There are no changes to the income tax rates, band or tax credits.
A household charge of €100 on residential properties is being introduced in 2012. Certain categories will be exempt from the charge i.e. properties in ‘ghost estates’ on a prescribed list. The charge will be levied on properties held on 1 January each year and the 2012 charge must be paid by 31 March 2012. This charge will be replaced by a charge on property values from 2014 onwards.
From 1 January 2012 deposit interest retention tax (DIRT) will be increased from 27% to 30%.
Mortgage Interest Relief
For first time buyers who took out their mortgage between 2004 and 2008, the rate of mortgage interest relief is being increased to 30% for the tax years 2012 to 2017. First time buyers who purchase a property in 2012 get mortgage interest relief at 25% and non-first time buyers will get mortgage interest relief at 15%. Mortgage interest relief will be abolished by 2018.
From 2013 employees paying tax via the PAYE system will be required to pay PRSI on rental and investment income.
With effect from 1 January 2012 the current 50% employer PRSI relief on employee pensions will be abolished.
The condition for an individual to be an Irish citizen in order to be liable to the domicile levy is to be removed. Currently the domicile levy applies to an individual who is both Irish domiciled and an Irish citizen. This amendment will ensure that tax exiles cannot avoid the domicile levy by renouncing their Irish citizenship.
Universal Social Charge (USC)
From 1 January 2012 the USC will be operated on a cumulative system. In addition, the lower exemption threshold will be increased from €4,004 to €10,036.
Property Based Tax Incentives
The Minister has abandoned the proposals from Budget 2011 dealing with the phasing out of legacy property tax reliefs following the Economic Impact Assessment.
However with effect from 1 January 2012 a property relief surcharge of 5% will be imposed on investors with an annual gross income in excess of €100,000. The property relief surcharge will apply on the amount of income sheltered by the property reliefs in a given year.
Section 23 relief will not be restricted or terminated for investors with gross income of less than €100,000.
Currently individuals with a pool of unclaimed accelerated capital allowances can carry these forward for offset against future rental income until fully utilised. Going forward accelerated capital allowances can only be claimed within the tax life of the particular investment. In cases where the tax life has ended before 1 January 2015 no unused accelerated capital allowances can be carried forward into 2015.
Approved Retirement Funds (ARF’s)
The annual imputed distribution from ARF’s for the year ended 31 December 2012 has been increased from 5% to 6%. This applies to ARF’s or multiple ARF’s exceeding €2m.
The tax levied on the transfer of an individual’s ARF on death to the individual’s child aged over 21 will be increased from 20% to 30%.
Personal Retirement Savings Accounts (PRSA’s)
Vested PRSA’s are now treated the same as ARF’s for the purpose of the annual imputed distribution. This will include the increased 6% deemed distribution for vested PRSA’s with assets in excess of €2 million.
There will be no change to the 12.5% rate of corporation tax.
R&D Tax Credit
The R&D tax credit currently applies to incremental expenditure with reference to a fixed base year of 2003. The Minister announced that the first €100,000 of qualifying R&D expenditure will benefit from the 25% R&D tax credit on a volume basis without the requirement to refer to the 2003 base year spend. The tax credit will continue to apply to incremental R&D expenditure in excess of €100,000.
The outsourcing limits for sub-contracted R&D costs are being increased to the greater of 10% of total costs (or 5% in the case of sub-contracting to third level institutions) or €100,000.
In addition, companies in receipt of the R&D tax credit will have the option to use a portion of the credit to reward key employees who have been involved in the development of R&D.
The 60% rebate which was available to employers in respect of statutory redundancy payments will be reduced to 15%.
The existing exemption from corporation tax and capital gains tax for start-up companies has been extended to include start-up companies which commence trading in 2012, 2013 and 2014.
Capital Gains Tax (CGT)
For disposals made after 6 December 2011 the rate of CGT has been increased from 25% to 30%.
Budget 2012 introduced a new incentive for property purchased between 7 December 2011 and 31 December 2013. If a property is purchased during this period and retained for at least 7 years no CGT will arise on any gain attributable to that 7 year period.
The Minister also announced the modification of CGT retirement relief in order to encourage a timely transfer of farm and businesses. Full details of the amendments to the relief will be announced in Finance Bill 2012.
The rate of stamp duty on non-residential property has been reduced from 6% to 2% in respect of instruments executed after 6 December 2011.
Consanguinity relief (50% reduction in stamp duty) on transfers of non-residential property within families will be abolished from 1 January 2015.
Capital Acquisitions Tax (CAT)
For gifts or inheritances taken after 6 December 2011 the rate of CAT will be increased from 25% to 30%. The current Group A tax free threshold is being reduced from €332,084 to €250,000 and will apply to gifts or inheritances taken after 6 December 2011. The current Group B and Group C thresholds remain unchanged.
With effect from 1 January 2012 the standard rate of VAT will be increased from 21% to 23%.
With effect from 1 January 2012 there will be increased motor tax rates.