€200 Parking Levy To Become Operational
01/06/2010 by Cormac Kelleher
The €200 parking levy originally announced in October 2008’s Budget is expected to become operational this summer. No commencement date has yet been officially announced. The Department of Finance has indicated that the levy is to be initially implemented on a pilot basis in Dublin city centre. The levy will be subsequently extended to encapsulate the majority of the Dublin City Council area and the major urban centres of Cork, Galway, Limerick and Waterford.
It is understood that for the pilot period, the levy will apply to workers who benefit from free parking spaces in Dublin city centre within the boundaries of the North and South Circular Roads. The affected postcode areas are understood to be Dublin 1, 2, 4 and parts of Dublin 7 and 8. The urban areas of Cork, Galway, Limerick and Waterford have not yet been designated.
The levy which was announced in the 2008 emergency Budget, provided for a flat rate levy of €200 per annum, per employee, provided with car parking facilities. The enactment of this levy has been delayed as a result of consultation with interested parties.
In circumstances where an employee shares a parking space, it is envisaged that each worker sharing the space will pay a reduced fee of €100 per annum. As the levy will be collected by employers, it is understood that there will be provision for a fine of up to €3,000 on employers who fail to operate and collect the levy from its relevant employees.
Preliminary Tax – 2010 Tax Period
01/06/2010 by Cormac Kelleher
Tax payers assessable to tax under the self assessment system are required to pay preliminary income tax. The tax payer has a number of options as regards the quantum and frequency with which such payments are made. There are three options, those being:
1. 90% of the final income tax liability for the current tax year (i.e. 2010 year) or
2. 100% of the final income tax liability for the immediately preceding year of assessment (i.e. 2009 year) or
3. In the case of taxpayers availing of the direct debit method, 105% of the final income tax liability for the pre-preceding year of assessment (i.e. 2008 year).
In light of the current economic environment, it is likely that for many tax payers their 2010 taxable profits are lower than those for 2008. In such circumstances where the taxpayer has opted to satisfy their preliminary tax obligations under the direct debit method, they may inadvertently overpay their tax for the relevant period. This is by virtue of the fact that their payments are being based upon the higher 2008 figures. Any subsequent overpayment would not be repaid to the taxpayer until such time as their income tax return for the period has been submitted and processed.
In circumstances where tax payers are paying preliminary tax by way of direct debit and there has been a decrease in taxable profits, consideration should be given to opting to base preliminary tax on options 1) or 2) above. In basing preliminary tax under these options, the quantum of preliminary tax paid should be minimised and the taxpayer should hopefully not be in a position where they have overpaid their preliminary tax. The overall cost of funding should accordingly be reduced.
In the event that it is decided to pay preliminary tax under options 1) and 2), the relevant payment is required to be paid on or before 31 October 2010 (16 November 2010 in the case of e filing). Clearly a change in the basis for the payment of preliminary tax would require a cancellation of the existing direct debit mandate. Any payments made under the direct debit system to date should be taken into account for the purposes of calculating the balance of tax payable.
Employer Job (PRSI) Incentive Scheme
14/05/2010 by Moore Stephens Nathans
In an endeavour to support job creation, Budget 2010 announced an Employer Job (PRSI) Incentive Scheme. Essentially the scheme exempts employers from their liability to pay employer PRSI contributions – 8.5% or 10.75% of gross pay. This scheme represents a real cost saving to employers.
The operation of this scheme is being overseen by the Department of Social and Family Affairs. As of yet the scheme has not been officially launched by the Department. The Department have indicated that it is expected the scheme will come into effect within the coming weeks.
Any new job created in 2010 which satisfy the scheme criteria will be able to benefit from the exemption. Qualifying jobs created in 2010 prior to the scheme becoming operational will benefit from the exemption for 12 months from the scheme launch date. Qualifying jobs created after the scheme launch date will benefit for the 12 months from the date of commencement of employment.
In order for a job to qualify under the scheme the following criteria must be satisfied:
- The employee must have been on the Live Register (unemployed) for at least 6 months;
- The job must be full time and be a new and additional position. Employers will not be allowed to substitute existing employees to avail of the scheme;
- The employer will be required to provide an up to date tax clearance certificate;
- Employers will be limited to a maximum participation rate of:
- 5% of their existing workforce or
- A maximum of 5 new jobs in the case of smaller companies
- The job must last for a period of 6 months or more. In the event that the job does not last for this period of time there will be a clawback of the PRSI exemption.
Non Principal Private Residence Charge
22/03/2010 by Cormac Kelleher
2010 is the second year of the non principal private residence charge introduced by Minister Lenihan. This charge applies to certain residential properties.
In general, the annual €200 charge will be payable in respect of non principal private residences located in the State. A payment will be required to be made by an “owner” of a residential property held by them at the “liability date”. For the purposes of the Act, an “owner” is defined as including any person who is entitled to (i) receive the rent of a property or (ii) where the property is not let, would be so entitled to receive rent if it were rented. The broadness of the definition not only includes ultimate beneficial owners but also can include a trustee (see exemptions below), agent or executor of an estate.
A liability will be calculated by reference to the “liability date”. In respect of the 2010 period, the liability date has been set at 31 March 2010 and payment is required to be made by 31 May 2010.
As indicated above, payments in respect of the 2010 period should be made by 31 May 2010. However, from our reading of the Act it would appear that the absolute final date by which the 2010 should be paid is 30 June 2010.
Exemptions
The Act provides for specific instances in which a residential property will not be within the scope of the charge. These are:
· Property occupied by the owner as his / her sole or main residence.
· The letting of a room under the Rent a Room Scheme is not liable to the charge. However, in keeping with the requirements of the Rent a Room Scheme, in order for this treatment to apply it is necessary for the owner to reside in the property.
