Taxing Times Finance Bill 2018 & Current Tax Developments - Focus. Clarity. Insight - Global
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Taxing Times Finance Bill 2018 & Current Tax Developments Focus. Clarity. Insight.
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TaxingTimes Finance Act 2018 1
Introduction
The Government published Finance Bill 2018 on 18 October 2018. The Bill contains the taxation
Conor O’Brien measures announced in the Minister for Finance’s Budget speech on 9 October 2018 as well as a
Partner small number of measures not previously announced.
The Irish economy is in robust health and
has staged a remarkable recovery from the
their affairs to ensure that they
are not inadvertently affected.
Contents:
downturn caused by the property market The Bill contains a number of measures
crash 10 years ago. This is a tribute to the designed to reduce the tax system’s
surefootedness of Irish policy-makers and administrative burden. These include a Personal Tax 2
to the discipline of Irish citizens. The healthy substantial rewrite of the Employment
economic environment is very positive Incentive and Investment Scheme and
for Irish businesses, as is the continued Start-up Refunds for Entrepreneurs tax
Employment Taxes 4
prudent management of government reliefs for investments in corporate trades
finances and the unrivalled stability of designed, inter alia, to simplify compliance;
Ireland’s attractive corporation tax regime. Business Tax 6
some simplification of the film tax credit,
There will be some disappointment that, and a reduction of some of the compliance
in what are relatively benign economic burden related to tax appeals. If this is
times, there is a paucity of tax measures Agri-business measures 10
the beginning of a trend of cutting red
designed to stimulate domestic tape, that would be most welcome as the
entrepreneurship, attract international administrative costs of our tax system have
mobile talent or reverse the many crisis-era Property & Construction 12
grown substantially in recent years – often
tax increases. driven by EU and OECD requirements
The Bill confirms the modest, but outside the Irish state’s control. VAT & other indirect taxes 13
welcome, income tax reliefs announced in Ireland’s income tax system is skewed
the Budget, including: against those on higher incomes to
• a reduction in the 4.75% rate of USC a degree that is almost unique in the Exit tax 16
to 4.5% developed world – more so than in any
• an increase of €750 in the standard rate other EU member of the OECD. The
income tax band top 1% of income earners in Ireland pay Ireland Introduces Controlled
• an increase in the home carer tax credit 28% of all income tax and USC, which is Foreign Company (CFC) rules 18
of €300 almost double the entire amount paid by
• an increase in the earned income tax the bottom 74% of income earners. More
credit of €200 than half of all income tax and USC is paid Implementation of the
The Bill also confirms the unwelcome by the top 7% of earners. Despite this, multilateral instrument (MLI) 21
tax increases announced in the Budget, the Bill confirms the practice of confining
including: tax relief to incomes under €70,000 and
of narrowing the income tax base. There Tax Rates & Credits 24
• a n increase in the VAT rate applicable to appears to be almost no prospect of
tourism-related activities from 9% reversals of the substantial crisis-era tax
to 13.5% increases in marginal income tax, capital
• the second of three 0.1% increases in
gains tax, capital acquisitions tax and other
the rate of employer’s PRSI, by way of
investment tax rates. All of these taxes are
an increase in employer contributions
to the National Training Fund now high by international standards.
• an increase in betting duties and tobacco- Ireland’s policy of offering a competitive
related excise duties tax regime to foreign corporate investment
The Government has again reaffirmed has been of great benefit to the nation,
its commitment to Ireland’s 12.5% and continues to attract near universal
corporation tax rate. Ireland’s commitment support. The contrast however with the tax
in this regard has been rock-solid for many regime offered to domestic entrepreneurs
years. The Bill confirms that the corporate is stark. That regime is uncompetitive by
exit tax which Ireland has committed to international standards and, if the tide of
introduce under EU law will be levied at the foreign corporate investment ever recedes,
12.5% rate. we may well regret not having nurtured
our domestic entrepreneurial sector when
The Bill includes the legislation necessary the time was right. It is to be hoped that
to comply with Ireland’s commitment sensible targeted measures to support this
under EU law to introduce controlled sector will be introduced.
foreign corporation (CFC) rules. These rules
are intended to target the artificial diversion
of profits to low-taxed jurisdictions. It is
not intended that genuine commercial
transactions would be affected but
Conor O’Brien
companies will need to carefully review
Head of Tax and Legal Services
2 TaxingTimes Finance Act 2018
Personal Tax
Robert Dowley
Partner
Universal social charge from €1,150 to €1,350 announced in the The charge applies from 1 January 2019
The Bill provides for the various changes Budget. Both increases apply from but payments made before then are also
to universal social charge rates and 1 January 2019. exempt from tax with retrospective effect.
thresholds announced in the Budget. Full
details of the revised rates and thresholds Hepatitis C and HIV Taxation of payments under
are available in the Tax Rates and Credits compensation payments Magdalen scheme
2019 table at the end of this publication. An exemption from tax applies to The current tax exemption for payments
As expected, the Bill confirms that these compensation payments by the Hepatitis made to women under the Magdalen
changes take effect from 1 January 2019. C Compensation Tribunal to individuals Laundries Restorative Justice Ex Gratia
infected with Hepatitis C or HIV. Scheme (and their state pensions) is
being extended to women who were
Income tax bands The Bill extends the tax exemption to
resident in certain adjoining institutions
The Bill provides for the increases in the payments made under a comparable
of the Magdalen Laundries.
standard-rate tax bands announced in overseas scheme in an EEA member
the Budget. It confirms that all bands state. This change comes into operation The Bill also provides for an exemption
will increase by €750 from 1 January on 1 January 2019. from tax for any income and/or
2019, with an equivalent increase in the gains realised from the investment/
additional band available to a dual-income Childcare support payments reinvestment of the payments qualifying
couple, married or in a civil partnership. for this exemption.
