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Income Tax Deadlines 2017

As the deadline for paper filing has come and gone as of October 31st, the focus now shifts to the online pay and file deadline. This tax season has been an unusual one in many ways. It’s not very often that we find ourselves in a hurricane in Ireland, and even rarer that such a storm could bring with it tidings of good.

Revenue has extended the online pay and file deadline for self employed people as a result of Storm Ophelia and the business time lost as a result of office closures. The previous deadline was November 14th, and has now been shifted to midnight on November 16th to allow people to recoup that lost time.

Revenue has also announced that their help-desks will be open until 8pm each night leading up to this deadline, and will remain open until midnight on the deadline day itself. This is to ensure that any issues are dealt with in a timely manner to avoid late filing.

As always, our advice is to file early and avoid an over-reliance on extended deadlines where possible. Should you have any queries or concerns related to this, please feel free to contact us.

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DCA PARTNERSDECLAN DOLAN & EAMONN GARVEY

TAX BOOKLET 2016

INCOME TAX

CHARGE TO TAX

Individuals and non-corporate persons

Income tax is charged on income of individuals, unincorporated bodies (s 1044), trustees (s 1046) and personal representatives (s 799).

Income of partnerships and European Economic Interest Groupings is charged on the individual partners (s 1008) or grouping members (s 1014).

Tax year

Income tax is charged on income arising in a tax year. The tax year coincides with the calendar year, for example, the tax year 2016 runs from 1 January 2016 to 31 December 2016.

RESIDENCE

Resident individuals

If you are resident and domiciled in the Republic of Ireland (ROI), you are liable to Irish income tax on your total income from all sources, i.e., your worldwide income.

You are regarded as ROI resident if your ROI presence amounts to:

(a) 183 days or more in a tax year, or

(b) an aggregate of 280 days in the current and preceding tax year.

Presence of not more than 30 days in a tax year is ignored for the purposes of the 280-day test (s 819). You are present for a day if you are present at any time during the day.

You are regarded as ordinarily resident in the ROI for a tax year if you were resident in each of the three immediately preceding tax years. You cease to be ordinarily resident when you have become non-resident for the three immediately preceding tax years (s 820).

Non-domiciled individuals

If you are resident but non-ROI-domiciled (for example, a foreign national living in Ireland), you are only taxed on foreign income to the extent that it is remitted to Ireland (s 71). This “remittance basis” extends to UK source income (since 1 January 2008).

Non-Irish-resident individuals

If you are non-Irish-resident, you are taxed on Irish source income, i.e., income arising in the ROI.

If you are non-Irish-resident but ordinarily resident in the ROI, you are liable to Irish tax on foreign investment income in excess of €3,810 in the tax year. You are not liable in respect of income from an employment or trade carried on abroad (s 821).

If you are a resident of a country that has a tax treaty with the ROI, you may be exempt, or due a credit, in relation to tax on Irish source income if that income is also taxed in the treaty country (see Double Taxation).

If you are an Irish citizen and Irish domiciled, but resident abroad, you may be liable to the domicile levy (€200,000 per annum) if:

(a) your world-wide income exceeds €1m,

(b) your Irish located property is worth more than €5m, and

(c) your Irish income tax liability is lower than €200,000.

INCOME TAX RATES

Individuals and married couples

A married person can opt to be assessed for tax purposes via:

(a) joint assessment on the husband (s 1017) or wife (s 1018), separate assessment (s 1023), or

(b) single assessment (s 1016).

A individual who is separated or divorced and not remarried, may by agreement with the ex-partner, opt for joint or separate assessment (s 1026).

The current tax rates are the standard rate (20%) and the higher rate (40%).

The 2016 standard rate bands are: €33,800 in the case of an individual, €37,800 in the case of a one parent family and€42,800 in the case of a married couple (s 15(2)). In the case of a dual income married couple, the €42,800 rate band may be increased by the lower of:

(a) €24,800, and

(b) the income of the second spouse.

The maximum standard rate band a dual income married couple may have is €67,600. However, the maximum part of the standard rate band that may be transferred between the partners of a dual income married couple in a tax year is €42,800.

Unincorporated bodies and trustees

Income of an unincorporated body or trustee (including a personal representative of a deceased person’s estate) is taxed at the standard rate (s 15(1), 799802).

Undistributed income of an accumulatory trust is subject to a 20% surcharge (s 805).

EXEMPTIONS

Exemption limits

An individual aged 65 or over with total income below €18,000 is exempt. In the case of a married couple, one of whom is aged 65 or over, the threshold is €36,000.

If the claimant has dependent children, the exemption limit is increased by €575 for each of the first and second child, and €830 for the third child and each subsequent child.

Other exemptions

The other main exemptions from income tax are:

(a) Personal injury settlements (s 189), payments from the Haemophilia HIV Trust (s 190), Hepatitis C compensation (s 191), and payments in respect of thalidomide victims (s 192).

(b) Income of artists, writers and composers, subject to an overall annual limit of €50,000 (s 195).

(c) Interest on savings certificates (s 42) and instalment savings schemes (s 197).

(d) Income of recognised charities (s 207, 208).

(f) Income of amateur sports bodies (s 235).

(g) Rent from let farm land (s 664). A claimant must be aged 55 or over, or unable through physical or mental incapacity to carry on farming. Exemption is given for the lower of:

(i) the farm rental income surplus, or

(ii) €40,000 where the lease is for more than 14 years, €30,000 where the lease is for 10 to 14 years, €22,500 where the lease is for seven to 10 years, or €18,000 in any other case.

(h) Rent-a-room relief (s 216A). Income from lodgers is exempt provided your gross income from such letting does not exceed €12,000 in the tax year.

(i) Home childcare earnings of up to €15,000 in the tax year (s 216C).

(j) Earnings of special assignees (s 825C). 30% of income above €75,000 in the case of employees assigned from a tax treaty country to work in their employer’s Irish operation.

(k) Start Your Own Business relief (s 472AA). Where a person previously long-term unemployed sets up a business, the first €40,000 of profits in a tax year are exempt. Expires 31.12.2016.

SCHEDULES

Income is charged under four Schedules: Schedule C, Schedule D, Schedule E and Schedule F (s 12).

Schedule D

Schedule D is the heading under which business income is charged to tax. It has five Cases (s 18).

Cases I and II

Case I charges the profits of a trade (s 2) and Case II charges the profits of a profession (s 3). Employment grants are not regarded as trading income (s 223226).

Legitimate business expenses are deductible, including:

(a) expenditure on trademarks (s 86), and know how (s 768),

(b) pre-trading expenditure (s 82), and pre-commencement staff training costs (s 769),

(c) the cost of establishing an approved savings-related share option scheme for employees (s 519B),

(d) a double deduction for wages paid to a previously unemployed person (s 88A).

Not deductible: private expenditure, capital expenditure (s 81), and entertainment expenditure (s 840).

Taxable profits are based on the profits of the accounts year ended in the tax year (s 61), with special rules for commencement (s 66) and cessation (s 67) years and short-lived businesses (s 68).

Land-dealing and farming

Profits from dealing in land are charged under Case I as trading profits (s 640, 641). Capital profits realised by a landholder are charged under Case IV (s 643).

Cases III, IV, V

Case III charges untaxed interest and income from foreign property.

Case IV charges miscellaneous income not falling under any other heading.

Case V charges rental income. Legitimate property-related expenses, including interest (restricted as to 75% as regards residential property, but not for tenants whose rent is paid by a housing authority) are deductible (s 97). Premiums and disguised premiums are partly taxed as rental income (s 98100), and are deductible rental (s 102) or business (s 103) expenses of the payer.

Profits under Case III-V for tax purposes are the actual profits arising in the tax year (s 70, 74, 75).

Schedule E

Schedule E is the heading under which employment income is charged (s 119). The PAYE system obliges an employer to deduct tax from employee pay (s 985, 986).

An employee is not entitled to any deductions in computing employment income, unless the expenditure is incurred wholly, necessarily and exclusively in the performance of the duties of the employment (s 114).

A termination payment is subject to tax (s 123), but the first €10,160 plus €765 for each year of service may qualify for exemption (s 201).

Benefit in kind (BIK)

An employee is taxed on expense allowances (s 117), benefit in kind (s 118), share options (s 128) and preferential loans (s 122) obtained from the employer. A loan is regarded as preferential if the interest rate is less than 4% in the case of a mortgage loan, or 13.5% in the case of any other loan.

BIK treatment does not apply to:

(a) an annual or monthly bus or train pass (s 118(5A)),

(b) a bicycle and associated safety equipment (costing up to €1,000) for travel to work,

(c) a qualifying shopping voucher worth not more than €500 (s 112B),

(d) shares worth up to €12,700 received through an approved profit sharing scheme (s 510) – is increased to €38,100 for shares held in an employee share ownership trust for a minimum of 10 years.

Company cars

The employee is tax on “notional pay” based on the cash equivalent of the benefit of use of a company car (s 121). This is calculated at 30% of the original market value (OMV) of the car, up to 24,000km. For business mileage that exceeds 24,000km, see rates below:

(a) For mileage between 24,000km – 32,000km the rate is 24%

(b) For mileage between 32,000km – 40,000km the rate is 18%

(c) For mileage between 40,000km – 48,000km the rate is 12%

(d) For mileage between 48,000km and upwards the rate is 6%

 

A new set of rates, due to come into effect by ministerial order, are calculated as a percentage of the car’s OMV, inclusive of duty and VAT, depending on your annual business travel and the car’s CO2 emissions category:

Category A: 0g/km up to and including 120g/km,

Category B: More than 120g/km up to and including 140g/km,

Category C: More than 140g/km up to and including 155g/km,

Category D: More than 155g/km up to and including 170g/km,

Category E: More than 170g/km up to and including 190g/km,

Category F: More than 190g/km up to and including 225g/km,

Category G: More than 225g/km.

Where the annual business travel is:

(a) 0 to 24,000 km, the BIK is:

(i) 40% for category F, G,

(ii) 35% for categories D, E, and

(iii) 30% for categories A, B, C,

(b) 24,000 to 32,000 km, the BIK is:

(i) 32% for category F, G,

(ii) 28% for categories D, E, and

(iii) 24% for categories A, B, C,

(c) 32,000, to 40,000 km, the BIK is:

(i) 24% for category F, G,

(ii) 21% for categories D, E, and

(iii) 18% for categories A, B, C,

(d) 40,000 to 48,000 km, the BIK is:

(i) 16% for category F, G,

(ii) 14% for categories D, E, and

(iii) 12% for categories A, B, C,

(e) 48,000 or more km, the BIK is:

(i) 8% for category F, G,

(ii) 7% for categories D, E, and

(iii) 6% for categories A, B, C.

The BIK figure will be able to be further reduced by the amount required to be made good, and actually made good, directly to the employer in respect of the car’s running costs.

Civil service travel and subsistence rates

Compensation paid to an employee for the use of his private car, is not taxed provided it complies with the following civil service travel rates.

Where the annual business travel is:

(a) Up to 6,437 km, the rate per km is:

(i) 39.12c where the engine size is up to 1200cc,

(ii) 46.25c where the engine size is 1201 to 1500cc,

(iii) 59.07c where the engine size is 1501 to 2000cc,

(iv) 70.89c where the engine size is over 2000cc.

(b) over 6,438 km, the rate per km is:

(i) 21.22c where the engine size is up to 1200cc,

(ii) 23.62c where the engine size is 1201 to 1500cc,

(iii) 28.46c where the engine size is 1501 to 2000cc,

(iv) 34.15c where the engine size is over 2000cc.

 

A lunch or overnight allowance paid to an employee is not taxed provided it complies with the following civil service subsistence rates:

(a) €14.01 in respect of an absence of 5 to 10 hours,

(b) €33.61 in respect of an absence of 10 hours or more,

(c) €125.00 (normal rate) in respect of an overnight stay by any employee €112.50 (reduced rate for extended stays), and €62.50 (detention rate),

As of 1 July 2015 class of allowances for Civil Service subsistence rates has been discontinued, meaning all employees, regardless of grade, are subject to the same rates.

