st October 2024.

• From 1^st October 2024 the minimum annual PRSI contribution is €650.

• There will be a further 0.1 percentage point in October 2025. From 1^st October 2025, (i) the employee PRSI rate will increase from 4.1% to 4.2%, (ii) the employer PRSI rate will increase from 11.15% to 11.25% and (iii) the rate will rise from 8.9% to 9% in situations where the weekly income is €496 or less.

• From 1st October 2025, the self employed PRSI rate will increase from 4.1% to 4.2%.

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.