Minister for Finance Publishes Finance Bill 2015

22.10.15

Minister for Finance Publishes Finance Bill 2015

 

The Minister for Finance, Michael Noonan T.D, has today (22nd October 2015) published Finance Bill 2015.  The Bill gives effects to taxation measures announced in Budget 2016.

Commenting on the publication of the Finance Bill, Minister Noonan stated:

Finance Bill 2015, gives legal effect to the range of tax measures that I announced on Budget Day. Subject to Dáil approval, the Bill will mean that from the 1st of January next year, people all over the country will see increases in their net pay. For the second budget in a row, every worker and pensioner who pays income tax and or USC will benefit from the changes announced in Budget 2016.

The USC reductions detailed in this Finance Bill will reduce the marginal rate of tax to 49.5 per cent for all earners who earn up to €70,044. This is an important milestone. Furthermore, the Bill provides for an exemption from an employee USC charge in respect of employer contributions to a PRSA, in line with the existing exemption for employer contributions to occupational pension schemes.

Our economy has been transformed and is growing strongly across all sectors of the economy and most importantly is creating jobs. Creating jobs and rewarding work remains a key driver of growth and prosperity. The objective now is to ensure the benefits of a growing economy are felt by every family in the country. There is provision in the Bill for the increase in the Home Carer’s Credit which I announced in my Budget statement and also for the Earned Income Credit, to the value of €550, available to those with earned income who do not have access to the PAYE credit. In addition, the Finance Bill provides for an increase in the Small Benefits relief, the limit goes up from €250 to €500.

Commenting on the sector specific measures contained in the Bill, Minister Noonan stated:

“For the farming sector, a number of agri-taxation reliefs which were due to expire at the end of December 2015 are being extended until the end of 2018. These include grofits or gains from the management of woodlands for active foresters are being removed from the high earners’ restriction. In addition, I am introducing a new incentive to encourage farmers to enter into a “succession transfer partnership”, in order to arrange for a managed transfer of a farm to a young trained farmer.

The introduction of a Knowledge Development Box will provide a 6.25% rate of corporation tax to apply to the profits arising to certain patents and copyrighted software which are the result of qualifying R&D carried out by the company qualifying for the relief. The Bill also provides for Country by Country reporting by multinationals in line with the approach agreed as part of the OECD BEPS project. Also, the measure providing Corporation Tax Relief for Start Up Companies, due to expire at the end of 2015, is being extended to the end of 2018.

Finally, I noted in my Budget Statement last week that my Department would be examining the various proposals in the Report of the Marine Taxation Review with a view to the feasibility of their implementation in the future”.

 

Ends

22 October 2015

 

Notes to Editors

In addition to the Budget measures the Bill also contains details of a number of further changes not yet announced, including many of a technical or administrative nature.        

 

Measures announced on Budget Day:

  • From 2016, the entry threshold to USC is increasing from €12,012 to €13,000, removing over 40,000 workers from the scope of the charge entirely. It is estimated that over 700,000 income earners will not be liable to USC at all from next year. Liability to USC is of course determined by the make-up of an individual’s income and it is important to point out that social welfare payments were never liable to USC. Thus an individual could have a state contributory pension and an occupation pension worth up €13,000 per annum without facing any liability to USC.
     
  • For taxpayers within the charge to USC, the three lowest rates are being reduced:     
     
  • The 1.5% rate to 1%. This applies on the first €12,012 of income;
  • The 3.5% rate to 3%. This applies on income in excess of €12,012 up to an increased threshold of €18,668;
  • The 7% rate to 5.5%. This applies on income in excess of €18,668 up to €70,044.
     

The exemption from the top rate of USC for medical card holders and those over-70 earning less than €60,000 is being retained also and these individuals will now pay a reduced maximum rate of USC of 3%.