Schedule F

Schedule F is the heading under which dividend income is charged to tax (s 20).

RELIEFS

Personal reliefs and tax credits

The personal reliefs and tax credits you can use to reduce your income tax liability are:

As a deduction when computing taxable income

No limit: Gifts to the Minister for Finance (s 483).

€150,000: Employment and Investment Incentive Scheme (EIIS) (s 490).

  €50,000: Film investment (ends 2014) (s 481).

  €35,000: This is the maximum deduction available to employees working in Algeria, Bahrain, Brazil, Chile, China, Congo, Egypt, Ghana, India, Indonesia, Japan, Kenya, Kuwait, Malaysia, Mexico, Nigeria, Oman, Qatar, Russia, Saudi Arabia, Senegal, Singapore, South Korea, South Africa, Tanzania, Thailand, United Arab Emirates, Vietnam. (s 823A). It is proportionate to the number of qualifying days spent working in those countries.

  €75,000: Carer for incapacitated person (s 467).

  €31,750: Expenditure on heritage buildings/gardens (s 482).

    €6,350: Seafarer allowance (s 472B).

    €3,810 with €1,270 increase for each child: Previously long-term unemployed person (s 472A). In the second tax year of employment, it is €2,540 with €850 increase for each child, and in the third tax year, €1,270 with €425 increase for each child.

As a tax credit against tax liability

No limit: Medical expenses (s 469).

€3,600: Widowed parent in the first year after bereavement; €3,150 (second year); €2,700 (third year); €2,250 (fourth year); €1,800 (fifth year).

€3,300: Incapacitated child (per child) (s 465).

€3,300: Married couple, or civil partners, basic personal tax credit (s 461).

€2,700: Health insurance premiums (s 470B), where the insured is aged 85+ on contract date or renewal date; €2,400 (aged 80 – 84); €2,025 (aged 75 – 79); €1,400 (aged 70 – 74); €975 (aged 65 – 69); €600 (aged 60 – 64);

€1,650: Basic personal tax credit (s 461).

€1,650: Single person child carer credit (s 462). Goes to the child’s primary carer.

€1,650: Blind person (s 468).

€1,650: Employee tax credit (s 472).

€3,300: Widowed person, or surviving civil partner (bereavement year) (s 461).

€3,000: College fees (Full-time course) (s 473A) (max).

€1,500: College fees (Part-time course) (s 473A) (max).

€1,000: Home carer (s 466A).

   €640: Rent paid by individual aged 55 or over.

   €640: Rent paid by married couple/widowed person, or civil partners aged under 55.

   €550: Earned income tax credit (s 472AB).

   €540: Widowed person, or surviving civil partner (other years) (s 461A).

   €490: Married couple, or civil partners one of whom is aged 65 or more (s 464).

   €320: Rent paid by married couple/widowed, or civil partners person aged 55 or over.

   €254: Training course fees (s 476) (max).

   €245: Individual aged 65 or more (s 464).

     €80: Rent paid by individual aged under 55.

     €70: Dependent relative (per relative) (s 466).

Other reliefs

The other main reliefs from income tax are:

(a) Home loan interest (s 244) Loans taken out after 31 December 2012 do not qualify unless approved before that date and drawn down in 2013.

Loans taken out between 2004 and 2008 continue to obtain relief, loans taken out between 2009 and 2012 are also relieved at 30%, but relief is abolished from 1 January 2018. During 2013 to 2017 inclusive, the interest ceiling for married couples and widowed individuals is €6,000, and for single persons it is €3,000, and the maximum rate at which relief will be given is 15% for first-time buyers and 10% for non-first time buyers.

(b) Bridging loan interest (s 245C:\Users\nmoore\Dropbox (Alan Moore)\Taxworld 2016\Editorial\Tax Booklet 2016\TCA0245.htm) and interest on money borrowed to invest in a company (s 248) or partnership (s 253) – but not a rental company.

(c) Compensation for change in work practices (disturbance money) (s 480).

(d) Pension contributions. The contribution limits, whether through an employer scheme (s 776) or Personal Retirement Savings Account (PRSA), or a self-employed retirement annuity scheme (s 787), are:

(i) aged under 30: 15% of earnings,

(ii) aged 30-39: 20% of earnings,

(iii) aged 40-49: 25% of earnings,

(iv) aged 50-54: 30% of earnings,

(v) aged 55-59: 35% of earnings, and

(vi) aged 60 or more: 40% of earnings.

This 40% limit also applies to a sportsman or sportswoman.

The overall annual earnings limit for pension contributions is 115,000 (s 787B).

Unless you have a personal fund threshold (PFT), the standard fund threshold is €2,000,000 and the maximum tax-free lump sum on retirement is €200,000.

(e) Covenants. To be tax effective, a covenant must be payable to:

(i) a human rights body, or to a recognised college to carry out research, and exceed, or be capable of exceeding three years, or

(ii) an individual who is aged 65 or over, or permanently physically or mentally handicapped, and exceed, or be capable of exceeding six years.

The maximum income that be tax-effectively covenanted is 5%, but this limit does not apply to income covenanted to an individual who is permanently physically or mentally handicapped (s 792).

(f) Stock relief (farmers). This is given at 25% of the increase in stock value (s 666), 100% in the case of a young trained farmer (s 667), and 100% to the extent that proceeds of compulsory livestock disposals are reinvested in replacement livestock (s 668).

(g) Home renovation incentive. Provides an income tax credit of 13.5% of qualifying home improvement expenditure. It is paid over the two years following the year in which the work was carried out. The minimum qualifying expenditure is €5,000; the maximum is €30,000. Expires 31.12.2016 (s 477B).

Capital allowances

In computing tax due on your business profits, you do not get any allowance for depreciation of business assets. Instead, you get a capital allowance over several chargeable periods until the cost of the asset has been fully allowed.

Capital allowances are computed exclusive of grants (s 317) and VAT (s 319).

Machinery or plant

Expenditure on machinery or plant used in your business is given an annual wear and tear allowance of 12.5% (s 284). A similar allowance is given for expenditure on software (s 291).

If you dispose of an item of machinery or plant on which capital allowances were claimed, and the disposal results in an underclaim (or overclaim) of allowances, you may be due a balancing allowance (or subject to a balancing charge) (s 288).

Cars

A car (new or secondhand) costing over €24,000 is given an annual 12.5% wear and tear allowance as if the car’s purchase price were €24,000 (s 373).

The capital allowances and leasing deductions of cars bought or leased since 1 July 2008 are based on the level of carbon emissions (see Benefit in Kind, above). Cars with emissions above 190g/km get no allowance (s 380K).

A taxi or short-term hire car is given an unrestricted write off of the purchase price at 40% per annum on a reducing balance basis (s 286).

Restrictions

If you carry on a trade of leasing machinery or plant, you may only set off the related capital allowances against income from that trade. This is relaxed if not less than 90% of your activity consists of leasing (s 403).

Industrial buildings

If you purchase an industrial building for your business, you may be due:

(a) an industrial building annual allowance (also known as a writing down allowance) (s 272),

(b) an industrial building accelerated writing down allowance (also known as “free depreciation”) (s 273), or

(c) an industrial building (initial) allowance (s 271).

If the disposal of an industrial building on which capital allowances were claimed results in an underclaim (or overclaim), a balancing allowance (or charge) may arise (s 274).

Industrial buildings annual allowance may be claimed at the following rates:

(a) 15%, in respect of expenditure on:

(i) palliative care units (hospices),

(ii) private convalescent facilities,

(iii) private hospitals,

(iv) registered nursing homes,

(v) sports injury clinics.

 (b) 10%, in respect of expenditure on:

(i) buildings for intensive livestock production,

(ii) market gardening structures.

 (c) 4%, in respect of expenditure on:

(i) airport buildings, structures, runways, aprons,

(ii) camp/caravan site buildings and structures,

(iii) factories, mills, dock undertakings,

(iv) mineral analysis laboratories,

(v) hotels.

Unused accelerated allowances carried forward beyond the tax life of the building will be lost. However, if the tax life of the building ends before 31 December 2014, only capital allowances unused as at 31 December 2014 will be lost.

High Earners’ Restriction

Where your income exceeds €125,000, the maximum reliefs and exemptions you can claim is the higher of:

(a) €80,000, and

(b) 20% of your total income.

An EIIS investment (s 490) is not subject to this restriction.

Farm buildings, structures, milk quotas

If you are a farmer, expenditure on farm buildings may qualify for a farm building allowance of 15% in each of the first six years and 10% in the seventh year (s 658).

Expenditure on the purchase of a milk quota may be written off over a seven year period (s 669B).

Losses

A trading or professional loss can be offset against income from all sources (s 381). An unused trading or professional loss is automatically carried forward against such income for the next and later tax years (s 382).

A trading or professional loss can be increased by current capital allowances (s 392).

A loss in the final year of trade (a terminal loss) may be offset against the income of the three immediately preceding tax years (s 385389).

A Case IV loss may be set against Case IV income and any unused balance may be carried forward against Case IV income of later tax years (s 384).

An  Case V (rental) loss may be set against Case V income and any unused balance may be carried forward for offset against rental income of the next and later tax years (s 385).

Double taxation

Double taxation is the imposition of comparable taxes in two or more states on the same taxpayer in respect of the same subject matter and for identical purposes.

There are three basic methods of relieving double taxation on income:

(a) the tax paid in the foreign country may be deducted (as if it were a business expense) when calculating the income that is liable to Irish tax,

(b) the tax paid in the foreign country may be credited against the Irish tax payable on the same income, or

(c) the income arising in the foreign country may be exempted from Irish tax.

The Irish government has negotiated double tax treaties (s 826) with: Albania, Australia, Austria, Belgium, Bosnia and Herzegovina, Botswana, Bulgaria, Canada, Chile, China, Croatia, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Ethiopia, Finland, France, Georgia, Germany, Greece, Hong Kong, Hungary, Iceland, India, Israel, Italy, Japan, South Korea, Latvia, Lithuania, Luxembourg, Macedonia, Malaysia, Malta, Mexico, Morocco, Kuwait, Netherlands, New Zealand, Norway, Pakistan, Poland, Portugal, Qatar, Romania, Russia, Serbia, Singapore, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Switzerland, Thailand, Turkey, United Arab Emirates, UK, Ukraine, USA, Uzbekistan, Vietnam, Zambia.

For full details, see http://www.revenue.ie/en/practitioner/law/tax-treaties.html.

SELF ASSESSMENT

Pay and file

If you are self-employed, or a company owner-director, you must (s 950):

(a) pay preliminary tax (s 952) on or before the preliminary tax date, i.e., 31 October in the tax year (s 958(2)), and

(b) file an income tax return on or before the return filing date, i.e., 31 October following the tax year to which the return relates (s 951).

Therefore, you must:

(a) pay the preliminary tax for the tax year 2016, and

(b) file the tax return for the tax year 2015,

on or before the pay and file date, i.e. 31 October 2016.

Computational error

If you file your return and pay your tax before the return filing date, but a computational error results in an underpayment of tax of not more than 5% of the tax liability, the shortfall may be paid by the following 31 December provided it does not exceed the greater of:

(a) €3,175, or 5% of the tax payable for the year, whichever is lower, and

(b) €635.

Insufficient preliminary tax

Interest applies from the preliminary tax date if the preliminary tax payment amounts to less than:

(a) 90% of the ultimate liability for the period,

(b) 100% of the liability for the preceding period, or

(c) where tax is paid through direct debit instalments, 105% of the liability for the pre-preceding period.