The Bill introduces an exemption
Full details of the revised thresholds are from income tax for certain payments The above changes are retrospective to
available in the Tax Rates and Credits 2019 made by the Minister for Children and 1 August 2013, when the scheme came
table at the end of this publication. Youth Affairs to assist with the cost of into operation. Where tax has been paid on
childcare, which for the most part are any of the income/gains referred to above,
Tax credits means-tested. The payments can be in 2013 or 2014, a claim for a refund can
The Bill provides for the increases in the made to parents or guardians, or the be submitted on or before 31 December
home carer tax credit from €1,200 to cohabitant of the parent or guardian of 2019. The normal four year time limit for
€1,500 and the earned income tax credit the child. refund claims applies for 2015 onwards.
TaxingTimes Finance Act 2018 3
Finally, the Bill establishes two new Dwelling house exemption Payment of tax following an
sections covering the declarations and There is an exemption from CAT in appeal
notifications to be made to Revenue to respect of inheritances of certain The Bill provides that any additional tax
exempt a deposit account containing residential property, subject to arising as a result of the determination
such payments from DIRT. conditions. One of these conditions of an appeal against an assessment to
is that the taxpayer does not have a CAT is due and payable on the same
Disposal of a site to a child beneficial interest in any other residential date that the tax due under the original
Relief from capital gains tax is available property at the date of the inheritance. assessment was payable. However, this
on the transfer of a site by a parent to The Bill provides that, for the purpose provision will not apply in circumstances
a child where the transfer is to enable of determining whether this condition where the amount of tax paid before
the child to construct his or her principal is met, the taxpayer will be treated as the making of the appeal is not less than
private residence on the site. The site having an interest in any residential 90% of the tax determined to be due
value must not exceed €500,000 and property that is subject to a discretionary as a result of the appeal. Instead, the
the area of the site must not exceed trust which they have established and of outstanding tax is payable within one
one acre. The relief will be extended to which they are a potential beneficiary. month of the date of the determination
a transfer of a site to the spouse or civil of the appeal.
partner of the child for disposals made
on or after 1 January 2019.
Time limits for making enquiries
Under the current CAT rules, the
Credit for capital gains tax – life
Revenue Commissioners can generally assurance policies
Capital acquisitions tax (CAT) make enquiries or authorise inspections A CAT relief exists whereby CGT
in relation to a return during the four occurring on the same event giving rise
CAT thresholds years commencing on the date the to the CAT is available as a credit against
In his Budget speech, the minister return is received. the CAT. On the death of a person
announced an increase in the tax-free insured under a life assurance policy,
threshold that generally applies for CAT There are a number of CAT reliefs any tax properly withheld by the life
purposes for gifts or inheritances from which are subject to claw-back if certain assurance provider is treated as CGT for
a parent to a child. The Bill provides for conditions are not met for a period of the purposes of the CAT relief.
the threshold to increase from €310,000 years. As a result of an amendment in
to €320,000, and also clarifies that the the Bill, the Revenue will be entitled A condition of the CAT relief is that
increase applies to gifts or inheritances to make enquiries and authorise the asset must be held by the donee
taken on or after 10 October 2018. inspections during the four year period for a period of two years after the gift
commencing on the latest date on or inheritance. The Bill includes an
On Budget Day, the minister referenced which all of the conditions for a relief or amendment to ensure the two year
concerns about the tax burden for exemption were required to be satisfied. requirement does not apply to life
families on inheriting the family home assurance policies in death situations
as being the driver for this increase. The given the life assurance policy will have
proposed increase in the threshold is
Surcharge for discretionary trust
matured on the death (and will not be
small, however, and there is a long way tax returns capable of being held for two years).
to go in restoring the threshold to the The Bill provides for a surcharge to be
previous level, which was in excess of imposed where a discretionary trust
tax return is not filed by the due date.
Business property relief –
€500,000 before the financial crisis.
The due date falls 4 months after the definitions
Full details of the revised tax-free valuation date of the inherited property The Bill updates a number of technical
thresholds are available in the Tax Rates subject to the discretionary trust. definitions included in the business
and Credits 2019 table at the end of this property relief legislation to align them
publication. with the definitions in the Companies
Act 2014.
4 TaxingTimes Finance Act 2018
Employment Taxes
Michael Rooney
Principal
Key Employee Engagement • €300,000 in all years of assessment, It is disappointing that the opportunity
Programme (KEEP) or was not taken to expand the relief
• 100% of the annual emoluments of to apply to a holding company of a
In his Budget speech, the minister
acknowledged that the level of interest the employee or director in the year qualifying group, and not just a single
to date in the KEEP incentive has been in which the qualifying share option is company. We hope that this change will
lower than expected. To incentivise granted. be implemented to ensure that the relief
the take-up of the incentive and to could operate in common commercial
The €300,000 limit is a lifetime limit, and
support SMEs in attracting and retaining situations.
key talent, the minister announced a replaces a previous limit of €250,000
number of changes to the rules relating for any three consecutive years of
assessment. The above limits apply Benefit-in-kind exemptions
to the total market value of qualifying
share options that may be granted by a separately to each qualifying company; for Permanent Defence Force
qualifying company to an employee or i.e. where an employee leaves and joins members
director. a new company, a separate €300,000 The Bill inserts a new provision to
lifetime limit applies.
The Bill confirms the Budget Day exempt from a benefit-in-kind charge the
changes announced by the minister. The proposed amendments are subject provision of living accommodation on
Specifically, it provides that the ceiling to a ministerial commencement order. land occupied by, used by or under the
on the maximum market value of shares control of the Permanent Defence Force,
The Bill also includes a technical
over which options may be granted by amendment which provides that as well as the provision of healthcare
a small and medium-sized enterprise Revenue may publish certain information to members of the Permanent Defence
(SME) to any one employee or director Force.
in relation to the company such as the
under the KEEP scheme should not
company’s name, address, CRO number, The exemptions apply for the 2018 and
exceed:
the date of exercise of the qualifying subsequent years of assessment.
• €100,000 in any one year of share options and the principal activity
assessment, carried on by the company.
Benefit-in-kind exemption
for the provision of electric
vehicles
As part of the Government’s
commitment to take action to address
climate change, the Bill extends the
exemptions from a benefit-in-kind charge
for employer-provided electric cars and
vans, which was due to expire at the end
of 2018.