· Residential property comprised in a discretionary trust.
· Property owned by a Revenue approved charity.
· Where the owner temporarily owns two properties at the liability date. This will only apply where the second property was acquired within one year of the liability date and the first property was disposed of within six months of the liability date. This exemption is supposed to provide for circumstances where individuals are changing homes.
· A spouse who is a joint owner of a property will not be liable to the charge if the property is occupied by the owner joint owning spouse as their principal private residence. In order to avail of the exemption, it is necessary for a decree of divorce or a decree of judicial separation to have been obtained prior to the liability date.
· An individual who does not reside in their property due to they being incapacitated by long term mental or physical illness.
· A property occupied on a rent free basis by a dependent relative. Such a property is required to be located within 2Km of the owners main residence.
· Newly constructed residential property. However, such properties must form part of the trading stock of the owner and must never have been occupied.
· Property occupied under a shared ownership arrangement scheme with a housing authority / Health Service Executive / voluntary housing body.
Co Ownership of Property
Residential property which is liable to the charge may be owned by two or more persons. In such circumstances, each co-owner will be jointly and severally liable to pay the charge. The payment of the €200 charge by one of the co-owners will discharge each of the other co-owners of their liability.
Late Payment
Failure to pay a liability in full on or before the relevant payment date will give rise to a late payment charge. A window of one month has been provided for by the Act post the relevant payment dates. Where payment has still not been discharged at this later date, a €20 late payment fee will apply in respect of each month, or part thereof, which the charge remains outstanding.
All unpaid charges will automatically become a charge on the relevant property.
Payment
Payment can be made online at www.nppr.ie or alternatively by way of bank draft / postal order / cheque. Irrespective of the manner in which payment is made, the following particulars will be required:
· Name of property owner
· Property address
· Correspondence address
· PPS Number (Personal Public Service Number) of the owner or tax reference number if the owner is a corporate body
Should you have any queries in relation to the above, please contact either Padraig O’Donoghue (padraig.odonoghue@moorestephensnathans.com) or Cormac Kelleher (cormac.kelleher@moorestephensnathans.com)
Research & Development Expenditure
01/03/2010 by Moore Stephens Nathans
Recent measures announced by the Minister for Finance enhance the attractiveness of locating R&D facilities in Ireland by increasing the R&D credit to 25% in addition to the normal Corporation Tax deduction, resulting in a total deduction of 37.5% for expenses which relate to R&D activities. The definition of what constitutes R&D is very wide and a broad range of activities is covered. From 2009 onwards the Government has also increased the attractiveness by amending the legislation to provide for a refund of excess credits, making the credit a valuable asset to many businesses.
A 25% tax credit is available to all companies for accounting periods commencing on or after 1 January 2009, within the charge to Irish corporation tax, who undertake research and development within the European Economic Area. The credit is calculated on incremental R&D expenditure which is in excess of the amount spent in the base year (2003). The research and development credit is in addition to the existing allowable deductions for the expenditure.
Where a company has excess R&D credit it can opt to (i) carry forward the excess indefinitely to utilize in future periods (ii) surrender to group members or (iii) to have the excess refunded.
The refund is spread over 3 years. The first instalment (33% of excess) will be paid not earlier then the due date for the CT Return for that accounting period. The second instalment (50% of the excess) will be paid not earlier than 12 months after the 1st instalment date. The third instalment of the remaining balance will be paid not earlier than 24 months after the 1st instalment date.
A specific R&D credit may be claimed in respect of qualifying expenditure incurred on the cost of construction / refurbishment of a building. This building must be used wholly and exclusively for the purposes of carrying on R&D activities. Any expenditure which is met directly / indirectly by State grants will not qualify for relief.
For further information please contact Antoinette Quinlan.
Finance Bill 2010 – Increasing Ireland’s Competitive Advantage
22/02/2010 by Cormac Kelleher
Details of the Irish Finance Bill 2010 were announced on Thursday, 4 February 2010. This Bill gives effect to the changes announced by the Irish Minister for Finance in his Budget statement of 9 December 2009. The Bill contains a number of key tax measures which when taken together copper fasten Irelands attractiveness as a holding company location. The “pro-enterprise” taxation measures included in the Bill build on Irelands existing strengths.
Transfer Pricing
The Bill has announced transfer pricing legislation which will adopt the OECD arms length principles and align Ireland with international standards. This new legislation will uphold Irelands international reputation as an onshore, well regulated and transparent low tax jurisdiction and has been widely welcomed by Irish businesses and in particular has been welcomed by The American Chamber of Commerce in Ireland, which represents 600 US multinationals operating in Ireland.
It is not considered that this announcement will cause undue concern for multinationals doing business in Ireland. This is on the basis that there should be no incremental administration burden on companies in terms of the requirements to have transfer pricing documentation in place. There should be no requirement to prepare additional transfer pricing documentation from a purely Irish perspective for, say, an Ireland / US transaction once the transaction is already covered from the US side. In addition, these new provisions will provide multinationals with a legislative justification for the level of profits generated in Ireland.
The new provisions will come into effect for accounting periods commencing on or after 1 January 2011. However, the regime will only apply in respect of arrangements entered into on or after 1 July 2010. Accordingly there exists a short lived opportunity for international organisations to review existing arrangements and those shortly up for renewal. Additionally, these new provisions will not apply to small and medium sized enterprises. In general, the determination of the size of an enterprise will be determined at group level.
The Bill indicates that the transfer pricing regulations will only apply to related party transactions in which the taxpayer is subject to tax at the trading rate of 12.5%. Income which may be classified as “passive income” and taxable at the higher rate of 25% should fall outside the scope of this new legislation (e.g. interest, royalties, certain dividends)
The draft legislation does not contain any specific penalty provisions. In the absence of same, it is understood that the general tax penalties set out in Irish legislation will apply.