REVENUE POWERS

Administration

The Revenue Commissioners are responsible for the administration of income tax, corporation tax and capital gains tax (s 849). Inspectors of taxes appointed by the Revenue are responsible for the local administration of the tax (s 852).

Anti-avoidance

An Irish resident individual who has power to enjoy income arising to a non-resident (e.g., an offshore company) may be assessed to tax on the income of that company (s 806).

Revenue may assess underpaid tax if in their opinion a tax avoidance transaction is wholly artificial (s 811).

Revenue may also potentially impose a 20% surcharge if they are successful in challenging a tax avoidance scheme. You may avoid such surcharge and interest by filing a protective notice (s 811A).

Information

A taxpayer must file a third party return of payments made to:

(a) a property management agent (s 888),

(b) a business person who pays fees to a self-employed service provider (s 889),

(c) a commission agent (s 890),

(d) a bank that pays interest without deduction of tax (s 891),

(e) a nominee shareholder (s 892),

(f) a UCITS intermediary (s 893).

An auditor who becomes aware that a relevant offence has been committed must report the offence to the Revenue if you do not rectify the offence within six months (s 1079).

Audit

A taxpayer must keep records that will enable him to make a true tax return. This means – a cash receipts book, a cheque payments book, a sales book, a purchases book, a register of assets and liabilities, and a record of asset acquisitions and disposals (s 886). Records may be stored electronically (s 887).

A Revenue inspector may inspect PAYE records (s 903), relevant contracts tax records (s 904), and general business records (s 905).

He may be accompanied by a member of An Garda Síochána (s 907).

He may require a financial institution to provide copies of bank statements (s 908).

He may require you to submit a statement of affairs (s 909).

He may check a third party return of information or payments made (s 899).

Revenue may take criminal proceedings against a taxpayer who deliberately and defiantly refuse to comply with tax laws by failing to pay tax or file returns (s 1078).

Collection

Tax

The Collector-General (s 851) may enforce collection of unpaid tax by:

(a) issuing a certificate to the appropriate sheriff or county registrar (s 962),

(b) suing for the tax as a civil debt in the District Court or Circuit (s 963) or High Court (s 966),

(c) taking bankruptcy proceedings against you (s 999),

(d) issuing an attachment notice to one of your debtors (s 1002),

(e) requiring payment of arrears before issuing a tax clearance certificate (s 1094, 1095).

Revenue may offset repayments between taxes (s 1006A) and appropriate tax payments as they see fit (s 1006B).

A court seizure order in respect of a Revenue debt takes priority over other debts (s 971). Unpaid relevant contracts tax and PAYE estimates (s 1000), and corporation tax (s 974), are preferential debts in company liquidation.

Tax may also be paid by donating a heritage item to a State-owned or State-funded gallery, library or museum (s 1003).

Interest

Interest on late tax (s 1080) accrues at the following rates for each day the tax remains unpaid:

(a) 0.0219% in respect of the period 1 July 2009 to the date of payment,

(b) 0.0273% in respect of the period 1 April 2005 – 30 June 2009,

(c) 0.0322% in respect of the period 1 April 1998 – 31 March 2005,

(d) 0.041% in respect of the period 1 August 1978 – 31 March 1998.

Surcharge

A 5% surcharge, which may not exceed €12,695, applies where a return is filed late, but within two months of the return filing date.

A 10% surcharge, which may not exceed €63,485, applies where a return is filed more than two months after the return filing date (s 1084).

Withholding taxes

Dividend withholding tax

An ROI-resident company must deduct dividend withholding tax (DWT) at the standard rate from dividend payments and other profit distributions (s 172B).

DWT need not be deducted from distributions made to:

(a) an Irish resident company, a pension scheme, an employee share ownership trust, a collective investment undertaking, or a charity (s 172C),

(b) a person resident in a tax treaty country, an EU resident, or a quoted company (s 172D),

(c) a qualifying intermediary, provided the ultimate beneficiary is non-liable (s 172E).

DWT may be credited against the recipient’s tax liability for the tax year in which the dividend is received (s 172J).

Annual payments

An annual payment (for example, a covenanted payment) is a payment that is pure income profit in the hands of the recipient. Where an annual payment is made:

(a) out of taxed income, the payer is chargeable to tax on the payment and is entitled to deduct tax at the standard rate (s 237),

(b) out of income not charged to tax, the recipient is chargeable and the payer must deduct tax at the standard rate from the payment (s 238).

Deposit interest retention tax

Financial institutions must deduct deposit interest retention tax (DIRT) at 41% from interest payable on deposits. This is so, even though the higher rate is now 40%.

DIRT deducted from general deposit account interest satisfies income tax liability but must be included in the recipient’s return of income (s 261).

DIRT does not apply to accounts held by pension funds (s 265) and charities (s 266), provided they have completed the appropriate declaration.

A person aged 65 or over, with income below €18,000 (individual) or €36,000 (married couple) may obtain a refund of DIRT (s 267).

Professional services withholding tax

An accountable person (a government department or State-funded body) must deduct professional services withholding tax (PSWT) at the standard rate from payments made for professional services (s 520) of:

(a) doctors, dentists, pharmacists, opticians and veterinary surgeons,

(b) architects, engineers, and quantity surveyors,

(c) accountants, auditors, and financial, economic, marketing, or business consultants,

(d) solicitors, barristers and other legal agents,

(e) geologists.

Relevant contracts tax

A main contractor must deduct relevant contracts withholding tax (RCT) at 35% from payments made to unauthorised subcontractor who has been engaged to carry out a relevant contract, i.e., construction operations, forestry operations, or meat processing operations on behalf of the main contractor (s 530, 531).

RCT also applies to activities carried out on the Continental Shelf.

Penalties

A person who fails to file a return or provide information on request, is liable to a penalty of €950 (s 1052). Where a return is filed negligently, the penalty is €125 plus the difference between the correct liability and the tax paid (s 1053). Where a return is filed fraudulently, the penalty is €125 plus twice the difference between the correct liability and the tax paid (s 1054).

Revenue may not seek a civil penalty wishes unless a court has determined that the penalty is due. Revenue may enforce collection of a penalty confirmed by a court, as if it were tax. Revenue may not recover penalties from the estate of a deceased person unless that person agreed, or a court confirms that the penalties are due. Revenue practice in relation to tax-geared penalties is given effect in the legislation.

APPEALS

A taxpayer aggrieved by an assessment to income tax or corporation tax may appeal within 30 days of the notice of assessment. The appeal may be settled before the appeal hearing by agreement between the inspector and the appellant or by withdrawal of the appeal (s 933).

The Appeal Commissioners must hear the evidence and order that the assessment be reduced, stand good, or be increased (s 934). They may summon and examine witnesses (s 939), and they may determine liability in cases of default (s 940).

The taxpayer may request that the appeal decision be reheard by a Circuit Court judge (s 942). If dissatisfied on a point of law, he may request the Appeal Commissioners to state a case for the opinion of the High Court (s 943).

PRSI

Pay-related social insurance (PRSI) is levied at the following rates, for the tax year 2016.

Employee

Exempt: Earnings up to €352 per week.

4%: Earnings above €352 per week.

Employer PRSI

8.5%: Earnings up to €376 per week. (This was 4.25% for 2011-2013 inclusive).

10.75%: Earnings above €376 per week.

Self-employed PRSI

4%: All earnings. The minimum contribution is €500 per year.

 

From January 2016, earnings between €352 and €424 per week are subject to a maximum PRSI credit of €12, this is reduced by 1/6th of earnings in excess of €352.

Universal social charge

Exempt: Income below €13,000; certain social welfare payments; income already subjected to DIRT.

1% (previously 1.5%): The first €12,012 of earnings.

3% (previously 3.5%): Income between €12,013 and €18,668.

5.5% (previously 7%): Income between €18,669 and €70,044.

The 3% rate applies if the earner is:

(a) aged 70 or over, or

(b) a medical card holder aged under 70,

with income less than €60,000.

8%: Remainder. The rate is 11% (i.e., 8% plus 3% surcharge) in respect of non-employment income in excess of €100,000 (reduced to 8% if the earner is aged 70 or over).

A 5% USC charge applies to income sheltered by area-based property incentives (accelerated capital allowances and “section 23” reliefs).

CORPORATION TAX

CHARGE TO TAX

An Irish resident company is chargeable to corporation tax on its worldwide profits and capital gains (s 21).

Corporation tax is charged for each financial year, i.e., calendar year.

Assessments are made by reference to an accounting period, and where an accounting period straddles two financial years, the profit is apportioned accordingly, to be charged at the appropriate rates (s 26).

Corporation tax is charged on the full amount of profits arising in the accounting period, whether or not such profits are received in the Republic of Ireland (ROI). Only legitimate deductions may be made (s 27).

RESIDENCE

A company is resident where it is centrally managed and controlled.

A non-resident company is chargeable to corporation tax on:

(a) any income arising through an ROI-located branch or agency (s 25),

(b) any chargeable gains derived from land, mineral rights, or assets used for the branch or agency.

An Irish registered company is automatically treated as ROI resident for tax purposes (s 23A). This rule does not apply in the case of a company:

(a) that is ultimately controlled by persons resident in an EU State or tax treaty country, or

(b) regarded as non-resident under the terms of an Irish tax treaty.

CORPORATION TAX RATES

Start-up companies

A start-up trading company can get a three year exemption which reduces its corporation tax charge (up to €40,000 per annum) to nil.

There is marginal relief if the charge is between €40,000 and €60,000. In theory, this means a start-up company can earn annual net profits of €320,000 (€40,000 divided by 12.5%) and pay no tax.

However, the relief is linked to the amount of employer’s PRSI paid by the claimant company, subject to a maximum of €5,000 per employee, and an overall limit of €40,000. The relief does not apply to trades carried on by associated companies.

This relief expires on 31.12.2018.

Standard rate

The standard rate of corporation tax (s 21) is 12.5%.

Foreign dividends paid from trading profits are taxed at 12.5%. If the dividend is not paid from trading profits, it is taxed at 12.5% provided:

(a) 75% or more of the paying company’s profits are trading profits, or derived from trading profits arising in EU States or treaty countries.

(b) 75% or more of the recipient’s assets, on a consolidated basis, must consist of trading assets.

Where the recipient company owns not more than 5% of a paying company based in an EU State or treaty country, the dividend is also taxed at 12.5%.

Excess foreign tax credits in respect of dividends taxed at 12.5% are not available for set-off against dividends taxed at 25% (but not vice versa).

Knowledge Development Box (KDB)

The KDB rate of corporation tax on profits from patented inventions and copyrighted software (qualifying assets) is 6.25% (s 769I).

Higher rates

The following types of income are taxed at 25% (s 21A):

(a) untaxed interest and income from foreign property (Case III income),

(b) miscellaneous income not taxed under any other heading (Case IV income),

(c) rental income (Case V income), and

(d) income from mining activities, petroleum activities, and dealing in land.

RELIEFS

The other main reliefs from corporation tax are:

(a) charges, i.e., interest, annual payments and royalty payments (s 243),

(b) interest on money borrowed to invest in another company (s 247), but such relief is denied in the case of lending between connected companies if there is a mismatch between interest lent and claimed,

(c) investment in films (s 481),

(d) investment in renewable energy (s 486B), and

(e) expenditure on “pure” research and development (s 766) – this amounts to a 25% tax credit against corporation tax liability and can lead to a repayment of up to 33% of unused tax credit not fully used in the first accounting period.

LOSSES

Trading loss

Carry back

A trading loss can be offset against profits of any kind in the current accounting period. If not so used, a trading loss can be offset against profits of a preceding accounting period of equal length. A claim must be made within two years of the end of the accounting period in which the loss occurs (s 396(9)).

A loss in the final year of trading (a terminal loss) can be offset against profits of the three immediately preceding years (s 397). This may give rise to a repayment of tax.