A full exemption will apply for electric
vehicles made available between
1 January 2019 and 31 December 2021
where the original market value of the
vehicle does not exceed €50,000. A
benefit-in-kind charge will arise in respect
of an electric vehicle with an original
market value exceeding €50,000. The
charge is calculated by reference to the
amount of the original market value of
the vehicle that is in excess of €50,000.
TaxingTimes Finance Act 2018 5
Ken Hardy
Partner
PAYE for health and dental Relief arising in special PAYE rules were enacted in Finance Act
insurance providers circumstances 2017 and the Income Tax (Employments)
Regulations 2018, which were released
The Bill confirms that PAYE should be The Bill introduces provisions to ensure
on 7 September 2018 to facilitate the
operated on the taxable value of the that employees who are paid on a
new system. The Bill introduces a
benefit of health or dental insurance weekly or fortnightly basis and have
number of additional technical changes
policies provided by an employer who an additional pay-day in a tax year
required to facilitate the new system,
is a health or dental insurance provider, (commonly referred to as a ‘Week 53
including:
or a tied health insurance agent, to its pay-day’), will not have an underpayment
employees. of tax when their liability is reviewed • The inclusion of an obligation for
following the end of the tax year. Certain employers to file a monthly USC return
Retirement benefits for public deductions and tax credits to which the
• U
pdate of the employer’s pension
servants employee is entitled, together with the
reporting requirements to include the
appropriate standard-rate band, will be
The public service pension-related ASC which will be payable by public
increased by 1/52 for employees paid
deduction (PRD), which currently applies servants from 1 January 2019
weekly and 1/26 for employees paid
to the remuneration of public servants, fortnightly. If the age exemption and • C
onfirmation that if an employer is
is to be abolished on 31 December associated marginal relief applies, it will required to re-gross income of an
2018 and replaced by an additional also be increased in the same manner. employee where the employer fails
superannuation contribution (ASC) from to correctly operate the PAYE system,
1 January 2019. the required income is chargeable on
Pay As You Earn (PAYE)
The Bill provides that ASC payable by a the employee as employment income
modernisation
public servant will be deductible as an • U
pdate of references to the Income
PAYE modernisation and real-time
expense in computing the amount of Tax (Employment) Regulations 2018
reporting for the administration and
taxable employment income in the tax
operation of the PAYE system will
year in which it is paid.
be introduced from 1 January 2019.
Extensive legislative changes to the
6 TaxingTimes Finance Act 2018
Business Tax
Colm Rogers Paul O’Brien
Partner Partner
Intangible assets identified in that review. Since Business and the second tranche (10/40ths),
Finance Act 2017 reintroduced a cap Expansion Scheme (BES) relief was which is available at the end of a four
on the annual deductibility of capital rebranded and relaunched as EII relief year investment term (subject to
allowances and related interest expense in Finance Act 2011, efforts have been meeting certain conditions)
in relation to expenditure incurred on made to streamline the relief and increase
• In certain circumstances where the
intangible assets on or after 11 October its attractiveness to both investors and
basis for withdrawal of relief is within
2017. This cap operates so as to restrict companies alike. The changes proposed
the company’s control (e.g. where the
the aggregate of the capital allowances in the Bill are welcome and hopefully will
company ceases to be a qualifying
and related interest expense allowed to result in the continued growth in popularity
company), the company can be
80% of the trading income derived from of EII fundraising in the SME sector. The
subject to the clawback (rather than
the intangible assets. The cap merely limits latest available statistics (for 2016) show
the individual). The amount of this
the deductible amount in a given tax year, that €108m of EII funds were raised (up
clawback varies depending on why the
with any unused excess carried forward from €74m in 2015).
clawback arises
for use in later years. The 80% cap does Whilst the proposed legislation aims to
not apply in respect of capital expenditure •T
he imposition of a penalty on the
consolidate and streamline the relief, many
on intangible assets before 11 October company (equal to 25% of the clawback
of the substantive features of EII - and
2017. arising on a withdrawal of relief) where
the Start-up Refunds for Entrepreneurs
it is concluded that the company
Where a company incurred expenditure on (SURE) relief which applies to investments
deliberately or carelessly made an
intangible assets both before 11 October by entrepreneurs in start-up companies
incorrect return (the ‘statement of
2017 (pre 2017 IP) and after 11 October are retained. The thresholds and limits
qualification’ being the return in this
2017 (post 2017 IP), only a portion of the applying to investors and companies alike
instance)
intangible asset allowances and interest remain unchanged, and the anti-avoidance
would be subject to the 80% cap. The legislation applying to EII and SURE • The inclusion of reporting requirements
amendment in the Bill requires that fundraisings go largely untouched. whereby the company must report to
the company identify separate income the Revenue Commissioners certain
The key improvement to the relief is
streams related to pre 2017 IP and post details relating to qualifying investments.
a move away from a system of ‘pre-
2017 IP. It then provides that the use of This is to facilitate the Revenue’s own
clearance’, under which companies applied
the capital allowances and related interest reporting requirements under the EU
to the Revenue Commissioners for
on capital expenditure on pre 2017 IP and General Block Exemption Regulation
certificates which they then provided to
post 2017 IP is ring-fenced for use against (GBER), an EU regulation which
investors, to a system of ‘self-certification’
income from the same IP. The result is that facilitates compliance of certain risk
under which companies raising EII and
capital allowances on pre-2017 IP which finance initiatives with EU state aid rules,
SURE financing will issue ‘statements of
were not subject to the 80% cap are not provided they meet certain outlined
qualification’ to investors. Investors will
available for use against income from post- conditions
then self-assess their own qualification
2017 IP. before claiming relief. Key features of this • A
facility whereby companies can apply
The amendment puts on a statutory basis new ‘self-certification’ system are: to Revenue for confirmation that they
the method of apportionment already set meet relevant conditions
• A
requirement that companies can
out in Irish Revenue guidance issued in only issue ‘statements of qualification’ The above move to a ‘self-certification’
January 2018. in circumstances where the company system is most welcome as, in practice,
has spent 30% of the funds raised for the requirement to obtain Revenue
Relief for Investments in qualifying purposes, or a period of two certification in advance of claiming relief
Corporate Trades years has elapsed since the end of the had, on occasion, been administratively
year of assessment in which the shares difficult to manage.
