Explained: Budget 2020

//Explained: Budget 2020

Summary of Budget 2020 Tax Measures

Personal Income Tax

Income Tax

An increase in the Home Carer Tax Credit from €1,500 to €1,600
An increase in the Earned Income Credit from €1,350 to €1,500

USC

1 year extension of reduced rate of USC for medical card holders
Measures to support EnterpriselSMEslAgri-sector

Key Employee Engagement Programme (KEEP)
Enhancements to the programme

Employment and Investment (Ell)

Enhancements to the programme

Ell provides individual investors with tax relief for risk capital investments in qualifying SMEs.
A range of proposals are being brought forward to enhance the scheme including a number of
technical adjustments; to improve its operation. The main changes are as follows:

. The level of relief: full income tax relief (40%) to be provided in the year in which the investment is made. This compares with current arrangements where 30% relief is provided upon the initial investment and a further 10% is given after Year 3 subject to certain conditions;

. The investment limit: the annual investment limit will be increased from €150k to €250K and to €500k in the case of those who invest for a minimum period of 10 years

 

Special Assignee Relief Programme (SARP)

Extension in its present format until 31 December 2022.

Foreign Earnings Deduction

Extension in its present format until 31 December 2022.

 

FED is intended to support irish companies who endeavour to expand their exports into new markets. it provides relief from income tax on up to €35,000 of salary for employees who travel out of State to certain qualifying countries for extended periods on behalf of their employer. Existing FED legislation
had a sunset clause of 31 December 2020. It is proposed to extend to extend the scheme until 31 December 2022 (three years 2020-2022).

 

Research and Development Tax credit

Enhancements to credit for email and micro companies.

Increase third level outsourcing limit.

Microbrewery relief
Production ceiling for qualification raised from 40,000hi to 50,000hl

Diesel Rebate Scheme
Relief for users of the scheme from increase in carbon tax

Betting Tax
Introduction of a relief from betting duty and betting intermediary duty up to a limit of €50,000 per calendar year. This relief only applies to single undertakings.

Extension of Section 6043 Capital Gains Tax Relief for Farm Restructuring

The current scheme provides for capital gains tax relief where an individual disposes of and purchases land and/or exchanges land with another farmer in order to consolidate an existing farm.

The scheme which is due to expire on 31 December 2019 is being extended to 31 December 2022 subject to state aid approval.

Housing

Help to Buy (HTB)

Extension in its present format until 31 December 2021.

Living City Initiative

Extension in its present: format until 31 December 2022

 

Climate and Environmental measures

Carbon Tax increase the rate by (~56 to 26 euro per tonne

Electricity Tax
Equalise the rate for businesses with that of non-business

Vehicle Registration Tax
VRT Environmental Health (NOx) Surcharge
Extension of VRT relief for hybrids and plug-in hybrid electric vehicles

Anti-Avoidance

Allowance for capital expenditure on scientific research
Correction of unintended additional relief

Corporation Tax — Collective Property Investment
Corporation Tax —- Compliance Measures
Irish Real Estate Funds (lREFs) and Section 110 anti-avoidance
Real Estate investment Trusts (REITs) — capital disposals

Corporation Tax — BEPS Implementation
Introduction of Anti-Hybrid Rules (EU Anti-Tax Avoidance Directive — ATAD)
Modernisation of Transfer Pricing rules

Stamp Duty on Schemes of Arrangement involving a ‘Cancellation Scheme’ where used for the sale of a Company

The Stamp Duties Consolidation Act 1999 will be amended by financial resolution to provide that a stamp duty charge of 1% is applicable where a scheme of arrangement, in accordance with Part 9 of the Companies Act 2014, is used for the acquisition ofa company.

Additional Taxation Measures

Tobacco Products

Tax Increase in 50c on pack of 20 cigarettes with pro-rata increase on other tobacco products

Increase in Stamp Duty on Non-residential Property

The rate of stamp duty applicable to non-residential property transactions will be raised from 6% to 7.5% from Budget night.

This will be subject to transitional arrangements whereby the existing 6% rate will apply to instruments executed before 1 January 2020 where a binding contract existed prior to Budget day (8:11 October 2019).

Consequential amendments will also be made to the legislation relating to the repayment of stamp duty where the land involved is subsequently used for residential development, so as to ensure that the rate of stamp duty chargeable after a full refund remains at 2%.

Capital Acquisitions Tax

The current Group A tax free threshold which applies primarily to gifts and inheritances from parents to their children is being increased from €320,000 to €335,000. This increase applies in respect of gifts or inheritances received on or after the 9th of October.

Compliance
Increase rate of Dividend Withholding Tax from 20% to 25% from 1 January 2020

As the first step in a two-stage process, the rate of Dividend Withholding Tax (DWT) will be increased from 20% to 25% from 1 January 2020. This will better align the amount of tax remitted by companies with the income tax and USC that is ultimately payable by the individual taxpayer. The 25% rate is considered to be a reasonable combination of the standard 20% rate of income tax and the most common rate of USC which is the 4.5% that applies to income between €19,874 and €70,044. In the event that the 25% rate results in an overpayment of tax, the relevant amounts will be refunded, as is the normal procedure. It is important to highlight that this measure does not alter the underlying liability to tax for Irish tax residents.

The second step is to introduce a modified Dividend Withholding tax regime from 1 January 2021.

Utilising real-time data collected under the newly modernised PAYE system, it is intended that Revenue will apply a personalised rate of DWT to each individual taxpayer based on the rate of tax that they pay on their PAYE income. Revenue will shortly be launching a consultation in order to
engage with stakeholders on how the proposed new system will operate.

Note: As announced in last year’s budget, from the 1 stJanuary 2020, there will be a 0.1% increase (from 0.9% to 1.0%) in the National Training Fund Levy, payable by employers in respect of reckonable earnings of employees in Class A and Class H employments

2019-10-08T17:11:30+00:00 October 8th, 2019|Uncategorized|