Taxation of Foreign Dividends
As a consequence of various tax incentives announced over the past number of years, Ireland has become a favourable holding company location. The Bill announced three further measures which should further improve Irelands attractiveness as a holding company location.
The Bill provides that dividends declared and paid out of the trading profits of a company resident in a non-treaty jurisdiction will be subject to Irish corporation tax at a rate of 12.5%. This treatment will only apply to trading dividends received from:
· 75% subsidiaries and
· The principal class of shares in which are substantially and regularly traded on a recognised stock exchange in Ireland, the EU, a treaty country or such other stock exchange as may be approved by the Minster for Finance.
Prior to the announcement of this provision, dividends received from a company resident in a non treaty jurisdiction would have been taxable at a rate of 25%. Dividends paid outof the trading profits of a company resident in a treaty jurisdiction are taxable at 12.5%.
In order to facilitate the above, the Bill has also simplified the rules for identifying the underlying profits out of which foreign dividends have been paid.
Irish companies in receipt of foreign dividends may be exempt from Irish corporation tax. This treatment will only apply where the Irish company holds less than 5% of the share capital and voting rights in the foreign entity. In addition, this treatment will only apply where the Irish company treats such income as trading income for tax purposes.
The provisions outlined above will apply to dividends received on or after 1 January 2010.
Interest Paid to a Company Resident in a “relevant territory”
Irish companies are currently exempt from operating Irish income tax and withholding taxes on interest payments made to companies resident in a “relevant territory”. A relevant territory is defined to include EU Member States and countries with which Ireland has double taxation agreements.
The Bill provides that this exemption will only apply where the recipient of the interest is “liable to tax” in the relevant territory. In the event that the recipient is not liable to tax in their home jurisdiction, Irish income tax and withholding tax will have to be applied to such payments. In such circumstances, consideration should be given to the relevant double taxation agreement. The relevant agreement may provide for a reduced or a nil rate of withholding tax and the interest may be exempt from income tax.
These provisions will only apply to interest paid on or after the passing of the Act. The Act is likely to be signed into law in early April 2010.
Double Tax Relief for Taxes on Foreign Branches
In general, an Irish resident company with a non Irish branch(s) will be subject to Irish tax on the foreign branch profits. A credit will typically be granted in respect of the foreign taxes paid in respect of the profits. To the extent that there are unutilised branch credits in a period, these credits are lost.
The Bill provides that any unutilised credits can be now carried forward indefinitely and credited against corporation tax on foreign branch profits payable in future accounting periods. This new provision will apply in respect of accounting periods ended on or after 1 January 2010.
Start Up Companies
A corporation tax exemption was previously announced in the Budget in respect of new start up companies. The Bill confirms that start up companies which commenced to trade in 2010 will be exempt from corporation tax and capital gains tax in each of the first three years. This exemption will apply to the extent that the entities tax liability for each of the three years does not exceed €40,000.
Intellectual Property
An intellectual property regime was introduced to the Irish tax code in May 2009. The Bill contains a number of significant changes to the regime which greatly enhances its attractiveness and widens its availability.
The list of qualifying intangible assets has been expanded and now includes applications for legal protection (e.g. applications for the registration of trade marks, patents, copyright etc). The amended definition is broadly in line with that of the OECD model tax treaty.
The 2009 legislation provided that there would be a clawback of relief if qualifying IP is disposed of within 15 years of first qualifying. The Bill has reduced this clawback period to 10 years
Assignment Relief
In an endeavour to encourage key international talent to relocate to Ireland, a relief programme was announced in 2009. With effect from 1 January 2010, the relief will apply to foreign employees from EEA countries who relocate to Ireland for the first time. Prior to the Bill, the relief only applied to employees coming to Ireland from countries outside the EEA. The minimum period for which an individual must remain working in Ireland has been reduced from three years to one year.
Relief will be granted by way of a year end rebate of taxes as apposed to a reduced payroll withholding tax obligation. The final Irish tax exposure will be limited to the higher of:
· Total employment earnings and benefits received in / remitted to Ireland; or
· The first €100,000 plus 50% of earnings and benefits in excess of €100,000
Summary
The package of measures outlined above reinforces Ireland’s status as a favourable location for international holding company structures and are to be welcomed.
If you have any questions on these or any other aspects of Irish tax, please contact either;
Cormac Kelleher (cormac.kelleher@moorestephensnathans.com) or
Mark Barrett (mark.barrett@moorestephensnathans.com)
Finance Bill Headlines
10/02/2010 by Moore Stephens Nathans
Business Tax
Start-up Companies
Relief from corporation tax for start-up companies has been extended to those companies commencing to trade in 2010. The exemption currently applies in respect of trading profits and gains of companies incorporated after 14 October 2008 and which commenced to trade in 2009. It applies for 3 years from the commencement of the trade. Click here to read `Irish Tax Exemption for Start Up Companies
Transfer pricing
The Bill introduces new transfer pricing provisions. These are intended to align Ireland with international standards by adopting the OECD arms length principles. The provisions will apply to both domestic and cross border trading transactions between associated companies and will apply only to large businesses, small and medium size enterprises are excluded. Those larger entities to whom transfer pricing applies must maintain sufficient documentation to show compliance and must ensure that this documentation is available on request. The provisions have a number of important exclusions, including land dealing transactions and for capital allowances. Click here to read `Establishment & Hosting of Irish Companies `
R&D Credit
The existing R&D tax credit is being amended to cover situations where a company carries out R&D activities in different facilities in separate geographical locations. LINK to R&D Credit Article
Intangible Assets
The capital allowance scheme for Intangible Assets has been enhanced to improve its effectiveness. The period for which the assets must be used in the trade to avoid a clawback on disposal has been reduced to 10 years.
