Insights

Irish budget 2020

  • Written By:
  • Published: Tue, 08 Oct 2019 08:00 GMT

Minister for Finance, Paschal Donohoe TD, will introduce budget 2020 on Tuesday, 8 October 2019.

Irish budget 2020

Although tax receipts in the year to date have surged, with an increase of €3.2 billion to September compared with the same period last year, with a no-deal Brexit looming at the end of October, there is little scope for the Minister to introduce tax reducing measures without equalising the reductions with other tax increasing measures.

There is not expected to be any 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 (“CGT”) or VAT.

It is expected that the usual suspects of excise duties on petrol and diesel will be increase. There is also an expectation that a new charge on all new petrol and diesel cars (as well as used imports) will be introduced.

There is hope that the Minister will review the tax reliefs currently available to support entrepreneurs and private business by increasing the €1million entrepreneurial relief ceiling currently available.

There has been lobbying for an increase in the capital acquisitions tax (“CAT”) tax free thresholds for a number of years now to restore the thresholds to their former levels particularly with the increase in property values. However no increase is expected in this year’s budget. Similarly there is no change expected to the CGT rate of 33%.

A cut to the universal social charge (“USC”) is a possibility again this year, consistent with the Government’s recent policy on increasing the USC entry level and reducing the rates of USC that apply.

Indirect Taxes

Stamp Duty

  • Increase in stamp duty on non-residential property from 6% to 7.5%. 6% rate will apply to instruments executed before 1 January 2020 where a binding contract existed prior to 8 October 2019.
  • The Minister introduced a technical amendment to the Stamp Duties Consolidated Act 1999 to apply a 1% stamp duty charge on Schemes of Arrangement involving a “Cancellation Scheme” in accordance with Part 9 of the Companies Act 2014.

Environmental Measures

  • The rate of carbon tax is being increased by €6 to €26 per tonne which for auto fuels will result in an increase of approximately 2 cents per litre from midnight on 8 October 2019. The increase on other non-auto fuels will apply from May 2020.
  • The VRT relief for conventional hybrids and plug-in electric hybrids is being extended until the end of 2020.
  • 1% diesel surcharge replaced with nitrogen oxide (NOx) emissions based charge for all cars registered from 1 Jan 2020. The charge will apply on a euro (€) per milligram/kilometre basis, with the rate increasing in line with the level of nitrogen oxide emitted.
  • The 0% benefit-in-kind rate for electric vehicles is being extended to 2022. The cap of €50,000 on the Original Market Value of the vehicle remains.

Excise Duties

  • The excise duty on a pack of 20 cigarettes will be increased by 50 cent with a pro-rata increase on other tobacco products.

Betting Tax

  • Relief has been introduced up to a limit of €50,000 from betting duty and betting intermediary duty per calendar year but only applies to single undertakings.

VAT

  • The Minister did not make reference to VAT changes in his speech.
  • Currently there are CO2 related thresholds for claiming capital allowances and VAT reclaims on commercial vehicles. These CO2 thresholds are to be reduced as part of Budget 2020.

Private client

Highlights

  • No change to personal tax rates or bands.
  • Changes to the Home Carer credit (from €1,500 to €1,600) and to the earned income credit (from €1,350 to €1,500).
  • One year extension of reduced rate of USC for medical card holders.

Rates/Bands/Credits

Rates & Brands 2020 2019 2018
Single person’s tax band €35,300 €35,300 €34,550
Additional band for single parents €4,000 €4,000 €4,000

Married couples' tax band
One income €44,300 €44,300 €43,550
Two incomes €70,600 €70,600 €69,100

Tax rate applicable to above bands 20% 20% 20%
Tax rate applicable to balance of income 40% 40% 40%

Personal Credits 2020 2019 2018
Single person €1,650 €1,650 €1,650
Married person €3,300 €3,300 €3,300
- Without dependent children €2,190 €2,190 €2,190
- Qualifying for one parent family tax credit €3,300 €3,300 €3,300
Single Person Child Carer Credit (one parent only) €1,650 €1,650 €1,650
Home carer's credit (Max) €1,600 €1,500 €1,200

Personal Credits 2020 2019 2018
Age credit (Single) €245 €245 €245
Age credit (Married) €490 €490 €490
PAYE tax credit €1,650 €1,650 €1,650
Earned Income Tax Credit €1,500 €1,350 €1,150
Incapacitated child (Max) €3,300 €3,300 €3,300
Dependent relative (Max) €70 €70 €70
Blind person’s credit €1,650 €1,650 €1,650
Employing a carer (at 40% rate) €75,000 €75,000 €75,000
Fisherman Tax Credit €1,270 €1,270 €1,270

PRSI & USC

No changes announced to PRSI.

