irish budget 2013: main tax changes

7/30/2019 Irish Budget 2013: Main Tax Changes

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Budget

2013


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Budget 2013: Main tax Changes

The main provisions announcedin Budget 2013 are set out below.Details of the much anticipatedlocal property tax were unveiledand this continues the theme ofbroadening the tax base.

While the rates of incometax were not increased theremoval of the weekly exemptamount and increase in theminimum PRSI contributionfor the self-employed togetherwith the extension of PRSI tounearned income in certain

cases results in an increase inthe effective rate of tax/USC/PRSI.

The combined impact of thenew local property tax, reduc-tions in child benet and thePRSI and USC changes notedabove are likely to further re-strict the ability of households

to deliver discretionary spend-ing in the domestic economy.

There were some positivemeasures for business taxeswith regard to the corporationtax relief for start-up com-panies, enhancement to theresearch and development

credit regime, continuationof the Enterprise InvestmentIncentive and Film InvestmentSchemes.

The continued support formaintaining Irelands 12.5%corporation tax rate was noted.This is ever more importantto maintain levels of foreigndirect investment givenincreased competition fromother jurisdictions.

A number of measuresbeneting farming were alsointroduced.

On the capital taxes front therates of capital gains tax andcapital acquisitions tax bothincreased to 33%.

There was a 10% reduction inthe tax free thresholds abovewhich capital acquisitions taxapplies for gifts and inherit-ances. The continued erosionof the tax free thresholdstogether with the ever increas-ing tax rate means that this taxis much more likely to bite in

2013 and beyond.

Pension rules are to bechanged in 2014 and willprovide for continued relief atmarginal rates where fundingfor a pension income of up to60,000 per annum. Notwith-standing this reduction inpension relief, clarication of

the basis on which pension taxrules will operate is neces-sary as uncertainty operatesto discourage provision forprivate pensions. In this regardit is welcome that the pensionlevy will not continue beyond2014.

Rates of tax on interest income

and certain life assurancebased savings products onceagain increased so that theafter tax return to savers con-tinues to be eroded.


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Income Tax: Maternity benet will be

taxable from 1 July 2013.

Top Slicing Relief whichprovides for a reduction inthe tax rate on certain lumpsums received on terminationof employment is no longeravailable from 2013 onex-gratia lumps sums wherethe non-statutory elementis in excess of 200,000.

The Foreign EarningsDeduction (FED) has beenextended to employmentrelated travel to certain

African countries.

The specied interest rateused in calculating the BIK onpreferential loans, other thanhome loans, is to be increasedfrom 12.5% to 13.5%.

There is to be a decrease inthe specied rate from 5% to

4% in relation to home loans.

PRSI: The minimum PRSI

contribution for the self-employed has increasedfrom 253 to 500.

The weekly PRSI allowanceof 127 has been abolished.

Modied PRSI payers willbe liable to PRSI on incomefrom a trade or professionand unearned incomefrom January 2013.

USC: Previously a reduced

rate of USC applied for

individuals over the ageof 70 and individualswith medical cards.

Standard rate of USC willnow apply for individualsaged 70 and over andmedical card holdersearning 60,000 or more.

Charities: New relief rate of 31% for

qualifying donations toapproved charities andother approved bodies.

Self-assessed tax payerswill no longer be able toclaim relief in respect ofthe qualifying donations.

Investment Reliefs: The Employment and

Investment Incentive (EII)has been extended to 2020subject to EU clearance.

Film Relief has been extendedto 2020. The scheme will bereformed in 2016 by movingto a tax credit model.

Deposit Interest Retention Tax: The rate of DIRT has

increased from 30% to 33%.

Exit tax applying to lifeassurance policies andinvestments funds is

being increased to 33%where payments are madeannually or more frequentlyand to 36% where otherpayments are made.

Pensions: Individuals may make a once

off withdrawal of up to 30%of the value of Additional

Voluntary Contributions.Withdrawals will be liable tothe individuals marginal rate.

Changes are expected to bemade in 2014 to cap taxpayersubsidies for pensionschemes which deliverincome of more than 60,000.

Personal tax


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Corporation Tax: A scheme was previously

introduced to provide relieffrom corporation tax fornew start-up companiesin the rst three years oftrading subject to certainlimits. The relief is beingextended to allow unusedrelief arising in the rst threeyears due to insufcientprots to be carried forwardin subsequent years.

In calculating relief forR&D tax credit, previouslythe rst 100,000 of R&Dexpenditure attracted reliefwithout reference to theexpenditure incurred in thebase year (2003). This level isbeing increased to 200,000.

Previously close companiesseeking to avoid additionaltax on certain undistributedincome were required todistribute reserves whereprofessional income and orpassive income exceeded635. This has now beenincreased to 2,000.

Business tax

VAT: The annual VAT cash

receipts basis thresholdhas increased from 1million to 1.25 millioneffective from 1 May 2013.

The farmers at rateaddition is reduced to4.8% with effect from

1 January 2013.

Excise Duties: Increases in motor tax

across all categoriesfrom 1 January 2013.

Rates of VRT havealso increased from1 January 2013.

Duty on pint of beer/cider

has increased by 10c, duty onbottle of wine by 1 and by10c on a packet of cigarettes.

Carbon tax is beingextended to solid fuels. 10per tonne will be appliedwith effect from May2013 increased to 20 pertonne from May 2014.

Licensed road haulierswill be entitled to a relief

from excise duty on auto-diesel from July 2013.

Vat and exCise

The rate of capital gains taxhas increased from 30% to

33% in respect of disposalsmade after 5 December 2012.

The rate of capitalacquisitions tax has

increased from 30%to 33% in respect ofinheritances/gifts receivedafter 5 December 2012.

CAT thresholds arebeing reduced by 10%

in respect of gifts takenafter 5 December 2012.

CaPital tax


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For More inForMation on how we CanhelP you, ContaCt:

John ComerfordTax Partner

t + 353 (0)1 677 9000e [email protected]

Gerry HigginsTax Partner


Eamonn MaddenTax Manager


This document represents a general overview of the matters discussed. Before acting or refraining from acting you should verify thecurrent tax position relevant to the actual fact pattern and seek professional advice. Cooney Carey accepts no responsibility for anyactions taken on the basis of this document.

Local Property Tax: The budget set out details

of the new Local PropertyTax (LPT). The RevenueCommissioners willadminister the schemewhich will operate on a self-assessment basis. Revenuewill issue guidance on thevaluation procedure.

The tax applies to ownersof residential property andapplies from 1 July 2013.

The tax will be based onthe market value of theproperty with a rate of

0.18% on values up to 1million and 0.25% on excessvalue over 1 million.

Limited exemptions willapply and there are alsoprovisions for deferralin certain cases.

Real Estate InvestmentTrusts (REITs): Details of Real Estate

Investment Trusts (REITs)were announced. REITsare listed companies andrepresent an internationallyrecognised model forproperty investment.

REITs may be used tohold rental property,

which provides areturn for investorssimilar to that of directinvestment in property.

Qualifying income and gainsof a REIT will be exemptfrom corporation tax at thelevel of the REIT company.Instead, the REIT is requiredto distribute prots annually,for taxation at investor level.

REITs may be used to holdproperty investmentsand will provide furtheroptions to structure Irishproperty holdings.

Full details of thismeasure will be includedin the Finance Bill.

ProPerty tax

irish budget 2013: main tax changes

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