Assets now covered by the scheme will include applications for the grant or registration of patents and copyright and a broader definition of know-how. Pre trading capital expenditure on specified intangible assets and impairment charges will also qualify for relief along with computer software acquired for commercial exploitation.
Foreign Dividends Liable at 12.5%
The scope for taxing foreign dividends at 12.5% has been extended to dividends paid out of the underlying trading profits of a company resident in a non-treaty country where the company is owned by a publicly quoted company.
Cross Border Mergers Relief
A transfer of trade and assets in a cross border merger will not now give rise to a balancing charge. The company acquiring the trade will step into the shoes of the transferor for capital allowances purposes.
Unilateral Credit Relief/ Royalty Income
An extension of unilateral credit relief in respect of withholding taxes on royalty income from non-treaty countries to all trading companies has been proposed.
Carry Forward of Unrelieved Foreign Tax on Branch Profits
Where an Irish company has foreign branches it is generally taxable on the profits of the branches and a credit is available for foreign tax suffered on those profits. A unilateral form of foreign tax credit relief was introduced in 2007 for taxes paid by foreign branches in non-treaty countries; credits could also be `pooled`. The amendment in Section 43 will allow unused credits to be carried forward against corporation tax in succeeding accounting periods. This affords similar treatment to branches as to income from foreign subsidiaries.
Income Tax
Domicile Levy
The Bill introduces the new annual domicile levy of €200,000 for individuals whose liability to Irish income tax is less than €200,000, whose worldwide income for a tax year is over €1m and whose Irish situated property is valued at over €5m on a valuation date.
The levy applies to individuals who are Irish domiciled and Irish citizens regardless of residence.
Irish income tax will be allowed as a credit against the domicile levy. It seems that to get the credit the income tax must have been paid before the due date for the levy.
In calculating the value of Irish property no deduction is given for borrowings.
The valuation date is 31 December for the year in question.
The new levy applies from 2010 and is payable on a self-assessment basis, so for 2010, the levy will be payable on or before 31 October 2011.
Shares in trading companies (or holding companies whose main value derives from subsidiary trading companies) are excluded from the definition of Irish situated property for the purposes of the €5m test.
Restriction of Reliefs for High Earners
The existing restriction of specified reliefs for High Earners has been extended. The entry level to which the restriction will apply is reduced from €125,000. The full restriction will apply where adjusted income is over €400,000
Special Assignment Relief
A special assignment relief which was introduced in Finance Act (No.2) 2008 to attract key talent from overseas has been extended to include EU & EEA nationals who are non Irish domiciled. The period of assignment to Ireland is reduced from 3 years to 1 year.
Income levy
The Bill provides broadly an extension of relief from the income levy with regard to earnings from foreign employments as follows:
Application of cross border workers relief to the income levy.
Exclusion from the levy for certain employment earnings of an individual who is resident in a country with which Ireland has a double tax agreement and where those earnings are not subject to PAYE, as a result of a notification issued by Revenue where they are of the view that to operate PAYE would be impracticable because of the circumstances of the employment or because of the amount of earnings involved.
PAYE Credit for Proprietary Directors
The Bill provides that the credit can only be given to the extent that PAYE has been deducted.
Mortgage Interest Relief
The Finance Bill has introduced measures with the intention to offer support to homeowners who bought at the peak of the property boom and now find themselves in negative equity and separately to encourage others who want to buy a house over the next three years:
Mortgage interest relief is extended to 2017 for qualifying loans taken out on or before 31 December 2011. Current rates and levels of relief will apply to these loans.
Extended relief at reduced levels will apply for those taking out qualifying loans during 2012.
Mortgage interest relief will be abolished from 2018 onwards.
Relief for Health Expenses
- The Minister may deem certain treatments ineligible for tax relief where those treatments would be considered to be contrary to public policy.
- Disallowance of general cosmetic surgery costs.
- Hospitals subject to some conditions, no longer need the approval of the Minister for Finance before a claim for expenses can be made. Nursing Home fees will qualify for relief provided 24 hour on site qualified nursing care is available.
Capital Taxes
CAT
Significant changes have been proposed to the CAT regime to simplify the administration and collection of CAT:
Introduction of a pay and file regime for CAT. The pay and file deadline will be aligned with the Income Tax Deadline of 31 October. The tax year will be split into 2 periods. Where the valuation date for the gift or inheritance arises between 1 January and 31 August the pay and file deadline will be on 31 October in that year. Where the valuation date arises between 1 September and 31 December the pay and file deadline will be 31 October in the following year. The extended ROS filing deadline will apply where ROS is used.
E-Filing will be required where certain reliefs are being claimed.
Capital gains tax
Certain gains made by a non trading offshore company that is in a group with a trading company will no longer be attributed to the Irish resident participators.
The Bill proposes changes to the date of disposal and acquisition for CGT purposes in respect of disposals subject to a CPO. The person disposing of the land is treated as making the disposal on the date the consideration is received or immediately prior to death, where the consideration has not been received at the date of death.
The Bill proposes amendments to the CGT retirement relief provisions under section 598 TCA by including payments under a buy-back or redemption of shares (which are not treated as a distribution) within the scope of the relief, and thereby within the scope of the €750,000 threshold
The Bill proposes amendments to the 80% `windfall tax` introduced by the NAMA legislation by providing for an exemption for disposals of small sites of under 1 acre and with a market value below €250,000. It also extends the remit of the tax to profits or gains attributable to planning decisions which may be in contravention of the development plan for the area
Stamp Duty
A new anti avoidance provision has been proposed to counteract the avoidance of stamp duty on share transactions. This arises through the use of debt which ultimately benefits the shareholder directly or indirectly. Where the debt is paid by someone other than the transferee, it is to be included as part of the consideration for the purposes of stamp duty.