  • An increase to the Home Carer Tax Credit of €190 to bring it up to €1,000 per year, to assist single income married couples with children or who care for an elderly or incapacitated relative. The income threshold up to which the home carer can earn has also been increased by €2,120. This measure is specifically targeted at lower-income families and will allow the home carer to earn up to €7,200 and still benefit in full from the tax credit, where the primary earner’s income does not exceed €35,600.
  • Income tax as currently structured, means that an employee will take home a greater proportion of their salary than a small business owner or entrepreneur on the same net profit. This was raised frequently during a consultation process on tax and entrepreneurship which the Minister conducted earlier this year. To start addressing this disparity, an Earned Income Tax Credit to the value of €550 will be available to those with earned income who do not have access to the PAYE credit.
  • The Employment and Investment Incentive (EII) and Start-Up Relief for Entrepreneurs (SURE) have been amended to comply with State Aid rules. In addition, expansion works to existing nursing homes will qualify for the EII.
  • The legislation providing for a scheme of accelerated capital allowances for the construction of buildings for use in the maintenance, repair, overhaul or dismantling of aircraft has been amended to comply with State Aid rules. The scheme has been commenced with effect from Budget Night.
  • A number of Agri-Taxation measures, including:       
     
    • Four measures which were due to expire at the end of December 2015 are being extended until the end of 2018:   
       
  • general stock relief,
  • stock relief for young trained farmers,
  • stock relief for registered farm partnerships, and
  • stamp duty exemption for young trained farmers;
     
    • An additional course is being added to the list of relevant qualifications required to apply for Young Trained Farmer relief from Stamp Duty. This course is also being added to the list of qualifying courses for “stock relief” from Income Tax for young trained farmers;         
       
    • A new succession transfer partnership model is being introduced to allow two people to enter into a partnership with the aim of transferring the farm to the younger farm at the end of the specified period. This will facilitate knowledge transfer and a gradual transfer of control between farm partners.          
       
  • The existing Capital Gains Tax relief applying to disposals of qualifying business assets by individual entrepreneurs and business people is being replaced with a simplified and upfront relief, applying a CGT rate of 20% (rather than the general rate of 33%) to the first €1 million of qualifying gains. This follows on from a public consultation held by the Minister earlier this year seeking the views of Irish entrepreneurs on additional tax measures that could be taken to sustain the progress we have made to date.
  • The Group A threshold for Capital Acquisitions Tax, for transfers from parents to their children, was increased from €225,000 to €280,000 with effect from 14th October 2015.
  • Based on the findings of a review of the three-year tax relief for certain start-up companies, this relief in its current form is being extended for a further three years until the end of 2018. The relief has been identified by entrepreneurs as an important support.
  • The Knowledge Development Box will provide a 6.25% rate of corporation tax to apply to the profits arising to certain patents and copyrighted software which are the result of qualifying R&D carried out by the company availing of the relief.
  • The cap on the amount of relevant expenditure that can qualify for the film relief scheme is being increased to €70 million. A minor technical amendment is also being made to clarify the definition of a broadcaster and the publishing requirements are being refined to recognise changes in EU State Aid requirements.
  • A requirement for multinationals with Irish parent companies to file Country by Country reports of their income, activities and taxes with the Revenue Commissioners will apply from 1st January 2016.  The Bill enables the Revenue Commissioners to make Regulations setting out further details of the information required to be filed.   It is intended that the reports will ultimately be shared with other tax authorities on a confidential basis.  The introduction of Country by Country reporting is the first deliverable under the OECD BEPS project.
  • The annual Stamp Duty charge of €2.50 / €5 on ATM and combined debit cards is being abolished from 1st January 2016 and will be replaced with a new 12c ATM withdrawal fee from 1st January 2016, which will be capped at €2.50 / €5 per annum per card.
  • The excise duty on a packet of 20 cigarettes in the most popular price category increased by 50 cent (including VAT), with a pro-rata increase on other tobacco products, with effect from midnight on 13th October 2015. This was the only excise duty increase in Budget 2016.