The minister announced in his Budget
were issued
speech that, following a recent review Whilst most of the features of EII
of the Employment and Investment • In the case of EII relief, the requirement and SURE are untouched, other key
Incentive (EII) regime, he would to issue separate ‘statements of improvements are worth mentioning:
introduce a package of measures in qualification’ for the initial relief granted
• The removal of the requirement for
the Finance Bill to address the issues (30/40ths) in the first year of investment
the qualifying company to have started
TaxingTimes Finance Act 2018 7
Olivia Lynch
Partner
trading within two years of issuing in Finance Act (No. 2) 2008. The relief film development uplift applies, the Bill
qualifying shares or to have spent the was due to expire for qualifying trades provides that FCTC relief will be available
money raised on R&D activities within which commence after 31 December at the following rates for the following
one month of the end of the investment 2018. The Bill extends the relief for periods:
term (where the company was relying companies which commence qualifying
• 3
7% for claims made between
on the carrying on of R&D activities to trades before 31 December 2021, where
1 January 2019 and on or before
qualify for relief) the relevant conditions are met.
31 December 2020;
• The extension of the EII relief (but The amount of corporation tax relief
• 3
5% for claims made after
not SURE) to preference shares and available is linked to the amount of
31 December 2020 but on or
redeemable shares, which will provide employer’s PRSI paid by the company
before 31 December 2021;
much needed flexibility in each accounting period, subject to a
maximum of €5,000 per employee and • 3
4% for claims made after
• Whilst investors (or their associates)
an overall annual corporation tax liability 31 December 2021 but on or
with existing interests in companies may
limit of €40,000 on qualifying income before 31 December 2022;
be precluded in certain circumstances
and gains (with marginal relief available
from claiming tax relief on further • 3
2% for claims made after
where the company’s corporation tax
investments, a relaxation of these rules 31 December 2022
liability would otherwise be between
has been introduced for certain ‘micro’
€40,000 and €60,000). A further The regional film development uplift will
companies. It is referred to as the
evaluation of the effectiveness of the be subject to EU approval.
‘start-up capital incentive’. This should
relief is to be carried out in 2021.
facilitate tax relief for ‘friends and family’ The Bill also provides for a number of
type investments in early-stage ventures amendments to ensure that the FCTC
Film corporation tax credit relief operates in an efficient manner.
• The relief has been extended to share relief The changes include a provision for the
issuances on or before 31 December
A reimagined film corporation tax credit credit to move to a self-assessment-
2021
(FCTC) relief was introduced in Finance based system. An amendment is also
• These new provisions will take effect for Act 2013 to promote the Irish film industry included in respect to the application
shares issued from 1 January 2019 by encouraging investment in Irish-made process to allow for the Department of
films. The scheme provides relief in the Arts, Heritage and the Gaeltacht to issue
As noted above, many of the complex
anti-avoidance provisions are retained form of a corporation tax credit related
and, indeed, compliance with the to the cost of the production of certain
GBER-based conditions is a prominent films (the previous version of the relief
feature of the revamped rules (including was an income tax-based relief provided
the requirement that all qualifying to individual investors in film production
investments must be based on a companies). The relief was due to expire at
business plan, with the concept of 31 December 2020, but the Bill provides
a business plan being defined in the for a four year extension, to 31 December
law quite comprehensively). Many 2024.
conditions therefore still need to be In his Budget speech, the minister also
satisfied to ensure that relief is available. announced that a regional uplift to the
Nevertheless, the over-arching shift FCTC relief would be introduced for
from a ‘pre-clearance’ system to a productions made in areas designated
‘self-assessment’ system should be under the state aid regional guidelines.
welcomed by all. The Bill provides for a new, time-
limited, tapered regional uplift of 5%
Relief from corporation tax for for productions in these particular
certain start-up companies areas. The regional uplift will apply to
productions which take place on or after
A relief from corporation tax for certain
1 January 2019. Where the regional
qualifying start-up trades was introduced
8 TaxingTimes Finance Act 2018
Tim Lynch
Partner
a certificate to a producer company amendments to ensure that a number biogas. A 100% wear and tear allowance
confirming whether a film is a qualifying of non-profit-making bodies are provided will be available for capital expenditure
film and whether it qualifies for the certain tax exemptions in order to avoid incurred between 1 January 2019 and 31
regional film development uplift relief. circular payments in and out of the December 2021.
Two amendments are also included Exchequer. These bodies include the
A qualifying vehicle means a new gas
in the Bill to ensure that FCTC relief Motor Insurers’ Bureau of Ireland, Limerick
vehicle which is constructed or adapted
remains state aid-compliant. Twenty Thirty Strategic Development DAC
for the transport of goods (or any
(a subsidiary of Limerick City Council), the
burden), the haulage of vehicles or the
Mutual agreement procedures National Transport Authority, Sport Ireland,
carriage of passengers. However, the
time limits the Child and Family Agency, and the
vehicle must be either unsuitable for use
Western Development Commission. In
The Finance Bill has made an as a private vehicle, or wholly or mainly
some cases, these exemptions have been
amendment to remove the normal four hired to members of the public or for the
included with retrospective effect from the
year time limit imposed on amending transport of members of the public in
bodies’ various dates of establishment.
a tax return, in the case where an the ordinary course of trade.
amendment is required by reason of a Refuelling equipment is defined as
Mutual Agreement Procedure (MAP).