VAT
The Bill outlines legislation to support the changes for treatment of 2nd hand means of transport announced in the Budget and is aimed at alleviating difficulties in the motor trade
Changes to the VAT treatment of public bodies are outlined, on foot of successful EU Commission proceedings. As a result of these amendments, Local Authorities in particular will be subject to VAT at the underlying rates on services where there could be a distortion of competition (e.g. waste disposal, leisure facilities etc) and on certain other activities listed in the Directive e.g. port and airport services. Where appropriate, input VAT on these supplies will be recoverable.
Anti-avoidance
A number of anti-avoidance provisions have been proposed within the Finance Bill, including:
Restrictions will apply on allowable CGT losses in cases where arrangements were in place to secure a tax advantage
Rent-a-room relief will not be available where the recipient is an employee or office-holder of the person making the payment
Revenue will not approve a profit sharing scheme where certain service companies are used or where arrangements are in place for loans to eligible employees.
Arrangements whereby a lessor and lessee can claim capital allowances on the same assets will be prevented.
The exemption for dividends received by an Irish tax resident company from an Irish tax resident subsidiary will be denied in respect of dividends related to profits earned while the subsidiary was tax resident outside Ireland. This applies where the dividend is paid within 10 years of the subsidiary becoming Irish tax resident.
Irish Tax Exemption for Start Up Companies
26/01/2010 by Cormac Kelleher
In keeping with Ireland’s pro enterprise tax policy, the Irish Minister for Finance recently announced a tax exemption for “start up companies”. This welcome tax initiative was previously announced by the Minister in 2008 but has only now been approved by the European Union. This stimulus has now been enacted into Irish law.
This initiative is part of Ireland’s pro business ethos. Various other business incentives have recently been announced by the Irish Government. Such announcements are complimentary to Ireland’s attractive holding company regime. As a consequence, there has been an upsurge in multinationals relocating their headquarters to Ireland, thus making Ireland an attractive location for international businesses to centralise corporate activities.
Organisations to have recently relocated to Ireland include XL Capital, who announced that it is relocating is headquarters from the Cayman Islands. Zurich Financial Services have also announced that they are to transfer the majority of their general insurance portfolios in Italy, Portugal and Spain to Ireland. Other organisations following the trend include the Willis Group and the Beazley Group.
Executives’ decisions on where to locate their corporate headquarters will be impacted upon by how US President Barack Obama’s administration ultimately treats tax havens. Companies located in Bermuda and the Cayman Islands are likely to be effected. From an international perspective, Ireland does not have a reputational issue that it is “just a tax haven”. Ireland is well perceived given its broad network of double taxation agreements.
How the exemption works
Qualifying companies will be exempt from Irish corporation tax and capital gains tax in each of their first three years of trading provided their tax liability does not exceed €40,000 per annum. In essence this exemption enables a company to generate trading profit of €320,000 per annum before incurring a tax liability.
Marginal relief will be available in circumstances where an entity’s tax liability is between €40,000 and €60,000. Relief will not be available where the tax payable is €60,000 or more in a period. Any excess profits will be subject to the very favourable rate of 12.5%, which applies to trading activities in Irish companies.
This exemption will not be available to companies carrying on trades which are taxable at the higher rate of 25% (e.g. land dealing and mineral exploration trades). In addition, it will not apply where a company transfers an existing trade to a connected person.
For further information in relation to the above please contact:
Andy Quinn (andy.quinn@moorestephensnathans.com)
Mark Barrett (mark.barrett@moorestephensnathans.com)
Phone: +353 1 888 1004
Tax Treatment of Payments To Locums
26/01/2010 by Cormac Kelleher
Changes have recently been announced in relation to the manner in which payments to locums are to be taxed.
The Revenue Commissioners have ruled that in general, payments made by medical practices to locums may be subjected to PAYE. As a consequence of this Revenue ruling locums may now be considered to be providing services similar to other employees of the practice.
Where a locum is deemed to be an employee of the practice, the practice is obliged to deduct PAYE / PRSI / income levy and pay same over to Revenue. As the locum will be considered an employee, the practice will also be required to pay employer PRSI contributions. These employer PRSI contributions can amount to 10.75% of the locums gross income. This additional payment will represent a real cost to the practice. Accordingly, consideration should be given to reviewing the commercial arrangements with the locums with a view to minimising this cost
PAYE / PRSI will not in all circumstances be applied to locum payments. This is on the basis that not all locums should be considered as employees of the practice. Certain locums should continue to be considered as “self employed” on the basis that they provide services to a large number of practices, are paid on the basis of the number of patients they see etc.
With effect from January 2010 we would recommend that practitioners advise their locums that they intend to operate PAYE / PRSI / income levy on all payments to be made to them. This treatment should be applied unless the locum is in a position to obtain a written determination from their Inspector of Taxes indicating that they are to be treated as self employed and paid on a gross basis.
The requirement to operate PAYE / PRSI / income levy on payments will give rise to an additional administrative burden. In order to ensure clients PAYE / PRSI / income levy requirements are satisfied, we are able to provide an in house payroll bureau service. This is a cost efficient solution for the simplification of the payroll process.
If you wish to discuss the above in more detail please contact a member of your service team.
New VAT rules from 1 January 2010
21/01/2010 by Padraig O'Donoghue
From 1 January 2010, new VAT rules will come into effect across the EU with regard to the VAT that arises on cross-border supplies and the procedure for recovering foreign VAT.
The three principal areas where there is change are as follows:
· Changes to the place of supply rules for services
· Cross-border refund procedures simplified
· New compliance requirements
The benefit of the new rules is that they provide a simplification of the method of accounting for VAT and a consistent treatment of VAT on services across the EU.