 

 

 

Measures not announced on Budget Day:

  • The Bill provides for an exemption for employees from USC on employer contributions to a PRSA, to bring the USC treatment of such contributions in line with employer contributions to occupational pension schemes.
  • Small Benefits: under the existing Benefit-in-Kind arrangements, an employer can provide an employee with a single non-cash benefit without applying PAYE, PRSI, etc. to that benefit. No more than one such benefit given to an employee in a tax year qualifies for such treatment. The maximum value for this benefit is being increased from €250 to €500. Where a benefit exceeds this maximum then the full value is taxable.
  • Following a review by the Department of Communications Energy and Natural Resources, the Bill introduces a “Petroleum Production Tax”, the purpose of which is to ensure that discoveries made under future exploration licenses will result in an increased financial return to the State and at an earlier point in time.  It will replace the Profit Resource Rent Tax which was introduced in Finance Act 2008. The Petroleum Production Tax will provide that:   
     
  • Once a field starts producing oil or gas, a minimum payment of 5% of annual gross revenues will be due annually;
  • The ultimate rate of tax and amount due will be determined on a variable basis depending on the profitability of an individual field and will be payable in addition to the existing 25% rate of corporation tax that applies to the profits from oil and gas exploration;
  • The operation of the Petroleum Production Tax will result in an increase in the maximum marginal tax take on a producing field (combining corporation tax and petroleum production tax) from 40% to 55%.

 

  • The Bill provides that the Minister for Finance may make regulations providing for the payment of a grant in respect of fuel costs to members of the Disabled Drivers and Disabled Passengers Scheme. The fuel grant replaces the excise duty repayment on the fuel element of the Scheme which was ruled incompatible with the EU Energy Tax Directive by the Court of Justice of the European Union. The fuel grant is being introduced to ensure that no member of the Scheme shall lose out as a result of the decision of the Court. The Bill also provides for an offence and penalties for furnishing false or misleading information for the purpose of receiving the fuel grant.
  • As indicated in the Spillover Analysis which was published on Budget Day, a particular focus of Ireland's tax treaty negotiation policy has been to engage with African countries that wish to extend their tax treaty networks. In this context, the Finance Bill will complete the final stage of the ratification process for a new Double Tax Agreement with Ethiopia.  The Bill will also complete the ratification procedure for replacement Double Tax Agreements with Zambia and Pakistan.  These two treaties have been renegotiated to reflect developments in international tax policy since they were signed in the 1970s.   The Bill will also include the final step to ratify four other international agreements:
    • a Protocol to our Double Tax Agreement with Germany and
    • Tax Information Exchange Agreements with Argentina, the Bahamas and Saint Christopher (Kitts) & Nevis.
  • Following on from the recent consultation on the tax treatment of expenses it is proposed that vouched expenses, incurred by non-resident, non-executive directors travelling in the course of their duties, will be exempt from income tax. This recognises the special role in corporate governance played by such Directors whose expertise and experience is of considerable value to the organisations on whose boards they sit.
  • While profits or gains from the occupation of woodlands are generally exempt from Income Tax, this relief is a specified relief for the purposes of the high earners’ restriction. One of the outstanding recommendations of the Agri-Taxation review was to examine this measure and the effect it is having on the forestry sector. Finance Bill 2015 removes forestry from the restriction, but only for active foresters. Passive investors in forestry companies will remain subject to the restriction.
  • Standard Life plc: some thousands of Irish shareholders in Standard Life who opted earlier this year to have their return of value payments from that company treated as capital  had their options delayed in the post and were defaulted into receiving an income payment. That income payment would be subject to tax under income tax rules which would likely result in a higher tax liability than if the payment was a capital payment subject to capital gains tax rules. A provision in the Bill will mean that Standard Life shareholders in that position will have their payment treated as capital and subject to tax under capital gains tax rules.

 

Next steps

  • Finance Bill 2015 Dáil Second Stage begins Wednesday 4th November 2015.

 

Timing of the Finance Bill

  • Under the regulations known as the “Two-Pack” which were formally adopted on 30th May 2013, a common budgetary timeline was introduced for all Euro Area member states.
  • In light of these requirements, the Government decided, from 2013 onwards, to bring Budget Day forward from the first week in December to on or before 15th October. This means that Budget 2016 was presented and published on Tuesday, 13th October this year.
  • The Government also decided that the Finance Bill should complete its passage through the Oireachtas by 31st December each year. This means also that, as this Finance Bill is published in 2015, it is called “Finance Bill 2015” even though it relates to Budget 2016.
  • Details of all the various measures in Finance Bill 2015 are provided in the Appendix to the Press Release.