Energy-efficient equipment
a storage tank for gaseous fuel, a
Many of Ireland’s double tax treaties and The Bill amends the scheme under
compressor, pump, control or meter used
the EU Arbitration Convention provide which accelerated wear and tear
for the purposes of refuelling gas vehicles,
a mechanism whereby the competent allowances are available for capital
or equipment for supplying gaseous fuel to
authority of each treaty country may expenditure incurred on the provision of
the fuel tank of a gas vehicle.
resolve difficulties or disputes arising certain energy-efficient equipment.
from double tax for a taxpayer by mutual The definition of “energy-efficient
agreement. A taxpayer can request Childcare and fitness facilities
equipment” has been amended to mean
MAP assistance from the Irish Revenue. for employees
equipment that complies with specified
MAP is most often requested in relation energy-efficient criteria and is named Finance Act 2017 made provision for
to transfer pricing of transactions on a specified list. The Bill provides accelerated capital allowances in respect
between affiliates in a group where that the Minister for Communications, of expenditure incurred by an employer
there is a difference in view between the Climate Action and Environment, on in the construction of a building used
competent authorities as to the amount approval of the Minister for Finance, can for childcare facilities or fitness centre
of profits which should be subject to tax specify the “energy-efficient criteria” facilities where certain requirements
in each treaty country. relating to minimum levels of efficiency, were met. However, the relief was
performance, speed, storage or efficacy introduced subject to the issue of a
In some cases the outcome of MAP may
to be met, and the certifications and commencement order which was never
require the profits of an Irish company to
standards to be complied with or tested issued.
be adjusted, and may result in a refund
of tax. In these cases the taxpayer will via statutory instrument. The Bill makes The Bill amends the qualifying
usually be required to submit revised provision for the Sustainable Energy expenditure definition so that the relief
tax returns for the affected accounting Authority of Ireland to establish and will be available to all employers and
periods. MAP procedures by their nature publish a list of equipment eligible under not just to persons carrying on a trade
can be complex and typically involve the scheme on its website. wholly or mainly relating to childcare
multiple past tax years. Accordingly, the services or the provision of facilities in
removal of the general four year time Gas-propelled vehicles and a fitness centre. It also includes a new
limit means there will be no time limit for refuelling equipment restriction that the facilities provided
revising tax returns to give effect to the must not be accessible or available for
The Bill provides for a new accelerated
agreed outcome of MAP. use by the general public.
capital allowances scheme for capital
expenditure incurred on gas vehicles The requirement for the issue of a
Tax exemptions for non-profit- and gas refuelling equipment used for commencement order has been revoked
making bodies the purposes of carrying on a trade. For and the provision will now take effect
The Bill makes some technical this purpose, gas means compressed from 1 January 2019.
natural gas, liquefied natural gas orTaxingTimes Finance Act 2018 9
Joe O’Mara Gareth Bryan
Partner Partner
Anti-avoidance on loans their main purposes, the avoidance of a an appeal in relation to farm stock
from close companies to tax charge under the pre-existing rules. values, (ii) removing the requirement
for certain information to be provided in
participators The amendment will apply in respect of
a statement of case, and (iii) clarifying
An anti-avoidance provision has been arrangements entered into on or after 18
the circumstances in which the Appeal
included in the Bill to counteract October 2018 (i.e. the date on which the
Commissioners can make a determination
arrangements designed to avoid or reduce Bill was published).
in an appeal without a hearing.
a charge to tax under specific rules which
apply where loans are advanced from Trustees ceasing to be resident Other
close companies to participators. in Ireland
The Bill contains technical updates
Currently a charge to tax applies where An exit tax charge arises where a trust to ensure that the most recent EU
a close company makes a loan to an which is resident in Ireland becomes directives are referenced in the
individual who is a participator or an non-resident as a consequence of the occupational pension scheme legislation.
associate of a participator. Under these trustees becoming neither resident
rules, the company will be required to nor ordinarily resident in Ireland. It is Professional Services Withholding Tax
account for tax at a rate of 20% on the calculated based on the market value (PSWT) is operated by certain state and
grossed-up amount of the loan. In effect, of the trust assets at the time the trust semi-state bodies. The Bill removes
the grossed-up amount of the loan is becomes non-resident. To ensure that six entities from the list of bodies that
treated as an annual payment. There the exit charge is EU-compliant, the are required to operate PSWT and adds
are various exclusions from this general regime will be amended to provide that four new entities - the Policing Authority,
rule and the tax paid is refunded to the the trustees can opt to discharge the exit Educational Research Centre, Sport
company if a claim is made within four tax in six equal annual instalments. Ireland and certain harbour companies.
years of the year of assessment in which These changes will come into operation
the loan is repaid. Tax Appeals Commission on 1 January 2019.
The proposed new rule captures any procedures
arrangements under which a participator The Bill makes some technical
in a close company (or an associate of amendments to the tax appeal
that participator) receives a loan and procedures, including: (i) providing for the
arrangements are entered into which matters that the Appeal Commissioners
have, as their main purpose or one of should have regard to in determining10 TaxingTimes Finance Act 2018
Agri-business measures
Andrew Gallagher
Partner
Income averaging allows certain farmers arises in 2019 and subsequent tax There are also amendments to take
to pay tax based on average profits over years. Where entitlement to relief arose account of EU state aid requirements
a five year period and is intended to between 1 July 2016 and 31 December that govern aid given to the agricultural
assist farmers in dealing with the income 2018, the information must be provided to and forestry sectors. These
volatility associated with the industry. Revenue along with the individual’s 2018 amendments provide that the aggregate
The Bill gives effect to the Budget Day tax return. of (i) stock relief available to a young
announcement that eligibility for this trained farmer, (ii) relief from stamp
The Bill also gives effect to the flagged
relief has been extended to cases where duty available to such individuals on the
extension to stock relief for a further three
the farmer, or their spouse/civil partner, acquisition of agricultural property and
year period, until the end of 2021. Stock
carries on another trade or profession, or (iii) the succession tax credit in respect
relief provides for an additional income tax
holds or controls more than 25% of the of certain farm partnerships cannot in
deduction for stock increases during the
share capital in a company carrying on a total exceed €70,000.
tax year. This extension applies to the three
trade or profession.
separate stock relief measures: Both the young trained farmer stock
Under current legislation, an individual relief and stamp duty exemption are
• the general 25% stock relief
who claims farm restructuring relief is being further restricted and will only
required to provide certain information • the 50% stock relief for registered be available to micro and small-sized
to Revenue. The Bill provides that this farm partnerships enterprises. Previously both reliefs
information is to be furnished to Revenue were also available to medium-sized
• the 100% stock relief for certain young
at the same time as the individual’s tax enterprises.
trained farmers
return when entitlement to the reliefTaxingTimes Finance Act 2018 11
Eoghan Quigley
Partner
Stamp duty measures
As announced on Budget Day, the Bill
provides an extension to 31 December
2021 of the exemption from stamp duty
on the transfers of agricultural land to
young trained farmers under the age of
35 where certain conditions are met.