Carry forward

An unused trading loss may be carried forward for offset against trading profits of the next and later accounting periods (s 396).

A Case III loss can be offset against Case III income of the current period. If not so used, any excess can be carried forward for offset against Case III income of the next and later accounting periods. The same treatment applies to Case IV losses.

Value basis relief

A 12.5% trading loss may be offset against a 25% taxed profit, but only on a value basis.

Rental loss

A Case V loss can be offset against Case V income of the current period. If not so used, any excess can be carried forward for offset against Case V income of the next and later accounting periods (s 399).

Capital loss

A capital loss can be offset against chargeable gains of the current period. If not so used, any excess can be carried forward for offset against chargeable gains of the next and later accounting periods.

Group relief

A group member company may surrender an unused trading loss to a company within the same 75% group (s 420).

A company that takes over a  trade previously carried on by another company may claim the predecessor’s unrelieved losses (s 400) if the trade continues, but “loss-buying”, i.e., acquiring the accumulated losses of a ceased business, is disallowed (s 401).

SELF ASSESSMENT

Preliminary tax

A company with a tax charge below €200,000 may pay preliminary tax based on its previous year’s liability.

A company with a tax charge above €200,000, must pay in two instalments:

(a) the first is payable on the 21st of the sixth month of the accounting period (e.g., 21 June for a calendar year period),

(b) the second is payable on the 21st of the eleventh month of the period (21 November for a calendar year period).

Where a company pays and files electronically, the 21st becomes the 23rd.

The preliminary tax payment must equal 90% of the ultimate liability.

Any remaining balance must be paid on or before the return filing date (s 958(3)).

Filing of  return

A company must file a corporation tax return on or before the return filing date, i.e., the last day of the ninth month after the end of the accounting period (s 951).

Close company surcharge

A surcharge of:

(a) 20% applies where a closely held company does not distribute investment or rental income to its shareholders (s 440), and

(b) 15% applies where a closely held professional service company does not distribute its income to its shareholders (s 441).

REVENUE POWERS

See Administration, Anti-avoidance, Information, Audit and Collection under INCOME TAX: Revenue powers.

APPEALS

See INCOME TAX: Appeals.

 

CAPITAL GAINS TAX

CHARGE TO TAX

Capital gains tax (CGT) is charged when a person makes a chargeable gain on the disposal of an asset (s 28).

An asset means property in any form including intangible property, such as an option or debt (s 532).

A disposal includes a part disposal (s 534) and the deriving of a capital sum from an asset (s 535).

CGT is charged on gains arising in a tax year after deducting allowable losses (s 31). Gains accruing to a partnership are separately assessed on the individual partners (s 30).

RESIDENCE

A person who is resident or ordinarily resident in the Republic of Ireland (ROI) for a tax year chargeable to CGT on his worldwide gains in that tax year.

A person who is neither resident nor ordinarily resident in the ROI, is chargeable on the disposal of ROI:

(a) land,

(b) minerals or exploration rights,

(c) branch or agency assets.

A foreign-domiciled person is only chargeable on the disposal of non-ROI to the extent that he remits the proceeds into ROI (s 29).

CAPITAL GAINS TAX RATES

The general rate of CGT is 33%.

A 40% rate applies to gains on disposals of:

(a) foreign life assurance policies (s 594(2)(f)), and

(b) a material interest in certain offshore fund (s 747A).

EXEMPTIONS

The main exemptions from CGT are:

(a) Annual exemption. The first €1,270 of gains for a tax year is exempt (s 601).

(b) Disposals of property acquired between 7 December 2011 and 31 December 2014, provided the property is held for more than seven years (s 604A).

(c) Chattel exemption. If the proceeds from the disposal of a durable chattel (“tangible movable property” other than wasting assets) do not exceed €2,540, the gain is exempt (s 602).

(d) Gains on government and certain other securities (s 607).

(e) Gains realised by pension funds (s 608) and charities (s 609).

(f) Gains on the following are also exempt (s 613):

 (i) instalment savings scheme bonuses,

 (ii) prize bond winnings,

 (iii) compensation for damages or personal injury,

 (iv) lottery and betting winnings, and

 (v) a disposal of pension rights.

(g) Transfer of residential site from parent to child, provided the site is to construct the child’s principal private residence, and the site’s market value does not exceed €500,000 (s 603A).

RELIEFS

The main CGT reliefs are:

(a) “Retirement” relief: This applies where a person aged 55 or more and disposes of a farm or business (“qualifying assets”), i.e., chargeable business assets – including shares in a family company that you have been held for 10 years or more.

If the disposal is to a child of the disponer the gain is exempt (s 599). From 1 January 2014, a lifetime limit of €3m applies if the disponer is aged 66 or over.

For other disposals the CGT is nil if the disposal proceeds do not exceed the lifetime limit of €750,000 (s 598). From 1 January 2014, the lifetime limit is reduced to €500,000 if the disponer is aged 66 or over.

If the proceeds exceed the lifetime limit, the CGT may not exceed half the difference between the proceeds and the lifetime limit.

A disposal of assets held by a family company owner may also qualify for relief provided they are disposed of at the same time and to the same person as the family company shares.

Let farm land can qualify if any of the following apply:

(i) Having been farmed prior to letting it is let under the early retirement scheme.

(ii) It is compulsorily acquired and was land let for 5 years the disposal.

(iii) The disposal is to a child and it was farmed prior to the letting.

(iv) It was let for not less than five years to the same person in the 25 year period ending with the disposal.

Retirement relief is subject to a “bona-fide commercial reasons” anti-avoidance test.

(b) Transfer of business to company (s 600): Where a business and all its (non-cash) assets are transferred as a going concern to a company in exchange for shares in that company, the base cost of those shares (for the purposes of future disposals) is reduced to match the cost of the assets.

(c) Principal private residence (s 604): A gain on the disposal of a main residence is exempt, provided it was occupied as the disponer’s main residence throughout the period of ownership, with the exception of the last 12 months of ownership.

(d) Entrepreneur relief (s 597AA): This provides a 20% CGT rate for disposals of chargeable business assets, owned for not less than three years, up to a lifetime limit of €1m. The relief does not apply to development land or investment assets.

For disposals of private company shares, the disponer must have:

(i) owned not less than 15% of the shares in the trading company (or its holding company),

(ii) been a full-time working director of the company for not less than three years prior to the disposal.

Effective 01.01.2016.

INDEXATION

For disposals made in 2003 and later tax years, the cost of acquiring an asset may be multiplied by the indexation factor appropriate to the year in which the asset was acquired:

1974-75: 7.528

1975-76: 6.080

1976-77: 5.238

1977-78: 4.490

1978-79: 4.148

1979-80: 3.742

1980-81: 3.240

1981-82: 2.678

1982-83: 2.253

1983-84: 2.003

1984-85: 1.819

1985-86: 1.713

1986-87: 1.637

1987-88: 1.583

1988-89: 1.553

1989-90: 1.503

1990-91: 1.442

1991-92: 1.406

1992-93: 1.356

1993-94: 1.331

1994-95: 1.309

1995-96: 1.277

1996-97: 1.251

1997-98: 1.232

1998-99: 1.212

1999-00: 1.193

2000-01: 1.144

2001: 1.087

2002: 1.049

LOSSES

A loss on a disposal is allowable if the corresponding gain would have been chargeable (s 546).

SELF ASSESSMENT

Preliminary CGT is payable (s 952):

(a) generally, on or before 15 December in the tax year, and

(b) as respects gains made in December, on or before 31 January in the next year.

The CGT return must be filed on or before 31 October in the tax year following the year in which the gain was made (s 958(2)).

REVENUE POWERS

See Administration, Anti-avoidance, Information, Audit and Collection under INCOME TAX: Revenue powers.

Withholding tax

If the seller cannot produce a tax clearance certificate the purchaser must deduct 15% withholding tax from the price paid for ROI:

(a) land,

(b) minerals or exploration rights,

(c) shares deriving their value from (a) or (b).

This does not apply if the transaction value does not exceed €500,000 (€1,000,000 for houses and apartments) (s 980).

APPEALS

See INCOME TAX: Appeals.

VALUE ADDED TAX

CHARGE TO TAX

Value added tax (VAT) is payable by a taxable person who engages in:

(a) the supply of goods, or

(b) the supply of services,

within the Republic of Ireland (ROI) for consideration in the course or furtherance of business.

VAT also applies to:

(a) the importation of goods from outside the EU.

(b) the Intra-Community Acquisition (ICA) of:

(i) movable goods (other than new cars, boats, or planes) acquired from a person who is registered, or ought to be registered, for VAT in another EU State, and

(ii) new cars, boats and planes (new means of transport) acquired from a person in another EU State.

Supply of goods

Meaning of supply of goods

A supply of goods means:

(a) The transfer ownership of goods by agreement.

(b) The handing over goods under a hire purchase type agreement.

(c) The handing over land or buildings developed on behalf of another person.

(d) The compulsory acquisition of goods by or on behalf of the State.

(e) The application (self-supply) of goods from a taxable to an exempted activity.

(f) The appropriation (self-supply) of goods to non-business use.

(g) The transfer of goods from an ROI business to its branch in another EU State.

A supply of goods does not include:

(a) A transfer ownership of goods to a lender as security for a loan.

(b) A transfer ownership of goods back to the borrower on redemption of the loan.

(c) A transfer in connection with the transfer of a business or part of a business to another taxable person.

Place of supply of goods

The general rule is that a supply of goods takes place where the goods are located at the time of the supply (s 29(1)(c)).

The exceptions to the general rule are:

(a) An Intra-Community Supply (other than a means of transport) – the place of supply is where the goods’ journey ends. But if the customer is VAT-registered the supply is deemed to take place in the EU State that issued the customer’s VAT number.

An Intra-Community Supply of a means of transport takes place where the goods’ journey ends (s 24(1)).

(b) The place of supply of goods that are assembled or installed is where the goods are assembled or installed (s 29(1)(b)).

(c) For goods supplied on board a boat, plane or train travelling between EU States, the place of supply is the EU State of departure (s 29(1)(d)).

(d) For distance sellers without an EU establishment, selling into an EU State, the place of supply is where the goods’ journey ends (s 30(1)-(2)).

Supply of services

Meaning of supply of services

The supply of a service means “the performance or omission of any act, or the toleration of any situation” other than a supply of goods.

Place of supply of services

There are two place of supply rules, depending on whether customer is a business (B2B service) or a consumer (B2C service):

(a) For B2C services, the place of supply is the supplier’s place of establishment. If the supplier has several establishments, the supply takes place at the establishment most concerned with the supply; if the supplier has no establishment, it takes place at the supplier’s usual place of residence (s 34).

(b) For B2B services, the place of supply is where the recipient is established – the “reverse charge rule.” The supplier must obtain the recipient’s VAT number and record it on the invoice.

Exceptions – the following services are treated as supplied where physically performed: property-related services, passenger transport, restaurants, cultural services, hire of means of transport.

The reverse charge mechanism applies to supplies of construction services between connected persons.

TAXABLE PERSON

Meaning of taxable person

A trader is a taxable person and must register for VAT (s 65) if in any continuous 12 month period if:

(a) his turnover from the supply of taxable goods exceeds, or is likely to exceed €75,000,

(b) his turnover from the supply of taxable services exceeds, or is likely to exceed €37,500,

(c) the value of his ICAs exceeds, or is likely to exceed €41,000,

(d) he disposes of developed property,

(e) being a distance seller selling into Ireland, his turnover from the supply of goods exceeds, or is likely to exceed €35,000in a calendar year (s 29(1)).

A farmer or sea-fisherman is not obliged to register but may elect to do so.

Property transactions

Exempt supply

The following supplies are exempt:

(a) undeveloped land,

(b) immovable goods (land or buildings) where the most recent development was more than five years before the supply,

(c) a completed property occupied for at least 24 months since its most recent development, where a taxable supply has occurred since that development between unconnected persons,

(d) a property completed more than five years before the supply, provided only “minor” work was carried out before the supply, i.e., work which does not adapt the property for materially altered use and the cost of which does not exceed 25% of the sale price.

