On Tuesday, 9 October 2018, Paschal Donohoe TD, announced the measures introduced in his second budget since being appointed as Minister of Finance.
As expected, there were no major tax overhauls in this year’s budget, or major changes to any of the headline tax rates for income tax, corporation tax, capital gains tax or VAT. You can see all the tax-related highlights announced by Minister Donohoe below. Our tax team is available for any queries you may have in respect of any of the measures announced in Budget 2019
- An increase of €750 in the income tax standard rate band for all earners, from €34,550 to €35,300 for single individuals and from €43,550 to €44,300 for married one-earner couples.
- Changes to the Home Carer credit (from €1,200 to €1,500) and to the earned income credit (from €1,150 to €1,350).
The following changes to USC will apply from 1 January 2019:
- €502 increase to €19,372 band ceiling.
- 4.75% rate reduced to 4.5%.
- For both new and existing mortgages, the interest deduction available for qualifying interest payments used in the purchase, improvement or repair of residential rental property is being increased from 85% to 100% from 1 January 2019.
|Rates & Bands||2019||2018|
|Single persons tax band||€35,300||€34,550|
|Additional band for single parents||€4,000||€4,000|
|Married couples' band|
|Tax rate applicable to above bands||20%||20%|
|Tax rate applicable to balance of income||40%||40%|
|-Without dependent children||€2,190||€2,190|
|- Qualifying for one parent family tax credit||€3,300||€3,300|
|Single person child carer credit (one parent only)||€1,650||€1,650|
|Home carer's credit (max)||€1,500||€1,200|
|Age credit (single)||€245||€245|
|Age credit (married)||€490||€490|
|PAYE tax credit||€1,650||€1,650|
|Earned Income Tax Credit||€1,350||€1,150|
|Incapacitated child (Max)||€3,300||€3,300|
|Dependent relative (Max)||€70||€70|
|Blind persons credit||€1,650||€1,650|
|Employing a carer (at 40% rate)||€75,000||€75,000|
|Fisherman Tax Credit||€1,270||€1,270|
PRSI & USC
From 1 January 2019, the weekly income threshold for the higher rate of employer’s PRSI will increase from €376 to €386. In addition, there will be a 0.1% increase in the National Training Fund levy payable by employers in respect of reckonable earnings of employees in Class A and Class H employments.
From 1 Janaury 2020, there will be a further increase of 0.1% in the National Training Fund levy payable by employers in respect of reckonable earnings of employees in Class A and Class H employments.
USC Rates & Bands from 1 January 2019
- Incomes of €13,000 or less are exempt.
For incomes of the following bands the following rates of USC will apply:
- Self-employed income in excess of €100,000 – 3% surcharge.
Employment Related Provisions
Extension of 0% BIK rate for electric vehicles
The 0% Benefit-in-kind rate for electric vehicles is being extended for a period of 3 years, with a cap of €50,000 on the original market value of the vehicle.
Key Employee Engagement programme (KEEP)
Further measures are being introduced to the Key Employee Engagement Programme (KEEP). The ceiling on the annual market value of shares that may be awarded will increase to 100% from 50% of salary. The 3 year limit will be replaced with a lifetime limit. The value of shares that can be granted under option in the scheme is to be increased from €250,000 to €300,000 per employee.
- The 12.5% corporate tax rate will be maintained.
- The three year start-up relief, which provides corporation tax relief for certain start-up companies, is being extended a further three years, until the end of 2021.
- The film corporation tax credit scheme is being extended to 2024. The Finance Bill will include further provisions for a time-limited additional 5% credit available in certain regions. This will taper out over 4 years.
- Further measures are being introduced to the Key Employee Engagement Programme (KEEP). The ceiling on the annual market value of shares that may be awarded will increase to 100% from 50% of salary. The 3 year limit will be replaced with a lifetime limit. The value of shares that can be granted under option in the scheme is to be increased from €250,000 to €300,000 per employee.
- A review group is to be set up to consider the regulation of crowdfunding. It will review the withholding tax obligations for peer-to-peer lending activities, with a view to their amendment as appropriate following the introduction of regulation.
- A review of Ireland’s transfer pricing provisions is to be undertaken in 2019.
- Accelerated capital allowances for employer-provided fitness and childcare facilities. These will provide an accelerated deduction for the capital investment costs incurred by employers who provide fitness and/or childcare facilities for the use of their employees.
- Accelerated capital allowances for gas-propelled vehicles and refuelling equipment. This will provide an accelerated deduction for capital investment in these vehicles.
- From 1 January 2019, there will be a 0.1% increase (to 0.9%) in the National Training Fund levy payable by employers in respect of reckonable earnings of employees in PRSI Class A and Class H employments. There will be a further 0.1% (to 1.0%) increase from 1 January 2020.
A new Anti-tax Avoidance Directive (ATAD)-compliant exit tax regime will be introduced from Budget night. It will tax unrealised capital gains where companies migrate or transfer assets offshore such that they leave the scope of Irish tax. The rate for the exit tax will be set at 12.5%.
Introduction of Controlled Foreign Company (CFC) legislation for accounting periods beginning on or after 1 January 2019. CFC rules are an anti-abuse measure, designed to prevent the diversion of profits to offshore entities (the CFCs) in low- or no-tax jurisdictions. CFC rules are traditionally a feature of territorial tax regimes. As Ireland has a worldwide tax regime, CFC rules have not previously been a feature of the Irish corporate tax regime. The Finance Bill will include more details.
Capital Acquisitions Tax (CAT)
The current Group A Threshold, which primarily applies to gifts and inheritances between parents to their children has increased by €10,000 from €310,000 to €320,000. This applies to all gifts and inheritances received on or after 10 October 2018. CAT rates remain unchanged at 33%.
Capital Gains Tax (CGT)
The current CGT rate is unchanged and remains at 33%.
There have been no changes to Entrepreneur Relief nor to Retirement Relief.
There are no changes to the current Stamp Duty rates.
There has been an extension of Young Trained Farmers Stamp Duty Relief (Section 81AA SDCA 1999) for an additional 3 years to 31 December 2021.
The 9% VAT rate on tourism activities has been reinstated to its former 13.5% rate.
The 9% VAT rate will be retained for newspapers and sports facilities.
The VAT rate on electronic publications (e-books and electronically supplied newspapers) will be reduced from 23% to 9%.
The current stamp duty relief for Young Trained Farmers has been extended for a further 3 years to 31 December 2021.
Vehicle Registration Tax (VRT)
A 1% surcharge is being introduced for diesel engine passenger vehicles registering in Ireland from 1 January 2019.
The VRT relief for conventional hybrids and plug-in electric hybrids is being extended until the end of 2019.
The 0% benefit-in-kind rate for electric vehicles is being extended for a period of 3 years, with a cap of €50,000 on the Original Market Value of the vehicle.
The excise duty on a pack of 20 cigarettes will be increased by 50 cent with a pro-rata increase on other tobacco products. An additional 25 cent will be added to roll-your-own tobacco with effect from midnight on 9 October 2018.
With effect from midnight on 9 October 2018, there will an increase in Minimum Excise Duty on tobacco products, so that all cigarettes sold below €11 will have the same excise applied as cigarettes sold at €11.
Betting duty will be increased from 1% to 2% on all bets within Ireland. The commission earned by betting intermediaries will increase from 15% to 25%. Both changes are effective as of 1 January 2019.