This is subject to a commencement
order.
Where a person qualifies as a young
trained farmer within four years of the
transfer of agricultural land, a repayment
of stamp duty can be claimed. The Bill
provides that, to claim a repayment, the
person must submit a business plan to
Teagasc and it must be a micro or small
enterprise.
There are also some technical
amendments to remove outdated
references in the young trained famer
relief provisions.
Farm consolidation relief was
reintroduced with effect from 1 January
2018. The Bill contains technical updates
to reflect that stamp duty is now claimed
on a self-assessment basis, which
was not the case when the relief was
previously available.
VAT on bloodstock
The financial resolutions passed on
Budget Day included an increase in the
VAT rate from 9% to 13.5% on the sale
of bloodstock. However, the sale of
bloodstock to flat-rate farmers should
continue to qualify for the 4.8% VAT rate.12 TaxingTimes Finance Act 2018
Property &
Construction JIm Clery
Partner
Carmel Logan
Partner
Rental income – landlord room(s) are used for a period which does Stamp duty
interest deductions on not exceed 28 consecutive days. There is Despite rumours in the weeks leading
a carve-out for (i) room(s) used by certain
residential properties up to the Budget, it is welcome that the
incapacitated persons, (ii) scenarios minister has not altered the stamp duty
Following the relaxation of interest where the room(s) are used for a
deduction restrictions in recent rate applicable to private rental sector
minimum of four consecutive days per (PRS) projects. Given the current housing
Finance Acts for certain properties week for not less than four consecutive
let to individuals in receipt of all rent challenges, any such change could have
weeks, or (iii) where the person using led to delays in project acquisitions,
supplement/housing assistance payment the room(s) is in full or part-time
or to local authorities, a full interest reduction in investment and ultimately
education in a university, college, school increases in the cost of delivering large-
deduction for landlords of residential or other educational establishment in the
properties will be restored from 2019. scale rental developments.
state. The aim is to reduce displacement
This is an acceleration of the 2021 of housing space to tourist letting. The Finance Bill has made some
timeframe announced last year and procedural changes to the provisions
reinstates full tax relief for a normal dealing with a stamp duty charge
Home Renovation Incentive
business expense. arising on the signing of a contract,
(HRI)
rather than on an actual conveyance or
Rent-a-Room Relief The Home Renovation Initiative scheme transfer on sale (for example, ‘certain
seeks to incentivise individuals to resting in contract’ scenarios). Where
The threshold for exempt income under
upgrade their homes using tax-compliant the appropriate stamp duty has been
the Rent-a-Room Scheme is currently
contractors. The relief is due to expire paid on the first event, the Revenue
€14,000 per annum. The Finance Bill has
on 31 December 2018 and has not been Commissioners will now issue a stamp
introduced measures to ensure the relief
extended in the Bill. certificate on the later event to the effect
does not apply to certain short-term
lettings from 2019 onwards, where the that the instrument is not chargeable
to stamp duty. Heretofore, the stamp
duty paid on the first event had been
transferred to the later instrument, with
the original instrument rescinded. This
process has become impractical with the
move to e-stamping.
The Bill contains technical amendments
to ensure that a taxpayer can
make a valid appeal to the Appeal
Commissioners against a decision by
Revenue on a claim for a repayment of
stamp duty. The time limit for making
such an appeal is 30 days.
Local property tax
The new valuation date for Local
Property Tax (LPT) is 1 November 2019.
A public consultation was undertaken by
the Department of Finance in April 2018
and the minister in his Budget speech
stated that the report will be published
in due course. The consultation will have
particular regard to valuation issues. The
minister reassured homeowners that any
future changes in LPT will be moderate
and affordable.TaxingTimes Finance Act 2018 13
VAT & other indirect taxes
Terry O’Neill
Partner
VAT Consequently, from 1 January 2019, required all EU member states to apply
the rate applying to the following goods the standard rate of VAT.
VAT rates and services will increase to 13.5%:
The Finance Bill confirms the The Bill confirms there are no other
restaurant and catering services; hotel
announcement in the Budget that the changes to the current rates of VAT or
and similar accommodation; admissions
VAT rate applicable to certain goods to the flat-rate farmer addition, which
to cinemas, museums and other
and services, mainly in the tourism remains at 5.4%.
attractions; hairdressing services, and
and hospitality sectors, will increase certain supplies of horses (other than for Forced sales of residential
from 9% to 13.5% with effect from use in food and agricultural production) property
1 January 2019. The 9% VAT rate and greyhounds. Suppliers of such
The Bill makes a technical change to a
will, however, continue to apply to goods and services will need to consider
VAT anti-avoidance measure commonly
sales of printed newspapers and the the impact of the higher VAT rate on their
referred to as the ‘developer rule’. The
provision of sports facilities. The 9% pricing, and to update their systems and
change is intended to ensure that the
rate will also be extended to books, procedures to apply the correct VAT rate
developer rule applies in the same
newspapers and periodicals supplied from 1 January 2019 onwards.
manner to forced sales of residential
electronically, with effect from 1 January The reduction in the VAT rate from property by receivers, liquidators and
2019. Electronic publications which 23% to 9% for books, newspapers and mortgagees as to non-forced sales.
wholly or predominantly are devoted periodicals supplied electronically follows The developer rule provides that VAT is
to advertising, or consist wholly or agreement reached among EU finance automatically chargeable on the sale of
predominantly of audible music or video ministers in early October to allow residential property by the developer
content, will continue to be subject to reduced rates of VAT to apply to digital of that property in the course of a
VAT at the 23% rate. publications. Prior to this, EU VAT rules property development business (or by14 TaxingTimes Finance Act 2018
Glenn Reynolds
Partner
a person connected to the developer of from 15% to 25%. The increases are Vehicle Registration Tax (VRT)
the property) where the developer was to take effect from 1 January 2019.
