Budget 2012 – More Highlights

December 6, 2011

The 2012 Summary of 2012 Budget Measures – Policy Changes is now online.

This includes the following points that were not fully addressed in the Minister’s Speech today.

Budget 2012 6 December 2011USC Surcharge on ‘Property Reliefs’ income – A surcharge will apply from 1 January 2012 on individuals with gross incomes over €100,000. The surcharge will be 5% on the amount of income sheltered by property reliefs in a given year. This will be operated as a a higher rate of USC and will apply to all ‘high earning’ investors with Section 23 or accelerated capital allowance schemes investments

Investors in accelerated capital allowance schemes will no lose their entitlement to unused capital allowances,  beyond the tax life of the scheme after 1 January 2015.

The new 2% Stamp Duty rate on non-residential property applies from Budget Day, 6 December 2011.

Consanguinity relief from Stamp Duty, which applies on transfers of non-residential properties between blood relatives is to be retained to the end of 2014 but will be scrapped after 1 January 2015. This relief provides for a 50% cut in the standard rate of Stamp Duty on intra-family transactions.

The €100 household charge will be replaced by a full property tax in 2014.

The increases in Capital Gains Tax (CGT) and Capital Acquisitions Tax (CAT) from 25% to 30% will apply from Budget Day. The cut in the tax-free Group-A CAT threshold (most commonly parent-to-child gifts and inheritances) will cut the maximum tax-free sum from €332,084 to €250,000. This also applies with immediate effect.

A new CGT incentive relief applies to properties bought between Budget night and the end of 2013. If the property is held for more than seven years, the Capital Gain arising in that period will not attract CGT. This incentive is introduced with immediate effect.

The tax relief scheme for corporate investment in renewable energy projects is being extended from 31 December 2011 to 31 December 2014. This scheme encourages investment in approved renewable energy projects in the solar, wind, hydro (including ocean, wave or tidal energy) and biomass sectors

The exit tax on life assurance policies is being increased from 27% to 30% in line with the increase in DIRT tax on deposit interest. These changes apply from 1 January 2012.

The €200,000 Domicile Levy is being extended to include non-Irish citizens. The Budget 2011 version of this levy was an embarrassing failure with just 10 people declaring themselves liable to pay it by the recent deadline, according to RTE News last month.

The VAT rate increase from 21% to 23% will apply from 1 January 2012. Traders will therefore avoid the VAT hike on their pre-Christmas and pre-New Year Sales receipts.

The VAT rate on District Heating is being cut from 21% to 13.5%

Admission charges to open farms will become liable to VAT from 1 January 2012. This will be charged at the 9% VAT rate for tourist enterprises.

Excise Duty on cigarettes goes up by 25 cents (including VAT) for a packet of 20. A pro-rata increase applies to other tobacco products.

The Carbon Tax increase on petrol and diesel applies from midnight on Budget Day, with the corresponding increases in Kerosene, Marked Gas Oil, Liquid Petroleum Gas (LPG), Fuel Oil and Natural Gas applying from 1 May 2012.

Betting Duty of 1% is being applied to remote betting. A  Gross Profits Tax of 15% is being charged on betting exchanges. These will commence from the second quarter of 2012, subject to EU Commission approval.

Research & Development Tax Credit – The first €100,000 of qualifying R&D expenditure will benefit from the 25% R&D tax credit on a volume basis. The tax credit will continue to apply to incremental R&D expenditure in excess of €100,000 compared to the equivalent expenditure in the base year 2003.

The outsourcing limits for sub-contracted Research & Development costs are being increased.

A portion of the R&D credit may be used to reward key employees who have been involved in the development of R&D.

The annual ‘imputed distribution’ charge on Approved Retirement Fund (ARF) assets is being increased from 5% to 6% in respect of ARFs with asset values over €2 million. This comes into effect on 31 December 2012. A similar charge will now apply to vested PRSAs with assets in excess of €2 million.

The 20% ‘final liability tax’ on the transfer of ARF assets on the death of an ARF owner to their adult children is being raised to 30%.

The current 50% employer PRSI relief for employee contributions to occupational pension schemes and other pension arrangements is being scrapped from 1 January 2012.

