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Ireland 2020 Budget Statement Delivered

On 8 October 2019, Ireland's Minister for Finance and Public Expenditure and Reform, Paschal Donohoe TD, delivered the 2020 Budget Statement. Some of the main tax measures of the Budget include the following:

  • The Key Employee Engagement Programme (KEEP) Scheme is amended as follows:
    • definitions within the legislation relating to qualifying companies and holding companies are to be amended so as to allow companies who operate through a group structure to qualify for KEEP;
    • definitions within the legislation relating to the conditions for a qualifying employee are to be amended to allow for part-time/flexible working and movement within group structures (as business needs dictate); and
    • the legislation is amended to allow existing shares to qualify for KEEP;
  • The Employment and Investment (EII) scheme for individual investors in SMEs is amended 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; and
    • the investment limit: the annual investment limit will be increased from EUR 150k to EUR 250K and to EUR 500k in the case of those who invest for a minimum period of 10 years;
  • The Special Assignee Relief Programme (SARP), which is an income tax relief measure that aims to reduce the cost to employers of assigning skilled individuals in their companies from abroad to take up positions in their Irish based operations, is extended to 31 December 2022 (currently to end 31 December 2020);
  • The Foreign Earnings Deduction (FED), which is intended to support Irish companies who endeavor to expand their exports into new markets by providing relief from income tax on up to EUR 35,000 of salary for employees who travel out of State to certain qualifying countries for extended periods on behalf of their employer, is extended to 31 December 2022 (currently to end 31 December 2020);
  • The Research & Development Tax Credit is amended (subject to State aid approval):
    • to increase the 25% R&D credit to 30% for micro and small companies and to enhance the existing limits on the payable credit;
    • to introduce a new provision to allow micro and small companies conducting pre-trading R&D to claim the credit before trading commences, limited to offset against VAT and payroll tax liabilities only; and
    • to increase the current limit on outsourcing to third level institutes of education from 5% to 15% in respect of all claimants;
  • Certain climate and environmental measures are implemented, including an increase in the Carbon Tax rate from EUR 20 per tonne to EUR 26 per tonne, with a target of EUR 80 per tonne by 2030;
  • Section 765 of the Taxes Consolidation Act 1997, which provides allowances for capital expenditure on scientific research, is amended to correct an unintended anomaly whereby the interaction of this section with other provisions can create the potential for unintended additional claims to relief;
  • A number of anti-avoidance measures are introduced to address aggressive activities by some Irish Real Estate Funds (IREFs) such as the use of excessive interest charges to avoid the payment of tax in respect of profits from Irish property, including the introduction of limitations on interest expenses based on debt to property cost and on an income to interest ratio;
  • A number of amendments are made to the Real Estate Investment Trust (REIT) framework to ensure that the appropriate level of tax is being collected from the regime, particularly in the area of capital gains, including:
    • the distribution of proceeds from the disposal of a rental property will be subject to dividend withholding tax upon distribution; and
    • an existing provision whereby a deemed disposal and re-basing of property values occurs should a company cease to be a REIT is limited to apply only where the REIT has been in operation for a minimum of 15 years, in line with the original policy intention of encouraging stable long-term investment in the rental property market;
  • Anti-Tax Avoidance Directive (ATAD) compliant anti-hybrid rules are introduced that apply to all corporate taxpayers;
  • The transfer pricing rules are modernized in line with the recommendations in the Coffey Review of the Irish Corporation Tax Code, including:
    • the incorporation the OECD 2017 Transfer Pricing Guidelines into Irish legislation;
    • the extension of the rules to cover cross-border non-trading and material capital transactions; and
    • the extension of the rules to SMEs, subject to a Ministerial Commencement Order;
  • The Stamp Duties Consolidation Act 1999 is amended 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 of a company;
  • The rate of stamp duty applicable to non-residential property transactions is raised from 6% to 7.5% from Budget night (8 October 2019), with a transitional arrangement providing that the existing 6% rate will apply to instruments executed before 1 January 2020 where a binding contract existed prior to 8 October 2019; and
  • The Dividend Withholding Tax is increased from 20% to 25%.

For more information, click the following link for the Budget 2020 webpage.

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