The Minister for Finance, Michael Noonan, announced the Jobs Initiative on 11 May last which is designed to stimulate job creation.
It includes the following measures in relation to business and employment taxes:
Abolition of employers PRSI on share based remuneration
Temporarily halving the lower rate of employers PRSI for certain employees
Amending the R&D tax credit regime to enhance flexibility in how companies account for the tax credit
Temporarily reducing the 13.5% VAT rate to 9% in respect of tourism related services
Share based remuneration
The Finance Act 2011 introduced the application of employers PRSI on share based remuneration. This has now been abolished and is effective from 1 January 2011.
Employers who have already remitted the PRSI due from 1 January 2011 to date will now be entitled to a refund of same.
Please be aware however that the employee PRSI charge of 4% and the universal social charge of up to 7% will still be applied to share based remuneration.
Reduced Rate of Employers PRSI
The lower rate of employers PRSI of 8.5% which applies to earnings which do not exceed €356 a week will be halved to 4.25%. This amendment is effective from 1 July 2011 and will apply until 31 December 2013.
Employer Job (PRSI) Incentive Scheme
The above existing scheme which allows for an exemption from employer PRSI where a person who has been unemployed for at least 6 months is taken on in a new full time job is to continue until the end of this year.
R & D Tax Credit
The Minister intends to amend the current R&D tax credit legislation in the forthcoming Finance Bill to enhance flexibility for companies in how they account for the credit. He did not however give any insight into the means by which this is to be achieved.
The Minister announced a reduction in the 13.5% VAT rate to 9% in respect of services relating to the tourism sector i.e. restaurant and catering services, hotel and holiday accommodation, and other services. The reduction is effective from 1 July 2011 and will expire at the end of 2013.
The 9% rate will apply mainly to restaurant and catering services, hotel and holiday accommodation and various entertainment services such as admissions to cinemas, theatres, museums, fairgrounds, amusement parks and the use of sporting facilities. In addition, hairdressing and printed matter such as newspapers, maps and programmes will be charged at the new rate. Businesses will need to consider their IT systems, menus, price lists and other changes necessary to accommodate the new rate of VAT. Further details of the activities qualifying for the new rate will be contained in the Finance Bill.
The Minister announced that a levy of 0.6% will apply to the capital value of assets under management in pension funds established in the State. This will apply for four years from 2011 to 2014. The market value of same will be determined on 1 January 2011
Tax Relief on pension contributions
The Minister referred to the commitment to the EU/IMF to reduce income tax relief on pension contributions from next year. The recently published update to the Stability Programme mentioned a 33% rate of tax relief on pension contributions. The Minister committed to examining tax relief on pension contributions in the context of the results of the Comprehensive Review of Expenditure currently being undertaken by the Minister for Public Expenditure and Reform.
As always, we will need to wait for the Finance Bill for the finer detail. If you have any queries on how the above will affect you or your business, please contact me on 021 4310266 or firstname.lastname@example.org.