THE FINANCE ACT 2012 – WHAT IT MEANS FOR YOU
Last month, President Higgins signed the Finance Act 2012, a bill which introduced a number of new measures to improve the business tax regime, into law.
One of the key features in the Bill was the corporation tax relief scheme for start-up companies. Under the new rules, and in accordance with an announcement by the Minister for Finance on Budget Day last December, new companies may be exempt from corporation tax on trading income for the first three years of operation. While this relief was already in place, the Bill confirms that is has been extended to companies commencing trade up to and including December 31st, 2014. Here, the maximum annual liability for which shelter is available under this scheme is €40,000 but the amount of relief available will be dependent on the amount of employer’s PRSI paid by a company and the number of staff it employees.
Another key development for business is the tax relief that applies where a company receives dividends from trading profits of a business that is tax resident in the EU or country that Ireland has a double tax treaty with. The rate of tax on dividends received from foreign bodies is usually 25%. However, under this scheme, the relief provides exemption from tax on dividends received by share dealers from portfolio shareholdings. The relief has also been extended in the Bill to also include dividends from companies located in countries with which Ireland has ratified the OECD Convention on Mutual Assistance in Tax Matters This opens up new markets for Irish companies, including Brazil, which is due to ratify the OECD Convention this year.
Generally, the Bill includes measures to support job creation and enhance Ireland as a destination for foreign direct investment, including foreign earnings deduction to support businesses that promote Irish exports to high growth economies such as Brazil, Russia, India and China. Also, the Bill sets out to reward the R&D efforts of companies here by allowing firms to reward key staff in this area by giving them the option of transferring a portion of their R&D tax credit to personnel who are heavily involved in research and development. Also, the government has set out guidelines which will make it much easier for businesses to claim the credit.
The Special Assignee Relief Programme, which was announced on Budget Day late last year, was confirmed in the 2012 Act. The purpose of the programme is to allow tax relief for Irish companies seeking to attract highly experienced personnel from abroad. Much has been written about the ‘brain drain’ that the Irish economy is suffering and the decision of highly skilled and specialised individuals to snub Ireland in favour of other jurisdictions with less penal tax codes. This measure should go some way to addressing the issue.
The Act also saw the extension of tax relief for corporate investment in renewable energy generation while improved relief for excess tax on royalties for the software industry were also highlighted.
For a full copy of the Bill, click here or contact us to see how we can help your company take advantage of some of the new measures announced by the minister last month.
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