A person making an exempt supply of property, may, together with the acquirer of the property, make a joint option for taxation. In such a case, the acquirer is accountable for the VAT.

Taxable supply

The supply of a developed property which is new and unused is taxable. Broadly, a property is new if it is developed in the five years prior to its disposal and unoccupied.

Letting of property

A landlord may opt to charge VAT on a letting of commercial property. Such an option is exercised by including an appropriate provision in the letting agreement. The option ceases if the landlord:

(a) makes an exempt letting,

(b) agrees in writing with the tenant,

(c) notifies the tenant accordingly,

(d) becomes connected with your tenant,

(e) allows a connected person to occupy the premises,

(d) allows the property to be used as a residence.

A landlord may not opt to tax a letting to a connected person, unless the connected tenant uses the property for an activity in relation to which he is entitled to 90% deductibility.

Capital goods scheme

A property’s tax-life (adjustment period) is generally 20 years (10 years in the case of a refurbished property). Deductible VAT is adjusted for each year (interval) of the property’s VAT life by comparing the VAT deducted on acquisition with the proportion of taxable use during the initial interval. Depending on whether taxable use has increased or decreased, the VAT deduction for that interval will decrease or increase.

Where a person with full VAT recovery sells a property, but did not reclaim VAT on the acquisition of the property, he can get a full VAT credit for the unclaimed VAT, scaled back in accordance with the number of years elapsed since the property was acquired.

A property owner must keep a capital good record for each capital good.

VAT RATES

Current VAT rates

The current VAT rates are (s 46(1)):

(a) 0% (the zero rate).

(b) 4.8% (the agricultural rate). This applies to supplies of live cattle, deer, goats, greyhounds, horses, pigs and sheep.

(c) 13.5% (the low rate). This is reduced to 9% for certain goods and services.

(d) 23% (the standard rate). This rate applies to goods and services that are not exempt, or specifically liable at 0%, 5.2%, or 13.5%.

A rate of 5.2% (the farmer’s flat-rate addition) applies to supplies of agricultural produce by flat-rate (i.e., unregistered) farmers (s 86(1)).

Zero rate

The goods and services chargeable to VAT at 0% (Schedule 2) are:

Intra-Community transactions

1. (1) Supplies to a VAT-registered person in another EU State.

(2) The supply of new means of transport, dispatched or transported to a person in another EU State.

(3) The supply of excisable products, dispatched or transported to a person in another EU State.

(4) The transport of goods within the EU to and from the Azores or Madeira.

Imports

2. (1) Goods imported from outside the EU consigned to another EU State.

(2) Transport of goods imported from outside the EU (provided the customs value of the goods includes the transport charge).

Exports

3. (1) The export of goods to a place outside the EU.

(2) Carriage of goods within the State where part of a contract to transfer the goods to a place outside the EU.

(3) Goods supplied to an authorised exporter.

(4) Work on movable goods brought from outside the EU for the purposes of such work.

Services relating to vessels and aircraft

4. (1) The provision of port or airport facilities (docking, landing, loading, unloading) for passengers and goods.

(2) The supply, modification, maintenance, repair, chartering and hire of sea-going ships of more than 15 tons and international commercial aircraft.

(3) The supply, maintenance, repair and hire of equipment for use in sea-going vessels in (2).

(4) The supply, maintenance, repair and hire of equipment for use in aircraft in (2).

(5) The supply of fuel and provisions for a sea-going ship or international commercial aircraft.

(6) The supply of navigation services by the Irish Aviation Authority.

Transactions treated as exports

5. (1) The supply of goods or services to certain international bodies.

(2) The supply of gold to the Central Bank.

Services by intermediaries

6. (1) Export agency services.

(2) Export agency services include services in relation to: carriage of goods to or from the Azores or Madeira; carriage of goods in transit to a place outside the EU; provision of docking, landing, loading or unloading facilities; the supply, maintenance, hire and repair of equipment for sea-going vessels; the supply of gold to the Central Bank.

(3) Intermediary services in relation to the travel agent’s margin scheme.

International trade etc.

7. (1) The supply of goods by a VAT-registered person in a free port to another such person.

(2) The supply of goods by a VAT-registered person in the Shannon zone to another such person.

(3) The supply of goods to be transported directly or on behalf of the supplier to a VAT-registered person in the Shannon zone.

(4) The supply of traveller’s goods (goods brought abroad by a traveller in accordance with the retail export scheme), provided the conditions are met.

(5) VAT repayment services in relation to traveller’s goods.

(6) The supply of goods in a tax-free shop to travellers departing the State to a place outside the EU.

The supply of food, drink and tobacco, to passengers travelling to another EU State, for consumption on board the ship or aircraft.

(7) The supply of goods and services to a qualifying export business.

Food and drink

8. (1) Food and drink for human consumption, excluding:

(a) alcoholic drinks,

(b) tea, coffee, etc. in drinkable form,

(c) ice cream, frozen desserts, yogurts, cereal or grain savoury products,

(d) potato crisps, popcorn, salted or roasted nuts,

(e) chocolates, sweets, biscuits, confectionery, but not plain bread.

(2) “Supplying food and drink” includes supplying food without drink and vice versa.

Certain printed matter

9. Printed books and booklets, but not newspapers, stationery, albums, and books of stamps, coupons or tickets.

Children’s clothing and footwear

10. (1) Children’s clothing, i.e., clothing of sizes not exceeding the size appropriate to a 10-year old child of average build.

(2) Children’s footwear, i.e., footwear of a size not exceeding the average size for a 10-year old child.

(3) A 10-year old child means a child under eleven years of age.

Medicine, medical equipment and appliances

11. (1) Medicine for human oral consumption.

(2) Medicine for animal oral consumption (but not for pets).

(3) Invalid carriages and appliances, and artificial body parts (but not artificial teeth, corrective spectacles, and contact lenses).

Fertilisers, feeding stuffs, certain seeds etc

12. (1) Animal feed other than pet food.

(2) Fertiliser supplied in packages of 10kg or more.

(3) Food-producing trees, plants, seeds, spores, bulbs, tubers, tuberous roots, corms and rhizomes.

Other zero-rated goods and services

13. (1) Lighthouse and navigation services provided by the Commissioner of Irish Lights.

(2) Life saving services provided by the Royal National Lifeboat Institution.

(3) Sanitary towels and tampons.

Air traffic control services supplied by the Irish Aviation Authority.

(4) Plain white wax candles and night lights.

Low rate (13.5%, but 9% as regards services marked *)

The goods and services chargeable to VAT at the low rate (Schedule 3) are:

Definitions

1-2. Definitions.

Food and drink for human consumption*

3. (1) Food and drink provided for human consumption by a vending machine, or in the course of catering (i.e., in the course of operating a hotel, restaurant, canteen, pub, catering or similar business).

(2) The supply, in the course of catering, of ice cream, frozen desserts, frozen yoghurts etc., potato crisps, popcorn and salted or roasted nuts, and non-alcoholic drinks.

(3) Hot take away food.

(4) Hot take away food does not include bread that does not meet the ingredient requirements.

(5) Cakes, crackers, wafers and biscuits, excluding:

(a) cakes not covered, or decorated with chocolate,

(b) ice cream, frozen desserts, etc.,

(c) chocolates, sweets and similar confectionery.

Live animals, animal feeding stuffs

4. (1) Greyhound feed supplied in units of 10kg or more.

(2) Live poultry and live ostriches.

Pharmaceutical products

5. Non-oral contraceptives.

Certain safety equipment

6. Children’s car safety seats.

newspapers and other printed matter*

7. Printed newspapers and magazines, brochures, leaflets and programmes, catalogues, directories, maps, charts, sheet music – provided the material in question does not consist mainly of advertising.

Shows, exhibitions, cultural facilities, etc*

8. (1) Cinema admission charges.

(2) Promotion of, and admission to, live theatre and concert shows, other than dances, which are not exempt.

(3) Amusement services.

(4) Admission to artistic, cultural, historical or scientific exhibitions (that are not exempt).

Private dwellings

9. (1) Services consisting of the development of immovable goods consisting of private dwellings, i.e., building type work (subject to the two-thirds rule).

(2) Routine cleaning of private dwellings.

Agricultural goods and services

10. (1) Agricultural services.

(2) Animal insemination services.

(3) Livestock semen.

Hotels, holiday accommodation*

11. Accommodation in a hotel, guest house, holiday home or caravan park.

Sporting facilities*

12. (1) Commercial sports facilities.

(2) Golf facilities provided by a member-owned golf club, if the turnover exceeds €37,500 in any continuous 12 month period.

(3) Golf facilities provided by a non-profit body, if the turnover exceeds €37,500 in any continuous 12 month period.

Other services

13. (1) Waste disposal services.

     (2) Minor repairs to movable goods.

     (3) Hairdressing services.*

Housing

14. The supply of immovable goods used for residential purposes, i.e., houses and apartments.

Non-residential immovable goods

15. (1) The supply of immovable goods not used for residential purposes, i.e., commercial property.

(2) Services consisting of the development of commercial property, i.e., building type work (subject to the two-thirds rule).

(3) Routine cleaning of commercial property.

Concrete works

16. (1) Concrete ready to pour.

(2) Standard-sized concrete building blocks.

Energy products and supplies

17. (1) Coal, peat and solid fuel products.

(2) Electricity.

(3) Domestic or industrial gas for heating or lighting.

(4) Home heating oil.

Photographic and related supplies

18. (1) Photographic development services.

(2) Photographs and negatives supplied by a professional photographer.

(3) Professional photographic services.

(4) Passport photographs supplied by a photographic vending machine.

(5) Film editing services.

(6) Photographic agency service receipts.

Hiring for short periods

19. Short-term hire of road vehicles, boats, caravans, mobile homes, and tents.

Certain repairs and services

20. (1) Repair and maintenance of movable goods (but not motor accessories, batteries, tyres, tyre flaps or tyre tubes, supplied in the course of a vehicle service).

(2) Zero-rated repair work (on movable goods for export, on aircraft or sea-going vessels, or on equipment used in international aircraft) is excluded from (1).

Miscellaneous services

21. (1) Care of the human body (health studios).

(2) Professional jockey services.

(3) Professional veterinary services.

(4) Tour guide services.

(5) Driving instruction (other than heavy goods vehicles).

Plants and bulbs

22. (1) Nursery or garden centre produce.

(2) Goods used for the agricultural production of biofuel.

Works of art

23. Original works of art (paintings, sketches, engravings, sculptures).

Antiques

24. Antiques more than 100 years old.

Literary manuscripts

25. Literary manuscripts certified as being of major importance.

Package rule

A supply consisting of a combination of goods and/or services chargeable at different VAT rates for a single price is chargeable at the highest rate applicable to any of the items in the package (s 47).

Two-thirds rule

If a combination of goods and services is supplied for a single price, provided the value of goods exceeds two-thirds of the total price for the job, the entire transaction is treated as a supply of goods (not a service) (s 41).

EXEMPT ACTIVITIES

VAT is not charged on any of the following supplies:

Postal services

1. Public postal services.

Medical and related services

2. (1) Medical care or treatment provided by a hospital, nursing home or clinic.

(2) Home care services undertaken on behalf of the Health Service Executive.

(3) Professional medical care services.

(4) Dental technician services and the supply of dentures and other dental prostheses.

(5) Professional dental or optical services.

(6) The collection, storage, supply, intra-EU acquisition and importation of human blood, milk and organs.

Independent groups, non-profit making organisations and other bodies

3. (1) Services supplied by an independent tax-exempt entity established for administrative convenience in order to render services to the members.

(2) Welfare or social security type goods and services provided by a non-profit body.