On the downside there is the potential for an increase in reverse charge costs for VAT exempt or partially exempt businesses and there are new compliance requirements which will be an additional burden on business.
The details of the main changes are set out in the following paragraphs.
Place of Supply of Services
At present the general rule regarding the place of supply of services to other VAT registered persons is that the VAT liability arises in the EU country where the supplier has his place of business, subject to certain exceptions.
From 1 Jan 2010 business to business services will be deemed to be supplied where the customer is located. This simplification means that the recipient of the service will self account for the VAT liability on the service in the country where they are located. There are a number of exceptions to this rule including services connected to land and buildings, passenger transport services, restaurant and catering services. Key areas to which the reverse charge will be extended are administrative services, leasing of means of transport and work on moveable goods (i.e. repairing moveable goods).
Foreign VAT refunds
From 1 Jan 2010 businesses will submit their foreign VAT reclaims electronically to the Irish Revenue who will verify the claim and forward it to the appropriate Member State to process the refund. This should speed up the claims process and provide a greater legal certainty for the claimant. The deadline for filing a foreign VAT refund claim will be extended from 30 June to 30 September following the end of the year in which the VAT was incurred. The new rules will restrict recovery for partially exempt companies to the Irish recovery rate.
New filing requirements
The new rules have extended the VIES filing requirements to services. Suppliers of certain services to foreign EU business customers will be required to file quarterly statistical VIES returns electronically through ROS from 1 Jan 2010.
The new rules also introduce a requirement that where the value of the goods supplied to foreign EU business customers exceeds €100,000 per quarter then a monthly VIES return will be required rather than a quarterly return.
Penalties will apply for late or incorrect submissions of VIES returns.
What you should do to prepare for the 2010 VAT Changes
1. Review how you are currently treating services supplied to or received from outside Ireland. Businesses in receipt of services from abroad will need to review whether they will be required to self-account for Irish VAT on receipt of the services.
If you supply administration or other similar services to customers in other EU countries you should contact them to obtain their VAT registration numbers and from 1st January any invoices issued should include the customers VAT No and a reference to the fact that the recipient is liable to account for the VAT on the service on the reverse charge basis.
2. Partially exempt companies should consider making a claim for an Eight Directive refund for 2009 foreign VAT prior to 31 December 2009.
3. Register for VIES
If you supply any services to customers in other EU countries where the customer will account for VAT on the reverse charge basis you should register for VIES from 1st January 2010.
4. Accounts System
Ensure your accounts systems can deal with new invoicing requirements and ensure the system is capable of producing VIES reports for services.
5. Review Customer Contracts
Review any clauses in customer agreements relating to VAT liability on the service provided.
Change in VAT Rate
21/01/2010 by Padraig O'Donoghue
The standard rate of VAT changed from 21.5% to 21% on 1 January 2010. All business should ensure that this change is reflected in their accounts package.
If your business accounts for VAT on the invoice basis and the correct date for issue of the invoice to another business is after 1st January then you should apply the 21% rate of VAT. If your transaction is with a private individual rather than another business then you should apply the VAT rate in force at the time you supplied the goods or services.
If your business accounts for VAT on the cash receipts basis you are not liable for VAT on your sales until you receive payment. However where the goods or services were supplied before 1 January 2010 but you did not receive payment until on or after 1 January 2010 you should account for VAT at the 21.5% rate.
If you require any further information on the change in VAT rates please contact padraig.odonoghue@moorestephensnathans.com
Summary Of Budget Measures 2010
10/12/2009 by Moore Stephens Nathans
Income Tax
- There have been no changes to the standard rate band or tax credits.
- Measures are being considered to create a new system for taxing income. There will be just two charges on income from 2011. This will encompass a new universal social contribution at a low rate on a wide base to replace employee PRSI, the health levy and the income levy; as well as income tax which will apply progressively.
- For 2010, the effective tax rate for high earners availing of tax incentives is to increase to 30% (plus PRSI and levies). The entry level threshold for the restriction will be at adjusted income levels of €125,000 (currently €250,000). The full restriction will apply at €400,000 (currently €500,000). The curtailment and removal of further reliefs is to be considered in the Finance Bill.
- The Minister is introducing an Irish domicile levy of €200,000 per annum on all Irish non-resident nationals and domiciled individuals, whose worldwide income exceeds €1,000,000 million and whose Irish-located capital is greater than €5,000,000.
- Mortgage interest relief is to be abolished entirely by the end of 2017. Those for whom relief would otherwise expire on or after 2010 will qualify for relief up to 2017. The Minister noted that transitional measures will be introduced.
- The tax treatment of pension lump sums and the rate of relief on contributions will be considered in the Government National Pensions Framework to be published shortly by the Department of Social and Family Affairs.
Corporation Tax
- The Minister reinforced his commitment to the 12.5% corporate tax rate on trading profits. He stated that “The 12.5% corporation tax rate will not change. It is here to stay.”
- The current 2009 scheme to provide a three year exemption from tax on the income and gains of new start-up companies will include companies who commence to trade in 2010.
- The Minister indicated that enhancements to the R&D tax credit regime and Intellectual Property regime will be detailed in the Finance Bill.
- The existing capital allowances scheme for energy efficient equipment for companies will be extended to include additional categories of eligible equipment including refrigeration and cooling systems, electro-mechanical systems and catering and hospitality equipment.
VAT
- The standard rate of VAT is being reduced from 21.5% to 21% with effect from 1 January 2010.
Capital Taxes
- There were no changes in the Budget on capital gains tax, capital acquisitions tax and stamp duty rates.