entitled to deduct VAT on the acquisition There are also a number of amendments
• Confirmation of the announcement to VRT legislation, including:
or development of the property. This
in the Budget of an increase in excise
measure will take effect upon the • A
1% increase in the rate of VRT
duty on a packet of 20 cigarettes by
passing of the Bill. chargeable on registrations of diesel
50 cents (including VAT), and pro-rata
increases on other tobacco products passenger cars and light commercial
Non-EU use of telephone cards vehicles in each of the CO2 emissions
The Bill removes provisions which as well as an additional 25 cent on
a 30 gram pack of ‘roll your own’ bands. There is no change to VRT rates
allowed for a repayment of VAT to for non-diesel, diesel hybrid and plug-in
telecommunication service providers in tobacco. These increases took effect at
midnight on 9 October 2018. There will hybrid vehicles.
cases where VAT had been charged on
the sale of a telephone card but where also be an increase in the Minimum • A
s announced in the Budget, the
that card had subsequently been used Excise Duty on tobacco products, extension of the VRT relief for the
outside of the EU. This measure will with the result that excise payable on purchase of hybrid electric vehicles to
take effect from 1 January 2019. all cigarettes sold below €11 will have 31 December 2019.
the same amount of excise payable as
cigarettes sold at €11. • R
epayments of the VAT element of
Excise duties VRT to leasing companies on acquiring
There are a number of excise-related • A
n amendment to the scope of the new cars will cease in respect of
measures in the Bill, including: sugar-sweetened drink tax (sugar tax). vehicles registered from 1 January 2019
The amendment results in certain onwards, and will cease altogether by
• Confirmation of the increase categories of beverages which 1 April 2019.
announced in the Budget in betting exceed the sugar content threshold
duty for bookmakers and remote and which do not meet a minimum •T
he VRT export repayment scheme
bookmakers from 1% to 2%, as well calcium content of 119 mg per 100 ml for EU Category M1 vehicles (i.e.
as the increase in betting intermediary becoming subject to sugar tax. passenger cars) is extended to all
duty for remote betting intermediaries Category A registered vehicles
(including light commercial vehicles).
•T
he introduction of a scheme for the
proportionate payment of VRT where
a vehicle leased in from another EU
member state is brought into Ireland
for the duration of the lease and is
subsequently exported from Ireland
following expiry of the lease. Certain
conditions must be met for this
proportionate payment to apply. This
follows a European Court of Justice
judgment which held that full rates
of VRT should not apply to vehicles
leased in from another member state.TaxingTimes Finance Act 2018 15
Other indirect tax the provisions also mean that it is not VAT treatment of hire purchase
developments possible to reverse VAT accounted for on transactions
SPVs.
A number of other recent indirect tax On 18 October 2018, the CJEU
developments outside of the Finance Bill In the context of MPVs sold through judgment was released in Volkswagen
are important to note. a chain, it will no longer be required to Financial Services (UK) Ltd (C-153/17),
account for VAT at each stage. However, a case concerning the VAT treatment of
Vouchers unlike SPVs, non-redemption of MPVs hire purchase (HP) transactions and HP
The VAT treatment of the issue, sale and should not give rise to a VAT charge. suppliers’ entitlement to VAT recovery
redemption of vouchers is due to be on general overhead costs relating to HP
updated with effect from 1 January 2019. The changes will take effect on
transactions. In summary, the judgment
The changes provide clarity on what 1 January 2019.
held as follows:
constitutes a voucher and how the issue, VAT recovery on deal fees •T
he treatment of a HP transaction as
sale and redemption of vouchers should
On 17 October 2018, the European involving a VAT taxable supply of goods
be treated from a VAT perspective. In
Court of Justice (CJEU) judgment was and a VAT exempt supply of credit is
particular, the changes introduce the
released in the Ryanair Limited v The compatible with the EU VAT Directive.
concept of a Single Purpose Voucher
Revenue Commissioners case (C-249/17) This reflects the current VAT treatment
(SPV) and a Multi-Purpose Voucher
which relates to Ryanair’s entitlement to of HP transactions in Ireland.
(MPV).
recover VAT on professional costs related
to its unsuccessful bid to acquire all of •V
AT on overhead costs incurred
Currently, the sale of vouchers, gift
the shares of Aer Lingus. The CJEU held by HP suppliers should be partially
tokens, book tokens, etc is not liable to
that Ryanair should be entitled to full recoverable based on a method which
VAT except where, and to the extent
VAT recovery on such costs on the basis takes into account both the taxable
that, the amount charged exceeds the
that it intended to provide management supply of the goods and the exempt
value shown on the voucher. Instead,
services to the target company following supply of credit. This was contrary to
VAT arises on redemption of the voucher.
acquisition, even though the acquisition the Advocate General’s analysis, which
As a result of the changes, VAT will suggested that VAT recovery should
was not completed and therefore the
now need to be accounted for on the not be available on costs which were
intended management services were
issue and sale of SPVs. This will create a incorporated into the price of the VAT
never provided. This is an important
cashflow cost as the VAT inherent in the exempt supply of credit.
judgment in the complex area of VAT
voucher will need to be paid up front to
recovery on deal fees.
Revenue. In cases of non-redemption,16 TaxingTimes Finance Act 2018
Exit tax
Orla Gavin
Partner
The EU Anti-Tax Avoidance Directive Ireland to dispose of its assets at market • a company that is resident in
(ATAD) was agreed by EU member value. The unrealised gains were subject another member state transfers a
states in 2016. Under the Directive, to capital gains tax charge at a rate of business (including the assets of the
Ireland was required to introduce an 33%. Companies that were ultimately business) carried on by a permanent
ATAD-compliant exit tax for companies controlled by EU/tax treaty resident establishment in Ireland to another
which transfer their tax residence or persons and not controlled by Irish territory, or
business assets outside of Ireland. The residents were excluded from the scope
• a company ceases to be tax-resident
regime had to be implemented by of the charge.
in Ireland.