USC rates & bands remain the same for 2020;

  • Incomes of €13,000 or less are exempt.
  • For incomes of the following bands the following rates of USC will apply:
  1. €0 to €12,012 @ 0.5%.
  2. €12,012 to €19,874 @ 2.0%.
  3. €19,874 to €70,044 @ 4.50%.
  4. €70,044 + @ 8%.

    • 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 to 2022. The cap of €50,000 on the original market value of the vehicle remains in place.

Key Employee Engagement programme (KEEP)

Further measures are being introduced to the KEEP scheme. The availability of the KEEP scheme is being extended to companies operating in a group and to facilitate employees who work on a part-time and/or flexible basis and for movements of employees within the corporate group. However, these changes are subject to State Aid approval.

Employment and Investment (EII)

The Minister announced improvements to the current EII scheme with effect from 8 October 2019. These improvements provide for the availability of full tax relief in the year of investment in place of the current position under which 10% tax relief is delayed for a period of three years. In addition, the current investment limit of €150k has been increased to €250k. The investment limit is further increased to €500k for investors who invest for a minimum period of ten years.

Special Assignee Relief Programme (SARP) & Foreign Earnings Deduction (FED)

The Minister also announced proposals to extend the current SARP and FED reliefs for a period of three years to 31 December 2022.

Housing Related Provisions

Help to Buy (HTB)

As expected, the HTB scheme has been extended in its current format for a further two years to 31 December 2021.

Living City Initiative

The current Living City Initiative has also been extended in its current format until 31 December 2022.

Business Taxes

Highlights

  • The 12.5% corporate tax rate applicable to Irish trades will be maintained.
  • The KEEP (Key Employee Engagement Programme) is being extended to allow companies who operate through a group structure to qualify for relief. New provisions will allow for part-time and flexible working and movement within group structures to qualify for relief.
  • The R&D tax credit is being increased from 25% to 30% for micro and small companies. New provisions will allow micro and small companies carrying out pre-trading R&D to claim the credit before trading commences. This will be limited for offset against VAT and payroll taxes only. These are subject to State aid approval

The current limited on outsourcing to 3rd level institutes of education will be increased from 5% to 15% for all claimants.

  • The production ceiling for qualification for micro-brewery relief is to be raised from 40,000hl to 50,000hl.

Anti-Avoidance

  • The Finance Bill will provide for new ATAD compliance anti-hybrid rules from 1 January 2020 to prevent arrangements that exploit differences in the tax treatment of an instrument or entity under the tax laws of two or more jurisdictions to generate a tax advantage.
  • Transfer pricing rules will be brought into line with the recommendations of the Coffey report. These include the incorporation of the OECD 2017 transfer pricing guidelines into Irish legislation.
  • A number of anti- avoidance measures are being introduced to combat the use of excessive interest charges by Irish Real Estate Funds (IREFs) and Section 110 companies to avoid the payment of tax on profits arising from Irish property. These will be introduced by financial resolution on Budget night.
  • A technical amendment will be included in Finance Bill 2019 to correct an unintended anomaly in respect of Section 765 TCA 1997 allowances for capital expenditure on scientific research to prevent unintended additional claims for reliefs.

Dividend Withholding Tax

  • The rate of DWT (Dividend Withholding Tax) will increase from 20% to 25% from 1 January 2020.
  • A modified DWT regime will be introduced from 1 January 2021 using real time data collected from the PAYE modernised system. A personalised rate of DWT will be applied to each individual taxpayer based on the rate of tax they pay on their PAYE income. Revenue will be introducing a consultation process to engage with the various stakeholders.

Capital Taxes

Capital Acquisitions Tax (CAT)

  • The current Group A tax-free threshold, which primarily applies to gifts and inheritances from parents to their children, has increased by €15,000 to €335,000. This applies to gifts and inheritances received on or after 9 October 2019.
  • The current CAT rate remains unchanged at 33%.

Capital Gains Tax (CGT)

  • Currently no changes have been made to the revised Entrepreneur Relief. However, the findings of an external review have to be further considered by the Department of Finance to determine changes that could be made better to support entrepreneurs and entrepreneurial activity.
  • Farm restructuring relief, introduced in Budget 2013, has been extended to the end of 2022 with no change to the conditions of the relief.
  • The current rate of CGT remains at 33%.