Budget Summary 2020

To paraphrase the music of Simon and Garfunkel, the Minster’s budget sought to allay the weariness of Brexit and ease our minds to build a series of tax and related financial measures as a “bridge over troubled water”. The budget has been heavily influenced by Brexit, Climate change and threats to Ireland’s Corporation Tax base.

The following are the key points from today’s Budget announcements:-

The introduction of an increase in the rate of carbon taxes from €20 per tonne of CO2 to €26. Petrol and diesel prices increase from tonight. Carbon tax on home heating oil will not increase until May 2020.

Changes to BIK on commercial vehicles from 2023. Electric vehicle BIK exemption extended to 2022.

The reform of Ireland’s transfer pricing rules taking account of updated OECD guidelines. The expansion of the rules to medium sized enterprises and to certain non trading income structures.

Further reform of the Corporation Tax regime for large corporates, taking account of the Anti Tax Avoidance Directive (ATAD) in relation to anti-hybrid rules, to apply to all corporate taxpayers from 2020.

The rate of withholding tax on dividends is to increase to 25% from 1 January 2020, and a modified DWT regime, using real time information, will be introduced from 2021.

The Help to Buy scheme has been extended in its present format to 2021, and the Living City Initiative has also been extended in its current format to 2022.

Stamp Duty on commercial property will increase from 6% to 7.5% from midnight tonight. Transition measures will apply for transactions in process.

The Special Assignment Relief Programme (SARP) and the Foreign Earnings Deduction (FED) have been extended in their current format to 2022.

An increase of €150 (to €1,500) in the earned income tax credit for the self employed.

An increase in the home carer credit of €100 to €1,600.

A one year extension of the reduced rate of USC for medical card holders.

A support package for beef farmers of €85m was announced. Farm restructuring relief has been extended to 2022.

No changes announced to Entrepreneur Relief, but the Minister is awaiting his Department’s consideration of the outcome of the review already undertaken, to determine any changes that might be made to the relief.

Increase in the Class A threshold by €15,000 to €335,000 for Capital Acquisitions Tax purposes.

Part time employees and group structures will be included in the KEEP (Key Employee Engagement Programme) scheme, to be set out in the Finance Bill.

Full relief will be granted in the year of investment for EII (Employment & Investment Incentive) with effect from today. The annual individual limit will be increased to €250,000 from today also. For investors who are prepared to invest for 10 years or more, an annual limit of €500,000 will apply.

The R&D tax credit will increase from 25% to 30% for micro and small companies, with an improved method of calculating the limit of payable credit (cash rebate rather than offset against Corporation Tax) to be introduced. Qualifying pre-trading R&D expenditure will now also generate a payable credit, for offset against VAT and payroll taxes. The current 5% limit on R&D expenditure outsourced to third level institutes is being increased to 15%.

Extension of free medical cards to persons aged 70 or over (subject to means test).

Increase in 50c on a pack of 20 cigarettes from midnight tonight.

The following links will provide further detail:

Ministers Speech

http://www.budget.gov.ie/Budgets/2020/Documents/Budget/Financial%20Statement.pdf

Summary of 2020 Taxation Measures

http://www.budget.gov.ie/Budgets/2020/Documents/Budget/Summary%20of%20Budget%202020%20Taxation%20Measures%20-%20Policy%20Changes.pdf

Tax Policy Changes

http://www.budget.gov.ie/Budgets/2020/Documents/Budget/Budget%202020%20Tax%20Policy%20Changes.pdf

Department of Finance Transfer Pricing Guidelines

https://assets.gov.ie/27357/24077dbc248e404695386e0a10fd6b24.pdf