(3) Goods and services supplied to its members by a non-profit body.

(4) The provision of sports facilities by a non-profit body.

(5) Cultural services provided by a Revenue-recognised cultural body.

Childcare and education

4. (1) Non-profit childcare services.

(2) Childcare provided by regulated childcarers.

(3) Educational activities.

Other activities

5. (1) Catering services supplied to patients in a hospital or nursing home, or to students in a school.

(2) The promotion of, and admission to, live theatre, concert and circus shows.

(3) The promotion of sporting events.

(4) The national broadcasting and television service.

Financial services

6. (1) Financial services: these include all the usual banking type services – lending money, operating bank accounts, credit card management, issuing, transferring and dealing in stocks etc.

(2) They also include managing a collective investment undertaking.

(3) A determination by the Minister for Finance that an undertaking is a collective investment undertaking takes effect from the date of the determination.

(4) Management of an undertaking is as defined by EU law.

Agency services

7. Insurance premium collection services, insurance agency services, and financial agency services.

Insurance and reinsurance services

8. (1) Insurance services.

(2)  Related insurance services include collecting premiums and claims-handling.

Investment gold

9. (1) The supply, intra-Community acquisition and importation of investment gold.

(2) Acting as an intermediary in relation to investment gold.

Gambling and lotteries

10. (1) The taking of bets.

(2) The issue of lottery tickets.

Letting of land and buildings

11. (1) Letting of land or buildings, but excluding letting of machinery, hotel or holiday accommodation, provision of sports facilities, car parking and the provision of safes.

(2) Permission to use a toll road is not exempt.

Other supplies of goods

12. Goods in relation to which the supplier was not entitled to a purchases VAT deduction (for example, a car).

Gas and electricity services

13. (1) Importation of gas through the natural gas system.

(2) Importation of electricity.

Exemptions by derogation

14. (1) Funeral undertaking.

(2) The supply of water by local authorities.

(3) The transport of passengers with their baggage.

(4) Admission to sports events.

TAXABLE AMOUNT

VAT is charged on the total consideration which the supplier become entitled to receive in relation to the goods or services supplied. The gross consideration (i.e., the taxable amount) includes all commissions, costs, charges and taxes (apart from VAT) in respect of the supply (ss 36-43).

Cash receipts basis

A taxable person may account for VAT on the cash receipts basis (s 80) if his turnover:

(a) derives as to 90% or more from sales to unregistered persons, and

(b) is less than €2,000,000 in any continuous 12 month period (effective 1 January 2014).

SELF ASSESSMENT

Generally, a VAT return must be filed, and the VAT paid, between the 10th and the 19th day of the month following the VAT period (ss 74-79).

Distance sellers must file a quarterly VAT return on or before the 20th day of the month following the calendar quarter (s 91(6)(a)-(b)).

If no return is filed, the Revenue may estimate and enforce collection of their estimate of unpaid VAT (s 110).

A  taxable person must also file a statement of intra-EU supplies in each calendar quarter. This VIES statement must be filed before the last day of the month following the calendar quarter (s 82).

REVENUE POWERS

Administration

The Revenue Commissioners are responsible for the administration of VAT (s 106).

Audit

A taxable person must:

(a) keep full and true records of all transactions which affect or may affect his VAT liability (ss 84-85),

(b) issue customers with a VAT invoice containing the details required by regulations (ss 66-72).

 An authorised officer may at all reasonable times enter a business premises and require the owner, or his employees, to produce for inspection any records relating to the business (s 108).

An inspector may make an assessment of VAT he believes to be underpaid (s 111).

Collection

Interest is charged at 0.0274% for each day the VAT is unpaid.

Penalties

A person who fails to comply with VAT obligations is liable to a penalty of €5,000 (s 115). If the failure is negligent, the penalty is €125 plus the difference between the correct liability and the tax paid. If the failure is fraudulent, the penalty is €125 plus twice the difference between the correct liability and the tax paid (s 116).

See INCOME TAX (Penalties) as regards enforcement of penalties.

APPEALS

A person aggrieved by an assessment to VAT may appeal within 14 days of the notice of assessment (s 111). The income tax appeal procedures apply (s 119).

CAPITAL ACQUISITIONS TAX

CHARGE TO TAX

Disponer and disposition

Capital Acquisitions Tax (CAT) applies to gratuitous benefits, for example, a gift (s 4) or an inheritance (s 9).

The person who provides the property is the disponer, and the disposition is the method by which the property passes. Where property passes by will, the disponer is the testator. Where property passes on intestacy (no will), the disponer is the deceased.

The term disposition is very widely defined to include not only a will or intestacy, but any method (including, for example, any trust covenant, agreement or arrangement) by which property can pass.

The date of the disposition is the date of death of the disponer in the case of property passing by will or intestacy, and in other cases it is the date on which the disponer provided the property (or bound himself to provide it).

Taxable benefits

To be chargeable, a gift (s 6) or inheritance (s 11) must be taxable.

A gift is taxable if:

(a) the disponer was Republic of Ireland (ROI) resident or ordinarily resident at the date of the disposition, or at the date of the gift, or

(b) the donee was Republic of Ireland (ROI) resident or ordinarily resident at the date of the gift.

Otherwise, only the part or proportion of the property situate in the ROI at the date of the gift is taxable.

An inheritance is taxable if:

(a) the disponer was ROI resident or ordinarily resident at the date of the disposition, i.e., the date of death, or

(b) the successor was ROI resident or ordinarily resident at the date of the inheritance.

Otherwise, only the part or proportion of the property situate in the ROI at the date of the gift is taxable.

A non-Irish domiciled person can only be regarded as ROI resident or ordinarily resident for CAT purposes if he has been continuously ROI resident for the five year period ending on the date of the gift or inheritance.

Taxable value

A property’s taxable value (s 28) is computed as:

Market value

less liabilities, costs and expenses payable out of the gift or inheritance

= incumbrance free value

less consideration paid by acquirer in money or money’s worth

= taxable value

Tax is charged on the valuation date. In the case of a gift, this is the date of the gift. In the case of an inheritance, it is generally the date of death, or the earliest date on which his personal representatives can retain the inherited property for the beneficiary (s 30).

RATES OF TAX

Inheritance tax

The rates applicable to gifts and inheritances are:

Threshold amount: Nil

The balance: 33% (since 6 December 2012).

Discretionary trust tax

Assets placed in discretionary trusts are subject to:

(a) A once-off charge of 6%, which is due within four months of the valuation date (s 18).

(b) An annual charge of 1%, which is due on 31 December each year, and payable four months later each year during the trust’s lifetime (s 23).

EXEMPTIONS

Exemption thresholds

For 2016, the group thresholds (Schedule 2 para 1) are:

(a) €280,000 (effective 14.10.2015, previously €225,000) (Group 1), where the beneficiary’s relationship to the disponer is: son or daughter, minor child of a predeceased son or daughter, parent (in the case of a non-limited interest taken on the death of a child). Child includes a foster child and an adopted child.

(b) €30,150 (Group 2), where the beneficiary’s relationship to the disponer is: lineal ancestor, lineal descendant (not within (a)), brother or sister, nephew or niece.

(c) €15,075 (Group 3), where your relationship to the disponer is: cousin or stranger.

For gifts and inheritances taken since 5 December 2001, only prior benefits received since 5 December 1991 from the same group threshold are aggregated with the current benefit in computing tax payable on the current benefit.

Other exemptions

The main exemptions from CAT are:

(a) Spouses’ exemption: Property taken from a spouse is exempt from gift tax (s 70) and inheritance tax (s 71).

The exemption also applies in the case of separated or divorced couples where the property passes by Court order (s 88).

(b) Principal private residence. To qualify, the beneficiary must have lived:

 (i) for three years ending on the transfer date in the residence, or

 (ii) for three of the four years ending on the transfer date in the residence and the residence which it has replaced.

The beneficiary must not have any other private residence and you must not dispose of the residence for six years after the transfer (s 86).

(c) An inheritance taken from a pre-deceased child (s 79).

(d) The first €3,000 of gifts taken in each calendar year (s 69).

(e) A gift or inheritance taken for public or charitable purposes (s 76).

(f) Objects of national, scientific, historic, or artistic interest, which the public are allowed to view (s 77). This relief also extends to heritage property owned through a private company (s 78).

(g) Pension lump sums (s 80).

(h) Securities acquired by a non-resident non-Irish domiciled beneficiary from a disponer who held them for at least three years (s 81).

(i) Personal injury compensation or damages, and lottery winnings. This also covers reasonable support, maintenance, or education payments received by a minor child if the child’s parents dead (s 82).

(j) Property acquired under a self-made disposition (s 83).

RELIEFS

The main reliefs from CAT are:

(a) A widowed person can “stand in the shoes of” a predeceased spouse (Schedule 2 para 6).

(b) Agricultural relief. To qualify, the beneficiary must be a “farmer”, i.e., 80% of the gross market value of his assets must consist of agricultural property (i.e., farm land and buildings, crops, trees and underwood, livestock, bloodstock, and farm machinery) located in the EU.

The relief is a 90% reduction of the full market value. The relief is withdrawn if the property is disposed of within six years and the proceeds are not reinvested within one year (six years in the case of a compulsory acquisition) (s 89).

(c) Business relief. To qualify, the property must be relevant business property, i.e., a sole trade business, an interest in a partnership, and unquoted shares in an Irish incorporated company.

The relief is a 90% reduction of the taxable value. The relief is withdrawn if the property is disposed of within six years of the date of the gift or inheritance and the proceeds are not reinvested within one year of the disposal (s 92).

(d) Favourite nephew (or niece) relief (Schedule 2 para 7).

(e) Double taxation in respect of US and UK equivalent taxes (s 106, 107).

(f) The proceeds of a life policy taken out to pay CAT (s 72).

(g) If the same event gives rise to a liability to both CAT and CGT, the disponer’s CGT can be credited against the recipient’s CAT (s 104).

SELF ASSESSMENT

A CAT return must be filed, and the tax paid:

(a) on or before 31 October, If the valuation date falls between 1 January and 31 August in the same year,

(b) on or before 31 October in the following year, if the valuation date falls between 1 September and 31 December in the previous year.

A secondarily accountable person (i.e., the disponer, trustee, guardian, committee, agent or personal representative of the donee or successor), must file a return if requested to do so by the Revenue (s 46).

REVENUE POWERS

Administration

The Revenue Commissioners are responsible for the administration of CAT (s 117).

Audit

The Revenue may inspect any gifted property, and the books and records of the donor (s 46(7)).

Anti-avoidance

A transfer of voting power attaching to private company shares without an actual transfer of shares, is taxed on the value of the transferred rights (s 44).

Information

Revenue may use information acquired in relation to any tax or duty in connection with any other tax or duty for which they are responsible (TCA 1997 s 872).

Revenue gather information for CAT from inland revenue affidavits (s 48) and if they feel tax is at risk, they may refuse to issue a certificate of probate in respect of an estate until the tax is paid (s 108).

Collection

Tax

CAT can be paid in five equal yearly instalments, inclusive of interest, the first of which is due 12 months after the due date. The instalment option is not available in respect of property taken by way of limited interest (s 54).

Revenue may take court proceedings against a non-compliant person (s 63). Unpaid tax is a charge on the property to which it relates (s 60).

Revenue may issue a clearance certificate to a compliant person (s 61).

Interest

Interest is charged at 0.0219% for each day the tax remains unpaid (s 51(2)).

 

Interest is payable on overpaid tax at 0.011% for each day or part of a day the tax is overpaid (s 57).

Surcharge

An understatement in the value of an asset may give rise to a surcharge (s 53) of:

(a) 10% if the market value declared was 50%-67% of the true value,

(b) 20% if the market value declared was 40%-50% of the true value,

(c) 30% if the market value declared was less than 40% of the true value.

