UNDERSTANDING FINANCE BILL 2013 – PERSONAL TAXES
For most businesspeople, the most widely reported measures in December’s budget were either anticipated long ago (the property tax) or of little relevance to their companies (the cuts in carer’s allowances). However, now that the dust has settled and the Finance Bill has been published in full, it’s clear that the legislation will have an impact on all businesses.
To help our clients, and readers of this blog, we have decided to highlight and explain some of the new changes that will have an impact on Irish firms in 2013. After all, any regulatory development is significant, even if the mainstream media don’t give it wall-to-wall coverage. The Finance Bill is a hefty piece of legislation, so we are going to divide it into manageable portions over the coming weeks – beginning with changes to personal taxation.
Being in deficit closing mode, the Government has sought to close loopholes and gain money from peripheral changes while avoiding outright rises in income tax.
The Foreign Earnings Deduction (FED) has been extended to include Algeria, Congo, Egypt, Ghana, Kenya, Nigeria, Senegal and Tanzania for the 2013 and 2014 tax years. Meanwhile, from July 1, maternity, adoptive and health and illness benefit will become subject to Income Tax.
Perhaps more significantly, the Bill has made changes to ex-gratia redundancy payments. From January 2011 Top Slicing Relief will no longer be available on ex-gratia lump sum payments where the non-statutory element of their redundancy or termination payment is €200,000 or more. This will be extended to cover lifetime ex-gratia payments made upon the death or disability of an employee. Foreign Service Relief shall also be abolished.
A key reform has also been made to the film relief scheme, which will no longer be available to individual investors. Instead, the relief will be in the form of a payable 32% tax credit to film Producer Companies (PCs). It is understood, however, that these changes will not take effect until January 2016. Meanwhile, tax relief on donations made by an individual will no longer apply to the donor. Relief will be given to the charity at a blended rate of 31%. As a result of this, donations to approved bodies will not be within the scope of the high earners restriction. An annual donation limit of €1m per individual per year has also been introduced.
Anti-avoidance measures are an easy political ‘sell’, and have also been introduced in the current bill. One measure concerns the remittance basis of taxation for non-domiciled individuals. Under the Bill, when a non-domiciled individual transfers his or her foreign-sourced income (or property bought using foreign-sourced income) to their Irish-based spouse or civil partner, and that income is remitted to the State on or after 13 February 2013, the non-domiciled person is deemed to have made that remittance.
Meanwhile, the Bill has also closed a loophole in schemes whereby employers place funds in a trust or other structure and the trustees grant long-term loans to employees rather than the employer paying their employees a salary or bonus. From February 13, payments to current, former or prospective employees out of a trust that is funded by the employee’s employer will be deemed to be income subject to Income Tax and Universal Social Charge. The provision, however, will not apply to genuine Employee Benefit Trusts.
The Bill has also introduced a new incentive scheme for the conversion and refurbishment of dilapidated Georgian houses, the Living City initiative. It provides tax incentives for works performed to refurbish residential and retail buildings, either to bring them up to a habitable standard or even to make improvements to buildings which are currently inhabited. The incentives are targeted at owner-occupiers rather than developers. The Living City initiative will be commenced by Ministerial Order and will apply to qualifying expenditure incurred within a five-year period of that date – you can find out more here.
Expert Tax Advisor in Dublin – Minimize Your Tax Liability
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If you’re keen to know about these in more detail, we’re happy to offer advice on how these changes can impact on you. Justcontact us to set up a meeting.
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