Capital Gains Tax Retirement Relief

The existing unlimited retirement relief from CGT for transfers of ‘qualifying assets’ to family members will be maintained for individuals aged 55 to 66. An upper limit of €3 million will apply to such transfers made by owners over 66 years, after a two year transitional period.

The current upper limit of €750,000 for assets transferred outside the family is being retained for individuals aged between 55 and 66 years. However a lower limit of €500,000 will apply to such disposals by persons over 66 years after a similar two year transitional period.

 

 

 

 

 


Budget 2012 Live Updates

December 6, 2011

Michael Noonan, Minster for Finance is now delivering his Budget 2012 speech to Dáil Éireann.

Budget 2012 6 December 2011The Minister has announced the following Tax measures:

Corporation Tax

  • No change in the 12.5% Corporation Tax rate.
  • A special Assignee Relief Programme to attract multinationals’ executives to Ireland
  • New Foreign Earnings deductions for individuals developing markets abroad
  • International financial services sector boosted by measures to be announced in Finance Bill
  • First €100,000 of Research & Development expenditure to be allowed for R&D credit.
  • Corporation Tax exemption for new companies extended for a further 3 years.

Farming

  • Farm transfers to the next generation are to be incentivised
  • Significant fall in the rate of stamp duty for farmland and other commercial property
  • Retirement relief for CGT to be modified – no detail of this measure included in the Budget Speech.
  • Farm partnerships to be encouraged by 50% Stock relief for participating farmers and existing 100% Stock relief for young farmers
  • The 9% rate of VAT to apply to Open Farms

Air Travel Tax

  • Government are ‘prepared to negotiate’ with Aer Lingus and Ryanair to incentivise tourist routes into Ireland

Construction Sector

  • Stamp duty for commercial property to be cut to 2% overnight – the previous top rate was 6%
  • The current rates for residential property will apply
  • CGT exemption for properties bought between tonight and the end of 2013 – if they are held for 7 years.
  • Commercial properties – NAMA can now approve rent reductions in certain cases, even in cases where ‘upward only rent review’ clauses apply
  • Those who bought homes at the end of the property boom will gain by an increase in mortgage interest relief to 30% for those homeowners
  • First time buyers will get 25% mortgage interest relief for property purchases in 2012

Property Reliefs

  • Detailed policy measures to be made in Finance Bill
  • s.23 Reliefs to small scale investors will not be cut
  • Surcharge of 5% will apply to sheltered income where one’s income is over €100,000

Income Tax

  • No increase in Income Tax bands, rates or credits.
  • Universal Social Charge to be changed to help low paid seasonal & temporary workers – the exempt income level rises from €4,004 to €10,036
  • the USC will be collected on a cumulative basis in 2012

Value Added Tax

  • The Standard rate of VAT will rise by 2% to 23%
  • The other rates of VAT remain unchanged

Capital Taxes

  • Capital Acquisitions Tax & Capital Gains Tax go from 25% to 30%
  • Standard Exemption for Capital Acquisitions Tax (parent-child transfers) cut from €332,084 to €250,000

Investment Income

  • Deposit interest retention tax (DIRT) increased from 27% to 30%
  • PRSI will cover rental and investment income from 2013

Approved Retirement (ARF) Funds

  • ARF ‘imputed distribution’ charge increased to 6%
  • ARF tax on death of a child over 21 goes to 21%
  • Citizenship condition on domicile levy is scrapped
  • Carbon Tax goes up from €15 to €20 per tonne – a 33% increase. This increase does not apply to home heating oil or solid fuel.
  • Double income tax deduction for Carbon tax for farming
  • VAT Refunds on farm buildings will include wind turbines

Other

  • The income tax relief on pension contributions remains unchanged – tax relief will remain at the marginal rate of tax.
  • A household charge of €100 per household is being introduced. Certain limited waivers will apply.
  • Motor Tax increases to raise €47 million
  • A new export refund scheme will apply to exports of motor cars
  • The existing tax exemption for the first 26 days of disability benefit per annum is to be abolished. The Minister described this as ‘an incentive for absenteeism’

Excise Duty

  • Alcohol excise duty is unchanged.