Penalties

A person who fails to file a return is liable to a penalty of €2,535.

If the failure is negligent, the penalty is €6,345 plus the difference between the correct liability and the tax paid. If the failure is fraudulent, the penalty is €6,345 plus twice the difference between the correct liability and the tax paid (s 58).

See INCOME TAX (Penalties) as regards enforcement of penalties.

APPEALS

A person aggrieved by:

(a) a Revenue decision as to the value of land or buildings, may appeal to the Land Values Reference Committee (s 66),

(b) an assessment, may appeal to the Appeal Commissioners (s 67).

STAMP DUTIES

CHARGE TO TAX

Stamp duty is charged on deeds, for example, a transfer, lease or mortgage (s 2).

Stamp duty is also charged, in the form of a levy, on insurance premiums (s 125), credit cards (s 114), and bank cards (s 123).

RATES OF TAX (DEEDS)

Transfer

A transfer of land or buildings is charged:

(a) non-residential property, at 2%,

(b) residential property, at

(i) 1% on the first €1,000,000 of consideration, and at

(ii) 2% on the remainder.

A transfer for less than full value (for example, a gift) is charged on the market value (s 30).

Lease

Stamp duty is charged on both the rent and the premium.

Premium: Stamp duty is charged at the same rate as a transfer.

Rent: If the lease is for a term which is indefinite, or for less than 35 years, the rate is 1% of the average annual rent. But if the lease relates to a house or apartment, and the annual rent is less than €30,000, the lease is exempt.

If the lease is for a term between 35 and 100 years, the rate is 6% of the average annual rent.

If the lease is for a term exceeding 100 years, the rate is 12% of the average annual rent (Schedule 1).

Transfers of marketable shares or securities

Stamp duty is charged at 1% of the price paid for the shares. This rate also applies to electronic share trading transactions within the CREST system (Schedule 1).

A transfer for less than full value (for example, a gift of shares) is charged at market value (s 30).

Fixed duty

Fixed duty is charged (Schedule 1) at €12.50 on the following documents:

Appointment of new trustee

Collateral security

Declaration of trust

Duplicate or counterpart

Transfer where no beneficial interest passes

It is charged at €0.50 on cheques.

EXEMPTIONS

The following transactions are exempt:

(a)  A transfer from one spouse to the other (s 96). The exemption also applies to a transfer made under separation, divorce or nullity proceedings.

(b) A transfer from one company to another within a 90% corporate group (s 79).

(c) A transfer of farm land to a young trained farmer (before 31 December 2015) (s 81).

(d) A transfer from one company to another as part of a corporate reconstruction or amalgamation (s 80).

(e) A transfer of land to a charity (s 82).

(f) A transfer of woodlands; duty is not charged on the value of the trees growing on the land (s 95).

(g) A  transfer of government stocks, aircraft and ships, wills, sheriff warrants, and State-owned property (Schedule 1).

PARTICULARS DELIVERED

A deed must be stamped with a “particulars delivered” (PD) stamp if it involves:

(a) a transfer of a fee simple,

(b) the grant of a lease for a term exceeding 30 years,

(c) assignment of a lease where the unexpired term exceeds 30 years.

The exceptions to this rule are:

(a) the creation of a joint tenancy between spouses, and

(b) conveyances and leases of houses to or by a housing authority.

SELF ASSESSMENT

The person liable to pay the stamp duty is the accountable person. This means the person to whom the property is transferred, leased, or mortgaged (s 1).

REVENUE POWERS

Administration

The Revenue Commissioners are responsible for the administration of stamp duties (s 137).

Collection

Duty

A deed must be stamped within 30 days of its execution.

Interest

Interest is charged at 0.0219% for each day the duty is unpaid.

Surcharge

An understatement in the value of property gives rise to a surcharge (s 15) of:

(a) 25%, if the undercharge was 15% – 30%,

(b) 50%, if the undercharge was 30% – 50%, and

(c) 100%, if the undercharge was greater than 50%.

Penalties

Failure to pay stamp duty on time gives rise to a penalty (s 14) of €30 plus:

(a) 10% of unpaid duty if less than six months late,

(b) 20% of unpaid duty if over six months but less than 12 months late,

(c) 30% of unpaid duty if over 12 months late.

See INCOME TAX (Penalties) as regards enforcement of penalties.

APPEALS

A person aggrieved by:

(a) a Revenue decision as to the value of land or buildings, may appeal to the Land Values Reference Committee,

(b) an assessment, you may appeal to the Appeal Commissioners (s 21).

 

FINANCE ACT 2015

The Finance Act 2015 was signed into law on 21 December 2015.

UNIVERSAL SOCIAL CHARGE

2. USC rates. Income below €13,000 is exempt.

Income up to €12,012 is taxed at 1% (previously 1.5%).

Income from €12,013 to €18,668 is taxed at 3% (previously 3.5%).

Income between €18,669 and €70,044 is taxed at 5.5%.

Income above €70,044 is taxed at 8%.

Income above €100,000 from self-employment is taxed at 11%.

Effective 01.01.2016.

INCOME TAX

3. Earned income tax credit. This new tax (max €550) applies to self-employed earners.

4. Home carer tax credit. Increased to €1,000 (previously €810).

5. Equality Tribunal. Corrects the name of the Director of the Tribunal.

6. Expenses of non-resident directors. Exempts vouched travel and subsistence expenses of non-executive directors in respect of the cost of attending meetings.

7. Expenses of State examiners. Exempts travel and subsistence expenses.

8. Health insurance.  For the purposes of the reduced €500 child-rate premium, a “child” is an individual aged under 21 (whether or not in full-time education).

9. Home Renovation Incentive. Extended to 31 December 2016.

10. Professional Services Withholding Tax (PSWT). Amends list of accountable persons.

11. Staff vouchers. Exempts a qualifying voucher worth not more than €500 from income tax, PRSI and USC. An employee can only receive one voucher per year.

12. Section 23 property. Ensures that CGT loss is not unintentionally restricted.

13. Self-assessment limit for PAYE taxpayers. Increased to €5,000 (previously €3,174).

14. High Earner Restriction. Woodlands relief will not be subject to the high earner restriction. Effective 01.01.2016.

INCOME TAX, CORPORATION TAX AND CAPITAL GAINS TAX

15. Rental income. Allows 100% interest deduction in respect of residential property rented under a qualifying lease to a tenant whose rent is paid by a housing authority. Effective 01.01.2016.

16. Deposit Interest Retention Tax (DIRT). Exempts accounts held by the Minister for Social Protection from DIRT.

17. Film tax credit. Increases the cap on eligible expenditure to €70m. The rules governing disclosable information in relation to film companies is aligned with EU guidelines.

18. Employment and investment incentive scheme (EIIS). Ensures the EIIS complies with EU General Block Exemption Regulations (GBER). Existing nursing home companies can raise EIIS funding to extend the home.

Changes the employment condition so that EIIS only applies where, compared to the previous year:

(a) employment increases by at least one qualifying employee, and

(b) payroll expenditure increases by the total emoluments of one qualifying employee.

19. Farm taxation. Partners in a registered farm partnership must be active farmers. The Minister for Agriculture can appoint inspectors to ensure a farm partnership is “active”. Provides a new succession tax credit, equal to the lower of:

(a) €5,000, or

(b) the partner’s assessable profits,

apportioned in the partnership profit-sharing ratio. Effective from a day to be appointed by the Minister for Finance.

20. Petroleum Production Tax (PPT). This new tax replaces Profit Resource Rent Tax (PRRT) and applies to oil and gas exploration authorisations first awarded after 18 June 2014. Key points:

(a) PPT is payable in addition to the 25% corporation tax that applies to profits from oil and gas production.

(b) PPT is a deductible expense for corporation tax purposes.

(c) The maximum effective tax rate on a productive field will be 55% (combination of corporation tax and PPT).

(d) A field that is producing oil or gas is subject to a minimum annual PPT charge of 5% of the field’s gross revenue less transport costs.

A field’s “R Factor” (cumulative gross revenue divided by cumulative gross costs) determines the PPT payable for that field:

(a) Where R Factor = 1.5, the PPT rate is

(i) 5% of gross revenue less transport costs, or

(ii) 10% of net income.

(b) Where R Factor = 1.5 to 4.5, the PPT rate is

10% + {(R – 1.5) / (4.5 – 1.5) * (40% – 10%) } of net income.

(c) Where R Factor is greater than or equal to 4.5 the PPT rate is 40% of net income.

21. Transfer of assets abroad. Amends the legislation to make it compatible with EU law by extending it to persons resident in an EEA/EU State. Disapplies the bona fide commercial transaction test in the case of a non-ROI resident who is resident in an EU State where:

(a) it would be unreasonable to draw the conclusion that the transaction forms part of a tax avoidance scheme, and

(b) that person carries on genuine economic activities in that State.

22. Schedule C. Extends the pay and file date to 15 February (previously 20 January).

23. Life policy non-residence declaration. The declaration need not be completed at the start of the policy.

24. Charities Regulatory Authority (CRA). The CRA is exempt from tax in respect of income from its Common Investment Fund. Effective 16 October 2014.

25. Relevant Contracts Withholding Tax (RCWT). Extends RCWT to activities carried out on the Continental Shelf.

26. Collective Investment Undertaking. Includes an authorised Irish Collective Asset-Management Vehicle.

27. Aviation service buildings. Amends capial allowances legislation to comply with EU rules.

28. Alternative Investment Fund Managers Directive (AIFMD). A non-resident investor in an AIF will not be charged to tax solely because the AIF is managed by an independent Irish AIF manager.

29. Additional Tier 1 capital instruments. These instruments, which ae issued by banks to meet their capital requirements, are treated as debt instruments for tax purposes.

CORPORATION TAX

30. Relief for start-up companies. Extends the relief to 31.12.2018.

31. Scientific research equipment. Restricts the capital allowance to equipment brought into use and prevents double allowance for the expenditure.

32. Knowledge Development Box (KDB). Profits from patented inventions and copyrighted software (qualifying assets) are taxed at 6.25%. The profits from qualifying assets eligible for the KDB rate is determined by the proportion which the company’s Irish R & D bears to total R & D.

Qualifying R & D includes outsourced R & D but excludes:

(a) R & D performed by related parties, and

(b) acquired intellectual property (IP).

To compensate for this exclusion, qualifying R & D can be increased by the lower of:

(a) 30%,

(b) total amounts paid to related parties and to acquire IP.

Each qualifying asset is treated as separate for KDB purposes. A group of interlinked assets can be relieved as a

A company which claims a payable R & D credit will not get a larger credit as a result of KDB.

Large companies must apply the transfer-pricing rules to determine income eligible for the KDB rate, and any apportionment between normal profits and KDB profits.

A loss on a KDB activity is relievable, on a value basis, against normal profits.

Effective 01.01.2016 to 31.12.2020.

33. Country by country reporting. This implements the OECD guidelines (05.10.2015) on Base Erosion and Profit Shifting (BEPS). An Irish resident parent of a multinational enterprise (MNE) must provide an annual country by country report to Revenue in respect of each tax jurisdiction in which it does business, showing:

(a) revenue, profit before tax and tax paid on profits,

(b) employees,

(c) capital,

(d) retained earnings.

Revenue can make regulations allowing an MNE to nominate an Irish company as a surrogate parent to file the report.

34. Parent-Subsidiary Directive (PSD). The PSD allows a subsidiary in one EU State to pay a dividend to a parent in another EU State free of withholding tax. This implements Council Directive 2015/121 which requires EU States not to grant PSD exemption in non-genuine circumstances, i.e., where there is no economic substance to the arrangement.

CAPITAL GAINS TAX

35. Entrepreneur relief. Introduces a 20% CGT rate for disposals of chargeable business assets, owned for not less than three years, up to a lifetime limit of €1m. The relief does not apply to development land or investment assets.