Carbon Tax
- A carbon tax at a rate of €15 per tonne is being introduced. The tax will apply to:
-Petrol and diesel from midnight 9 December. ( An increase of 4.2c per litre for petrol and 4.9c per litre of diesel)
-Kerosene, Marked Gas Oil, Liquid Petroleum Gas (LPG), Fuel Oil and Natural Gas from 1 May 2010.
-Coal and commercial peat subject to a Commencement Order. - Participants in the EU Emissions Trading Scheme (ETS) in respect of those fuels will be exempt.
- The yield from carbon tax is to be used to boost energy efficiency, to support rural transport and to alleviate fuel poverty. 50% of the carbon tax yield will be used to fund measures such as retrofitting homes for those at risk of fuel poverty. It is also proposed that carbon tax may be used to maintain or reduce payroll taxes.
- The Commission recommendation that carbon tax should be clearly visible at the point of final consumption was not adopted in the Budget.
Vehicle Registration Tax (VRT)
- VRT relief of up to €1,500 will be provided where a car of 10 years or older is scrapped and replaced with a new car with low carbon emissions ie Band A or B. This "scrappage scheme" will run from 1 January 2010 to 31 December 2010.
- The existing VRT exemption for series production electric vehicles and the VRT relief of up to €2,500 for certain hybrid electric vehicles are being extended for a further two years until 31 December 2012.
Employer PRSI
- €36 million is to be allocated to an Employers Job Incentive Scheme which will provide PRSI exemption to encourage employers to recruit employees. Further details of the scheme are to be announced by the Minister for Social and Family Affairs.
Excise Duty
- A reduction of excise duty is being introduced on alcohol products of 12c per pint of beer/cider, 14c per half glass of spirits and 60c per standard bottle of wine.
Tax Avoidance Schemes
- The Minister announced plans to introduce a package of measures to improve the effectiveness of the Revenue Commissioners in tackling the shadow economy and in dealing with tax avoidance schemes.
Other
- Public servants in the higher tax bands will be subject to pay reductions up to 15%. A reduction in salaries generally for the public sector ranging from 5% to 10% is being introduced.
- Reductions are to be introduced in the monthly rates of child benefit at the higher and lower level by €16, bringing them to €150 and €187 respectively.
- The Government has accepted the Commission on Taxation recommendation of the need for a property tax. Work is to begin on registration of ownership and valuation of land.
- Water charges are also to be introduced.
- A credit review system is to be established for the SME sector offering an independent review of refusals for bank credit by banks participating in NAMA.
Tax Commission Report and Year End Tips
01/12/2009 by Moore Stephens Nathans
As a result of the recommendations in the Report of the Commission on Taxation there are a number of matters that should be considered before the Budget on December 9th:
1. Capital Gains Tax retirement relief / Capital Acquisitions Tax - Business Asset Relief/Agricultural Relief
At present a capital gains tax exemption applies on proceeds of less than €750,000 arising on the sale of a business or shares in a family business where certain conditions are met. Where the disposal is to a child, the deemed market value, even if it exceeds €750,000, may be exempt from tax in certain circumstances. Also capital acquisition tax reliefs apply to a child being gifted a farm or a business. It appears that Retirement Relief and Business Asset/ Agricultural relief is to be restricted to shares and assets ie farms worth less than €3m.
It may be prudent in circumstances where such transactions are contemplated anyway to advance the timing of completion of such a transaction to a date in advance of the December Budget to ensure that the present tax reliefs are availed of.
2. Pension contributions
Relief is currently available at a taxpayers marginal tax rate on contributions to a personal pension scheme at rates ranging from 15% to 40% of earnings depending on age. This is subject to an income cap of €150,000 for 2009. A restriction in the level of relief in this area would seem to be a prime target of any attempts by Government to boost overall tax revenues. It may be prudent for taxpayers to advance the payment of any contributions to a date before 9th December so that the tax consequences can be determined with certainty.
In the case of companies the level of contributions to an approved company pension fund are not presently restricted in this manner and it may well be prudent for any company to consider advancing any contributions that it intends to make anyway in 2009 to a date in advance of 9th December.
Other year end tips
- Maximise income between a married couple at the 20% rate band
The maximum earnings that can arise to a married couple with one spouse employed is €45,400. In many businesses the reality is that the second spouse often provides an essential and unremunerated support function to the business owner, which if performed by another person would be deserving of a wage or salary.
It is tax efficient if that second spouse were to be remunerated in a manner that maximises the benefit of the overall maximum standard tax rate band applying to a married couple of €72,800. This can also permit that second spouse to make arrangements in relation to a private pension in their own name at retirement.
Research and Development Tax Credits
01/12/2009 by Moore Stephens Nathans
In last years Finance Bill the time limit within which companies could reclaim research and development tax credits was reduced to one year. The practical implication of this is that any company with a December year end has until 31 December 2009 to submit a claim to Revenue for a refund of tax credits arising in the year ended 31 December 2008.
This is a generous relief and is one of the central planks of the Governments initiatives to maintain investment levels in Ireland. In respect of claims made after 1 January 2009, the company can apply for a refund of the credit from Revenue which is paid in three instalments over three years, which makes this a valuable relief.
It has in our experience wider application than is generally realised and in our view it can be beneficial to carry out an independent review of business processes and activities to ascertain if any benefit may be forthcoming.
Moore Stephens European Executive Council meets in Ireland
25/11/2009 by Brian Hayes
The European Executive Council of Moore Stephens met yesterday in our Dublin offices. Presentations from our Dublin International Partner Andy Quinn and discussions with our Managing Partner Carl Dillon over the day re-enforced Ireland’s considerable advantages as the place to do business in Europe. Carl Dillon said “Discussions not only highlighted the advantageous tax regime, but also revealed accessibility into the market through the commercially aware and well educated workforce that exists, coupled with Ireland’s agility as a smaller economy to bounce back from recessionary times”. Moore Stephens Council members leave us carrying with them positive impressions of both Moore Stephens Nathans and of Irish business opportunities.
