The main points of Minister Noonan’s Budget 2013 Speech, announced this afternoon:
The Minister announced a new 10 Point Tax Reform Plan which “includes measures that will make a real difference to SMEs”.
- Reforms to the 3 Year Corporation Tax Relief for Start Up Companies
- Increasing the cash receipts basis threshold for VAT from €1 million to €1.25 million and changes to the Close Company Surcharge.
- A doubling of the initial spend eligible for the R&D tax credit from €100,000 to €200,000
- Extensions to the Foreign Earnings Deduction for work related travel.
In addition, a diesel rebate is to apply for hauliers from 1 July 2013.
A new “PlusOne initiative” will encourage employers to hire long-term unemployed individuals. This will replace the existing Revenue Job Assist and Employer PRSI Incentive schemes.
The 25% & 100% Stock Relief incentives will continue until 31 December 2015.
A wider range of registered farm partnerships (eg beef production) can now avail of an enhanced 50% rate of Stock Relief.
A new Capital Gains Tax relief will apply on disposals of farm land for farm restructuring purposes. This once-off relief will apply from January 2013 to December 2015, and is subject to EU approval.
Film Industry & Tourism
The Film Tax Relief Scheme is extended to 2020, and the scheme will move to a tax credit model in 2016. These changes are aimed to ensure that production companies and not ‘high earner’ investors, will now benefit from the tax relief.
The 9% VAT rate for the tourism industry will continue in 2013.
A three-year Local Property Tax exemption will apply to:
- All new or previously unoccupied homes bought before the end of 2016.
- Purchases of any homes in 2013 by first time buyers.
- Residences in unfinished estates.
In addition, the Budget 2012 Capital Gains Tax incentive for properties bought before 31 December 2013 means that they will be exempt from Capital Gains Tax if held for at least seven years.
New “Real Estate Investment Trusts” will allow commercial property investors “to finance property investment in a risk diversified manner”.
- Tax relief on pension contributions will only apply to schemes delivering a pension income of up to €60,000 per annum. This will apply from 1 January 2014.
- Tax relief on pension contributions will continue at the marginal rate of tax.
- The 2012 Pension Levy will cease after 2014.
- the reduced rate of USC for over-70s earning over €60,000 will cease from 1 January 2013.
- Top Slicing relief will no longer be available on ex-gratia lump sum termination /severance payments, where the non-statutory payment is over €200,000.
- Individuals with AVCs may in 2013 withdraw up to 30 per cent of their value. Withdrawals will be subject to marginal rate income tax. This will apply for 3 years after Finance Act 2013 is passed.
The minimum annual self-employed annual contribution will rise from €253 to €500.
The weekly €100 PRSI-exempt allowance for employees is being abolished.
“Unearned” trade or profession income will be subject to PRSI in 2013
From 2014, PRSI will apply to rental income, investment income, dividends and deposit interest.
Local Property Tax
The Local Property Tax will commence from 1 July 2013. Its main features are as follows:
- It will be collected by the Revenue Commissioners
- Owners of residential properties, including rental properties, will be liable for payment.
- The tax will be payable on the basis of the self-assessed market value of the property. The Revenue Commissioners “will provide valuation guidance”. Alternatively, “a competent valuer” can be used.
- The tax will be 0.18% of the market value up to €1m, and 0.25% on values over €1m.
- Properties valued between €100,000 – €1m will be charged “at the mid-point of valuation band of €50,000 width” eg where the value is between €150,001 and €200,000, the tax will be calculated at 0.18 per cent of €175,000.
- Properties below €100,000 will be charged at 0.18% of €50,000.
- Properties valued over €1 million will be liable at 0.18% on the first €1m and at 0.25% on the balance.
- Payment options will include direct debit; credit & debit cards, cash (!!) or “deduction at source” from salary,pension or “certain State payments”.
- Exemptions largely correspond to exemptions from the Household Charge.
- A “system of voluntary deferral arrangements” will apply to
- individuals earning up to €15,000, & couples earning up to €25,000.
- individuals earning whose “gross income less 80 per cent of mortgage interest” is below €15,000, (€25,000 for a couple). Marginal relief will apply where the income is up to €10,000 over the income limit
- Interest will be charged on deferred amounts at 4% per annum. Deferred property taxes and interest will have to be discharged on the sale/transfer of the property.
The Household Charge is abolished from 1 January 2013 and the NPPR Charge will end on 1 January 2014.
The Revenue Commissioners will “strictly enforce” the Local Property Tax and collect any unpaid Household Charge for 2012. Unpaid arrears will rise to €200 per property from 1 July 2013.
The only Income Tax measure mentioned in the Budget Speech relates to Maternity Benefit, which will be treated as taxable income from 1 July 2013. Maternity Benefit will remain exempt from the USC.
There is no increase on excise duty on diesel and petrol
Immediate rises from midnight tonight:
- 10 cent on a pint of beer or cider & on a standard measure of spirits
- €1 0n a standard 75cl bottle of wine
- 10 cent on a pack of 20 cigarettes
- 50 cent on a 25g pack of “roll your own” tobacco
VRT and motor tax will rise from 1 January 2013.
Carbon tax will apply to solid fuels at a rate of €10 per tonne from 1 May 2013, and €20 per tonne from 1 May 2014.
DIRT on deposit interest rises from 30% to 33%
Capital Gains Tax (CGT) & Capital Acquisitions Tax (CAT) rates similarly go from 30% to 33%
Capital Acquisitions Tax (CAT) thresholds are cut by 10% from midnight tonight.
The Minister remains fully committed the Corporation Tax tax rate of 12.5%
The Minister has confirmed that Ireland has agreed a new Inter-Governmental Agreement with the United States in relation to the US Foreign Account Tax Compliance Act, commonly, (if unfortunately), known as FATCA.