1 January 2020.
The new ATAD-compliant exit tax
The tax rate for the exit charge is set at
The minister confirmed on Budget Day regime does not distinguish between
12.5%, which is equivalent to the Irish
that Ireland would bring forward the date the ultimate owners of a company in
corporation tax rate on trading profits.
of implementation of an ATAD-compliant applying the charge. This broadens the
However, the Bill contains specific anti-
exit tax regime. The minister considered scope of companies potentially subject
avoidance measures which seek to deny
that early introduction of this measure to the revised exit tax regime.
the 12.5% rate where the charge arises
would provide certainty to businesses
The new regime will tax unrealised as part of a wider transaction to dispose
currently located in Ireland and to those
capital gains on certain capital assets of the asset in circumstances where a
considering investing in Ireland in the
where: gain would otherwise have been taxable
future.
at a rate of 33%.
• a company that is resident in another
Prior to Budget Day, Ireland had an exit
member state transfers assets from No exit charge arises where certain
tax regime which deemed a company
an Irish permanent establishment to assets are disposed of such as Irish land,
which ceased to be tax-resident in
another territory, exploration rights or assets in use as partTaxingTimes Finance Act 2018 17
of a trade in Ireland. This is because such
assets should remain within the charge
to Irish tax.
The measures allow for a harmonised
approach on intra-EU transfers of
assets. They deem the market value of
assets subject to exit tax in another EU
member state to be the acquisition cost
in Ireland. However, these provisions do
not apply to treat the asset brought into
Ireland as acquired at market value for
capital allowances purposes.
Capital gains tax principles apply in
measuring the exit gain. This means that
foreign currency movements during the
holding period of the asset may result in
an increase or decrease in the gain, as
measured in euro terms.
In line with ATAD, the Bill provides
an option for payment of the exit tax
to be deferred where the assets are
transferred to an EU/EEA country. Where
a company makes the deferral election,
the tax will be payable in six equal annual
instalments. The first instalment will
be due nine months after the event
triggering the exit charge where the
company is subject to corporation tax
or, in the case of capital gains tax, on • The assets or business carried on by The Bill provides that the Revenue may
31 October in the tax year following the a permanent establishment is sold or seek security from a company electing
year in which the exit tax event occurs. disposed of. for the exit tax deferral where in their
view such a deferral would present
The remaining instalments would be due • The assets are transferred to a non EU/
a serious risk that tax would not be
on each of the next five anniversaries of EEA country.
collected. It also permits the Revenue
the initial due date.
• The company ceases to be resident in to seek payment of unpaid exit tax from
To avail of the option to pay in six an EU/EEA country. an Irish-resident group company or an
instalments, the company must make Irish-resident controlling director of the
• The company becomes insolvent or a
an election and include certain specified company.
liquidator is appointed.
information in the tax return for the year
An existing exemption from exit tax,
in which the event triggering the exit tax • The company fails to pay the
which applies where a company ceases
occurs. instalments within 12 months of the
to be resident in Ireland as a result of
due date.
In addition, the company is obliged to a merger under European directives, is
supply certain information to the Irish In those circumstances, any part of preserved in the Bill.
Revenue within 21 days of the end of the exit tax which has not been paid,
The Bill also contains transitional
each of the five calendar years following together with late payment interest
provisions relating to the administration
the event which triggers the exit tax. (computed as if the deferral did not
of the pre-existing exit charge.
apply), becomes due and payable.
The deferral will cease to apply where
any of the following occur:18 TaxingTimes Finance Act 2018
Ireland introduces Controlled
Foreign Company (CFC) rules Conor O’Sullivan
Partner
Ireland is required under the EU Anti- on an arm’s length basis, the CFC The Irish-based activities in scope of
Tax Avoidance Directive (ATAD) to enact charge does not apply. Therefore, where the CFC charge could be conducted in
Controlled Foreign Company (CFC) companies with Irish operations have Ireland by an Irish resident company
rules. The Finance Bill sets out the arrangements in place with low-taxed or a non-resident company. The CFC
CFC measures which take effect for foreign group members, one protection charge can apply to either the company
accounting periods beginning on or after against the imposition of a CFC charge controlling the CFC or to a connected
1 January 2019. in relation to a CFC’s income from these company, depending on who performs
arrangements is to adopt robust transfer the relevant activities in Ireland.
Ireland has chosen to adopt one of
pricing policies that apply an arm’s length
two possible frameworks under ATAD, Foreign resident companies potentially
price to the arrangements.
which is a transactional approach that may be CFCs because of common
applies transfer pricing principles in individual owners but no CFC charge
determining if profits of a low-taxed CFC Scope of application to CFCs applies unless and to the extent that a
should be taxed in Ireland. The general As Ireland taxes worldwide profits of Irish company holds shares in that CFC.
thrust of the regime is to assess an resident companies, including the profits
Irish company with a CFC charge based of foreign branches, the CFC regime does Exclusions from the scope of
on an arm’s length measure of the not apply to the foreign branches of Irish
the charge
undistributed profits of the CFC that are resident companies. Instead it will apply
attributable to the activities of Significant to Irish tax on income of foreign resident There are a number of exclusions from
People Functions (SPFs) carried on in companies where certain activities are the CFC charge, discussed below:
Ireland. The CFC charge does not apply performed in Ireland by a company that The essential purpose test
where the essential purpose of the controls the CFC.
The CFC charge does not apply if
arrangements is not to secure a tax
The meaning of ‘control’ is broadly securing a tax advantage was not the
advantage.
defined to include companies under essential purpose of an arrangement
the common control of an individual or giving rise to the CFC’s income.
Interaction with transfer individuals owning not less than 25% of
pricing For many groups that have low-taxed
the company. However, the CFC charge
foreign subsidiaries because they have
If arrangements involving SPFs in Ireland is only applicable to companies and not
taken advantage of local tax incentives,
are in place with a CFC which are either to individuals. It also only applies to the
the overriding commercial purpose for
already within the scope of Ireland’s extent of the proportionate shareholding,
the CFC’s business arrangements will
transfer pricing regime or remunerated held by the company in the CFC.
mean that, despite the tax benefitsYou can also read