Ireland still attractive to International business
23/10/2009 by Moore Stephens Nathans
BRITAIN’S second-biggest insurer Aviva plans to cut costs and exploit growth opportunities by moving its European headquarters to Ireland.
The company denies the move is linked to Ireland’s competitive corporation tax rate of 12.5%. Aviva is to simplify the range of products it offers across its 12 European businesses and speed up new product launches, it said.
Its chief executive for Europe, Andrea Moneta, said Ireland’s low corporate tax rate of 12.5% would cut the company’s overall tax bill, but stressed the targeted efficiency gains did not depend on tax reductions.
"The programme is going to deliver a set of improvements in terms of revenues and costs, and there is also room for improvement in terms of the blended tax rate we have," he said.
Other overseas companies including WPP, the leading British advertising agency, and British insurance brokers Willis, which owns the Dublin-based Coyle Hamilton Group, have relocated their headquarters to Ireland enticed by the low rate of business tax.
WPP said it moved here in opposition to the change in British tax rules. It will save up to 10% of its overall profits as a result of the more favourable tax regime here, it said.
Mark Barrett, tax partner with Moore Stephens Nathans, said that while the strategic objectives given for the decision to move are plausible "there is no doubt in my mind that it is tax driven".
The flow of companies into Ireland over the past 12 months highlights the attractiveness of Ireland as a place to relocate to, Mr Barrett said.
"It remains to be seen what gains the economy will derive from this type of transfer," he said.
The 12 European businesses being integrated into the Irish operations, which has still to be given regulatory approval, excludes Aviva’s domestic British business and its Benelux operations.
The group’s decision will not have any real impact on jobs in Ireland, but Stuart Purdy, managing director, Hibernian Aviva in Ireland, said it will result in more capital being held by the group at the new Irish headquarters for the rest of Europe. It was also a significant endorsement for the Irish arm of the European operations, he told the Irish Examiner.
He was not in a position to say how much the lower tax regime will add to overall profit.
This story appeared in the printed version of the Irish Examiner Friday, October 23, 2009
Non Principal Private Residence Charge
19/10/2009 by Moore Stephens Nathans
The Local Government (Charges) Act 2009 (the “Act”) as enacted on 24 July 2009 provides for the introduction of a €200 charge on certain residential property. This charge was originally announced by Minister Lenihan in the supplementary April 2009 Budget.
In general, the annual €200 charge will be payable in respect of non principal private residences located in the State. A payment will be required to be made by an “owner” of a residential property held by them at the “liability date”. For the purposes of the Act, an “owner” is defined as including any person who is entitled to (i) receive the rent of a property or (ii) where the property is not let, would be so entitled to receive rent if it were rented. The broadness of the definition not only includes ultimate beneficial owners but also can include a trustee (see exemptions below), agent or executor of an estate.
A liability will be calculated by reference to the “liability date”. In respect of the 2009 period, the liability date has been set at 31 July 2009 and payment is required to be made by 30 September 2009. For 2010 and future periods, the liability date will be 31 March of each year. Liabilities will be required to be discharged by 31 May of the relevant year.
As indicated above, payments in respect of the 2009 period should be made by 30 September 2009. However, from our reading of the Act it would appear that the absolute final date by which the 2009 should be paid is 31 October 2009.
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Moore Stephens Announces Irish Operations
03/09/2009 by Moore Stephens Nathans
Newly named Irish accountancy practice targets Top 10 industry position
Dublin, September 4th 2009: Leading Irish owned accountancy and business advisory practice, Nathans, has today announced that it has joined Moore Stephens International, one of the largest international accounting and consulting groups. From today, Nathans which has offices in Dublin and Cork will become Moore Stephens Nathans. Today's development is part of a wider growth strategy being pursued by the firm which employs 123 people, is currently ranked among the Top 15 accountancy practices in Ireland and in 2008 reported fee revenue of €11 million.
Originally established in Cork in 1970, recent growth at Nathans has been increasingly led by its Dublin operations. The Practice expects to achieve revenue growth in the region of 40% at its Dublin office to the end of 2012. The business is well resourced and intends to drive this growth both organically and through acquisition. Nathans' has recently advised on the image rights elements to a number of high profile transactions in European club football and International Rugby Union. Today's announcement also coincides with Nathans' departure from the HLB Network which it joined in 1996.
Carl Dillon, Managing Partner, Moore Stephens Nathans said; "Over the past 18 months Nathans has performed strongly in an extremely difficult market, consolidating its position and building its core business. The practice is now well positioned for future growth through our offices adjacent to the IFSC in Dublin and newly renovated premises on Cork's South Mall. The move to the Moore Stephens international network was the next logical step in the execution of our growth strategy."
Richard Moore, Chairman of Moore Stephens International said; "Given the demand across Moore Stephens worldwide for a strong international service in Ireland, it was critical to have a full service firm in Dublin able to deliver to our international clients' needs. We were convinced that Nathans, being already active internationally and keen to leverage the specialist expertise available within Moore Stephens International, could offer the best fit for our continued success in Ireland."
"Growth in Dublin with a particular focus on developing our international client base is a key part of our strategy. We believe the firm is excellently placed to build upon the impressive performance achieved in recent years. The firm is also well resourced and will drive its strategic growth ambitions through both organic and acquisitive initiatives. We will also continue to invest in technology, talent and developing our service excellence." Carl Dillon added.
Nathans Welcomed to Moore Stephens
03/09/2009 by Moore Stephens Nathans
Managing Partner Carl Dillon with Richard Moore at Moore Stephens Nathans welcome to Moore Stephens International network in London