For disposals of private company shares, the disponer must have

(a) owned not less than 15% of the shares in the trading company (or its holding company),

(b) been a full-time working director of the company for not less than three years prior to the disposal.

Effective 01.01.2016.

36. Anti-avoidance. Counteracts a scheme whereby cash is transferred to a non-resident company to enable the value of that company’s assets to be primarily derived from cash (instead of land or buildings). Effective 22.10.2015.

37. Restrictive covenants. Counteracts a scheme whereby a payment to a non-resident person in respect of a restrictive covenant undertaking avoided CGT. Effective 22.10.2015.

38. Time of disposal. As regards compensation received on or after 01.01.2016 in respect of compulsorily acquired land, the time the compensation is received is:

(a) the time of disposal, and

(b) the time the chargeable gain is deemed to have accrued.

39. Attribution of gains to resident participators. There has been doubt as to whether TCA 1997 s 590 was compatible with EU law. This section clarifies that Revenue will not seek to attribute gains of a non-resident company to its Irish resident participators where the disposal by the non-resident company was made for bona fide commercial reasons and did not form part of a tax avoidance scheme.

40. ICAVs. TCA 1997 ss 615-617 allow a deferral of gains where an asset is transferred within a chargeable gains group; the gain is only triggered if the asset (or the company owning the asset) leaves the group. Investment companies (and now, authorised Irish Collective Asset Management Vehicles – ICAVs) within the “gross roll-up” regime cannot avail of this deferral.

41. Intra-group gains.  TCA 1997 s 615 allows a deferral of gains where a business is transferred within a chargeable gains group. The transfer must be made for bona fide commercial reasons and must not form part of a tax avoidance scheme. Effective 22.10.2015.

42. CGT clearance. Increases the threshold, in the case of houses and apartments, to €1,000,000 (previously €500,000).

VALUE-ADDED TAX (VAT)

52. Gas and electricity. Applies the reverse-charge mechanism to supplies (including a supply of a gas and electricity certificate) made by wholesalers of gas and electricity. The recipient, not the supplier, must account for VAT. Effective 01.01.2016.

53. Adjustment to returns. An adjustment is subject to the same rules as the original return.

54. Education. Widens the definition to include

(a) education, training and retraining, provided by a recognised body,

(b) private tuition in relation to school or university education.

55. Capital goods scheme. Applies anti-avoidance rules to supplies of incomplete property between connected persons.

56. Registration. Allows Revenue to cancel a VAT number if the person to whom it was issued does not become, or ceases to be, an accountable person.

57. Margin scheme. The margin scheme does not apply to cross-border supplies of new means of transport.

58. Cancellation of VAT number. On cancelling a trader’s VAT number, Revenue can

(a) notify the trader’s suppliers of the cancellation,

(b) publish details of the cancellation in print and other media.

59. Refund of tax paid. A formal claim must be made by a person seeking a refund of VAT paid on foot of an estimated demand.

60. Exempt activities. Exempts betting and exchange services provided to customers outside the State.

STAMP DUTIES

62. Young trained farmer – qualifications. Adds the BSc (Hons) in Agriculture awarded by Dundalk Institute of Technology to the list of approved qualifications.

63. Young trained farmer – relief. Extends the relief to 31.12.2018.

64. Bank cards. Replaces the flat rate (€5 p.a., for a combined card, €2.50 p.a. for a cash card) with a charge €0.12 for each ATM cash withdrawal. The annual charge is capped at €2.50 for cash card withdrawals and €5 for combined card withdrawals.

65. Credit cards. Replaces the definition of “bank” and “building society” with “credit institution” and “financial institution”.

CAPITAL ACQUISITIONS TAX

67. Parent-child threshold. Increased to €280,000 (previously €225,000). Effective 14 October 2015.

MISCELLANEOUS

69. Standard Life shares. Shareholders whose election to take B shares was delayed in the post are deemed to have taken a capital payment and are accordingly subject to CGT (not income tax) on the payment received.

70. Marriage equality. Adapts the legislation to allow for same sex marriages.

71. Mandatory disclosure of certain transactions. Minor changes in relation to:

(a) the rule which allows a taxpayer to avoid penalties by reporting a disclosable transaction on or before the filing deadline for the tax year in which the transaction took place – the deadline means the new TCA 1997 s 959A deadline, and

(b) the 21 days which a marketer of a scheme must respond to Revenue means 21 working days.

72. Confidentiality of taxpayer information. Amends  the definition of “professional body.”

73. Records. Must be retained for five years after the trade has ceased.

74. Exchange of information. The EU Directive on Administrative Cooperation (“DAC 2”) which implemented the OECD’s Common Reporting Standard (CRS) required banks to disclose non-resident account holders to Revenue authorities.

75. Revenue powers. New powers enable Revenue to:

(a) Get information from a third party whose identity is unknown.

(b) Seek a High Court order requiring a third party to disclose information and to direct that the existence of a disclosure order is not communicated to the taxpayer.

(c) Seek information from a financial institution about an unknown taxpayer.

(d) Seek a High Court order requiring a financial institution to disclose information and to direct that the existence of a disclosure order is not communicated to the taxpayer.

(e) Apply to Appeal Commissioners to consent to seek taxpayer information from a third party (named by a financial institution) in relation to foreign tax. This enables Revenue to act as a conduit in providing information to foreign tax authorities.

76. Property agents. An agent must include in the return of information, as regards each residential property he manages:

(a) the owner’s tax reference number, and

(b) the local property tax (LPT) number for the property.

A government body paying rent or rent supplement must include in its return of information the LPT number for each property.

77. Nomination of Revenue officers. Allows the Revenue Commissioners to nominate an officer to discharge certain functions where previously only the Collector-General could have made such a nomination.

78. Penalties. Applies the percentage penalties for deliberately (or carelessly) filing an incorrect return to an excess refund paid by Revenue in relation to such a return.

79. Double taxation and exchange of information. Allows arrangements with non-governmental bodies bodies (e.g., OECD) to have the force of law in Ireland.

80. Tax treaties. Adds Ethiopia to the list of treaty countries and updates the references to new treaties with Germany, Pakistan and Zambia.

Adds Argentina, Bahamas and St Kitts and Nevis to the list of tax information exchange countries.

81. Fuel grant. Allows the Minister for Finance to pay a fuel grant to a disabled driver.

82. Penalties. Provides for penalties where a person provides false information in relation to a fuel grant.

83. Exemption. The fuel grant is exempt from income tax, PRSI and USC.

84. Disabled Drivers Scheme. Amended to reflect changes brought about by the fuels grant.

85. Water conservation grant. Exempted from income tax and USC.

86. Authorisation of lenders. Technical changes.

87. NTMA.

88. Technical amendments.

89. Care and management.

90. Short title.

THE HARD-KNOCK TAX LIFE OF THE SELF-EMPLOYED

With the General Election edging ever closer, taxation has once again come up as quite a hot topic. Everything from the abolishment of the USC to increases in taxation have been discussed ad nauseum in recent weeks. However there is one important taxation issue that is often overlooked, despite being a reality for many workers in this country. The issue at hand here is the many ways in which self-employed individuals find themselves carrying an extra weight of taxation due to their employment status than their PAYE paying counterparts.

Figures from 2014 suggested that the percentage of the Irish workforce who are self-employed makes up nearly a quarter of the overall workforce at over 17%. Thus, the financial burden of harsher taxation here is one which affects a large percentage of our working population and is an issue which demands to be raised. So, if you or your loved one is currently self-employed, just how much of a tax disadvantage does your self-employed status put you at?

One way in which the self-employed are at a disadvantage is through the percentage of tax they must pay. All employees, whether self-employed or otherwise will pay the top tax rate of 52% on all income up to €100,000. However it is when income goes above this figure that self-employed individuals will have to pay an additional amount of USC, which is not applicable to other employees.

The PAYE tax credit is another nail in the coffin for the self-employed as those in the PAYE system gain a €1,650 tax credit each year which can have a lightening effect on your tax bill, this tax credit is not applicable to self-employed workers who will instead now earn a €550 credit on earned income from 2017.

Self-employed workers may also find themselves missing out in terms of paying PRSI. Self-employed individuals must pay PRSI at 4% on any earnings over €5000 whilst PAYE employees do not pay any PRSI if they earn less than €18,304 per year. This difference in PRSI thresholds means that the self-employed person will have paid a significant amount of tax before other employees need to consider it.

If you are self-employed and concerned about perhaps having overpaid tax, we would recommend getting in touch with Revenue for a re-evaluation of your payments from the past four years. If you find yourself in need of assistance with your own or your company’s finances, please don’t hesitate to contact us here at DCA Accountants where we will be happy to help.

TAX BACK: WHAT’S THE CRAIC?

Claiming tax which you have overpaid is a common concern for most workers, yet it is one that is often overlooked. Each of us either know someone or is the person who is most likely to say “I think I have overpaid tax, I will definitely look into it” only to entirely forget and get on with daily life.

Although new tax reductions were introduced in the most recent budget, which may have had a slight effect on our wallets many workers are still feeling the tax pinch. To hopefully alleviate some of this stress, and replace some of the money into your own pocket where it belongs, we have collated some of the most common ways that you may have overpaid tax. Reports suggest that a great many people are unaware of having paid too much tax, and are failing to reclaim it. Many people are also unaware that you can claim for as far back as four years, so whilst you may be on track with tax payments now, it is possible that you can claim for previous years. I’m sure none of us would argue with having a few extra pennies in our wallets for the weekend.

Rental Tax Credit

This credit only applies to those who have been in rental accommodation on December 7th 2010, and is due to be phased out entirely. Before then however, you may be able to claim some tax back for your rental status.

Health Insurance

Those who have private health insurance, you may be entitled to claim some tax back. This will be dependent on the cost of your policy.

Marriage Tax

The common joke about tying the knot for the tax breaks is still doing the rounds, and is based somewhat in truth. If you have been married in the past four years and not notified Revenue, you may have overpaid tax and be eligible for a rebate. This is typically based on what you both earn and your income bands, and your joint assessment situation. Isn’t that what true love is?

DIRT

Whilst first time buying has become a minefield in recent years, the one small saving grace is the ability to claim back DIRT on savings for your deposit. Definitely something for first time buyers to bear in mind during the stresses of purchasing.

Travel Costs

Travelling to and from work every day can be a significant drain on your finances when paying full price for public transport. Employees can purchase a TaxSaver commuter ticket through their employers which allow tax free commuter tickets as part of a salary package.

Home Carer Tax Credit

Many people who have taken time out to care for children or elderly relatives are unaware that a tax credit can be awarded to the working spouse to ease financial worries. In Budget 2016, it was also announced that the cut off rate for the earnings of the non-working spouse would be raised from €5,080 to €7,200, meaning that this can apply to many more people than previously. The credit itself has also been increased this year from €810 to €1,000.

USC

Despite a reduction of the USC in the most recent budget, the USC remains a tax which is an irritation for many workers. There are a couple of ways in which you may have been overpaying this tax and be due a rebate, the most obvious one being in relation to medical cards. If you have a full medical card, you should notify Revenue of your change of circumstances as you may have overpaid USC. Also, if your income fell below the threshold at any point, Revenue should be notified.

Expenses

Many workers remain unaware that they may be entitled to claim tax back on a number of expenses aside from their travel costs. These costs can range from uniforms to tools for trades such as engineers and electricians. For teachers, an annual allowance of €518 is allotted for expenses incurred in terms of teaching supplies, and this applies to many other professions. It is advisable to check the Revenue website to see if you may be entitled to claim back on some of your own working expenses.

These are just a few ways that you may have inadvertently overpaid taxes, and may be able to claim a refund. We would recommend investigating your tax payments in full for the previous four years in order to ascertain if you are due a refund. Should you require any assistance with your own or your businesses finances please don’t hesitate to contact us here at DCA Accountants.