There are no changes to the income tax rates, band or tax credits.Local Property Tax
With effect from 1 July 2013 a local property tax (LPT) will apply and some of the main features of this tax are as follows:
- Revenue will be responsible for administering and collecting this tax.
- It will operate through a self-assessment system which will require property owners to ascertain the market value of their property. Revenue guidance will be provided or a competent valuer can be used.
- The initial valuation is set until 2016.
- The LPT will be charged at 0.18% of the market value of the property up to €1 million and at 0.25% on amounts above €1 million.
- The market value of the property will be divided into bands with the initial band covering €0 - €100,000. Thereafter bands of €50,000 width will apply up to €1 million. The LPT will be calculated by applying the tax rate to the mid-point of the band. No band will apply where the property is valued at over €1 million.
- There will be an exemption to the end of 2016 for new or previously unused properties which are bought during the period from 1 January 2013 to 31 December 2016.
- First time buyer purchases in 2013 will also be exempt until 2016.
- Returns must be submitted to Revenue by 7 May 2013. There will however be a 3 week extension for electronic filers.
- The household charge ceases with effect from 1 January 2013.
- The NPPR ceases with effect from 1 January 2014.
- Any unpaid arrears together with interest and penalties on the NPPR and the household charge will remain as a charge on the relevant property.
From 1 July 2013 this benefit will be taxable for all claimants.
Charitable donations with effect from 1 January 2013 from all individual doners will be treated the same with the tax relief being repaid to the particular charity at a new blended rate of 31%. An annual donation limit of €1 million will apply.
PRSI & Universal Social Charge
The weekly PRSI exemption of €127 has been removed.
The minimum level of annual PRSI for self-employed contributors will increase from €253 to €500.
From 2013 PRSI will be extended to all other sources of income i.e. dividends, rental income, deposit interest for certain public servants and from 2014 for all employees.
From 1 January 2013 the reduced rate of USC which applies to medical card holders and individuals aged over 70 will be discontinued for anyone with income in excess of €60,000 per annum.
With effect from 1 January 2013 Top Slicing Relief will no longer be available on ex-gratia lump sums where the non-statutory element exceeds €200,000.
The employer rebate for statutory payments which was previously reduced from 60% to 15% will be abolished from 2013.
DIRT & Exit Tax
From 1 January 2013 deposit interest retention tax (DIRT) will be increased to 33%. Exit taxes will be increased to 33% for annual payments and 36% for others.
BIK on Preferential Loans
For BIK purposes the specified interest rate for preferential loans, other than home loans, will be increased from 12.5% to 13.5%. There will be a decrease in the home loan rate from 5% to 4%.
An extension of the general rate of stock relief of 25% and 100% for young trained farmers to 31 December 2015.
A widening of the definition of registered farm partnerships to include other production partnerships such as beef.
The introduction of CGT relief for farm restructuring transactions. The commencement of this relief is subject to the receipt of EU State Aid approval.
A reduction in the Flat Rate Addition from 5.2% to 4.8% with effect from 1 January 2013.
Tax relief on pension contributions will continue at the marginal rate of income tax.
Pension levy to be abolished from 2014.
There will be pre-retirement access to funded AVC’s. Individuals will be permitted for a 3 year period from the passing of the Finance Bill to withdraw up to 30% of these funds. The withdrawals will be subject to tax at the individual’s marginal rate of tax.
From 2014 tax relief for pension contributions will be capped in respect of schemes which deliver income of more than €60,000 per annum.
The Employment and Investment Scheme (EIIS) has been extended from 2014 to 2020.
Film Relief has been extended to 2020. However the operation of the scheme will be changed to a tax credit model in 2016.
Corporate Tax Rate
The Government’s commitment to the 12.5% standard tax rate was affirmed.
Assistance for Small and Medium Enterprises (SME)
Certain measures targeting the SME sector have been announced, including the following:
- Reforming the 3 year corporation tax relief for start-up companies so as to allow such companies to carry forward any unused relief to offset against future profits. This is subject to the maximum amount of relief in any one year not exceeding the qualifying amount of employers PRSI in that year.
- Increase in VAT cash receipts basis threshold from €1m to €1.25m.
- Amending the close company surcharge de minimus level – increase to €2,000 from €635.
- Amending the R&D tax credit by doubling the initial spend eligible for credit from €100k to €200k (2003 base year).
- Rebate on diesel for tax compliant hauliers effective from 1 July 2013.
- Extending the foreign earnings deduction, for work related travel to countries beyond the BRICS: Algeria, Congo, Egypt, Ghana, Kenya, Nigeria, Senegal and Tanzania.
Ireland reached agreement with the US in respect of compliance with FATCA, (Foreign Account Tax Compliance Act) which broadly seeks to facilitate the reporting of Irish accounts held by US persons and the reciprocal exchange of information regarding US financial accounts held by Irish residents.
Real Estate Investment Trusts
The Budget has announced that a tax regime is to be introduced to facilitate the establishment of real estate investment trusts (or REITs) in Ireland. This form of structure is likely to be modelled on similar structures in the US and UK.
REITs provide a tax efficient property investment vehicle whose aim is to provide an after tax return for investors similar to that of a direct investment.
Agri Food Industry
The agri food industry features in the Tax Reform Plan, with extensions announced to stock relief, the broadening of the definition of registered farm partnerships. However, a reduction to the VAT flat – rate addition was also announced in the Budget.
An accelerated capital allowance scheme is to be put in place to encourage the construction of aviation specific facilities, such as hangers and ancillary facilities to attract additional aviation sector organisations to the country. The scheme is to be available for a five year period with tax relief on the qualifying expenditure to apply over a seven year period.
- Increase in rates of CGT and CAT from 30% to 33% (effective from 6 December 2012).
- CAT thresholds decreased by 10% (effective from 6 December 2012).
- Beer/spirits: +10c per measure.
- Wine: + €1 per 75cl bottle.
- Cigarettes: + 10c per pack.
- VRT & motor tax: increase and adjustment in bands from 1 January 2013.
- Carbon tax extended to solid fuels from 1 May 2013.
If you wish to discuss any of the above please contact Noel Murphy or Una Beecher on 021 4310266.