Like the playing of national anthems before big sporting events, it has become a time-honoured tradition for a Minister for Finance to include in his budget speech every year a commitment to retaining Ireland’s 12.5% Corporation Tax rate. Given recent developments not surprisingly the Minister for Finance had to change his script for this afternoon’s speech.
The Minister in referencing the approach taken also confirmed the introduction of significant corporation changes for large companies with regard to the limitation on interest relief and reverse anti hybrid rules.
The Minister also referenced the expected significant employment growth of 8%, with 400,000 more jobs expected in 2022.
A summary of the main tax features in this afternoon’s budget are as follows:
Covid Related Measures
- EWSS will remain in place until 30 April 2022, on a graduated basis.
- No change for October and November
- 2 tier structure for December, January and February of €151.50 and €203
- Flat rate subsidy in March and April 2022 of €100.
- Closed to new employers from January 2022.
- The tax debt warehousing scheme is extended to allow self-assessed income taxpayers with a material interest in the employer company to warehouse Income Tax liabilities related to their Schedule E income. More detail is required to understand how this will work in practice.
- Petrol and diesel to increase from midnight tonight.
- Carbon Tax increases from €33.50 to €41 per tonne (effective from Budget Day for auto fuels and 1 May 2022 for other fuels).
- A tax exemption of €200 in respect of personal income for households who sell electricity to the grid.
- VRT rates increases announced of between 1% and 4%. The €5,000 relief for Battery Electric Vehicles (BEV) is to be extended to the end of 2023.
- Changes to Accelerated Capital Allowance Scheme for energy efficient equipment announced.
- 12.5% Corporate Tax rate retained for SMEs and companies/groups with a turnover of less than €750m per annum.
- 15% effective rate to be introduced from 2023 for the larger companies.
- Company start up tax relief to be extended, and increased to 5 years from commencement.
- New Tax credit relief at 32% for the digital gaming sector on eligible expenditure up to a maximum of €25m per project.
- ATAD measures will be introduced in the Finance Bill to include a 30% limit on deductible interest expense and introduction of anti-reverse hybrid rules.
Value Added Tax
- Reduced 9% VAT rate retained for the hospitality sector to the end of August 2022.
- Decrease in the Farmers Flat rate addition from 5.6% to 5.5%.
- Income Tax deduction for home expenses for those working at home of 30% of vouched expenses for heat, electricity and broadband in respect of days worked at home.
- €1,500 increase in the Income Tax Standard Rate Band (single and married with one income).
- €50 increase in personal tax credit, employee tax credit and earned income credit.
- USC second rate band (2%) increased by €608 to €21,295.
- Reduced rate of USC for medical card holders is being extended for a further year.
- BIK exemption for Electric Cars extended to 2025 on a tapered basis:
- 2023 – OMV reduced by €35,000
- 2024 – OMV reduced by €20,000
- 2025 – OMV reduced by €10,000
- No changes announced.
- 3% Zoned Land Tax to be introduced in Finance Bill 2021 payable on the market value of the land, with a 2 year lead in time for land zoned before 1 January 2022, and a 3 year lead in time for land zoned after 1 January 2022. This will replace the vacant site levy.
- Pre-letting expense deduction for landlord extended to the end of 2024.
- Help to Buy scheme extended to end of 2022 (at the enhanced rate of support).
- Minimum wage increases to €10.50.
- Young Trained Farmer Stamp Duty relief and Stock Relief extended to 31 December 2022.
- General Stock Relief for farmers to be retained to end of 2024.
- EII Scheme extended for a further 3 years, and scheme changes announced. 30% expenditure rule to be removed.
- 50c additional duty on a pack of 20 cigarettes.
- Free GP care for children aged 6 and 7.
- Bank levy extended to end of 2022.
- New youth travel card will offer 50% discount to those aged between 19 and 23 across the transport network.
- Employer’s PRSI weekly income threshold for the higher rate will increase from €398 to €410 in 2022.
Link to relevant Department of Finance papers https://www.gov.ie/en/campaigns/0020e-budget-2021/
Please contact a member of the Keogh Ryan Tierney Tax Team if you have any queries.
The Keogh Ryan Tierney Tax Team – 12 October 2021