Finance Bill 2018. Captured in full - Deloitte
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Finance Bill 2018. Captured in full.
Finance Bill 2018 | Captured in full
Contents
Overall comments 01
Ireland Inc. and Foreign Direct Investment 04
Individuals and Entrepreneurs 07
Financial Services 10
Real Estate 12
Global Mobility and Employment Taxes 14
Indirect Tax (VAT) 16
Finance Bill 2018 |
Overall comments
Overall comments
Finance Bill 2018, published recently on 18 scope of Irish tax without a charge to CGT on further enhancing the KEEP incentive. The
October 2018, contains a number of key exit. KEEP scheme subjects any gain arising on
measures which will impact the taxation of both the exercise of qualifying share options to
•• Ireland’s Controlled Foreign Company (CFC)
individuals and corporates in an Irish tax context. Capital Gains Tax at the time of disposal of
legislation has been outlined in Finance Bill
This includes measures to introduce new exit the shares, in place of higher personal taxes
2018. Deloitte submitted a detailed document
tax provisions in Ireland, Controlled Foreign at the time of exercise (as is the general
to the Department of Finance in response
Company legislation, as well as providing for treatment for share option gains).
to the CFC public consultation published
the enactment of measures announced in last in September. The EU Anti-Tax Avoidance •• The income tax reliefs for investment in
week’s Budget 2019. The Finance Bill reflects Directive (ATAD) requires Ireland to introduce corporate trades have been overhauled in
the focus of Budget 2019 in addressing key CFC rules that will be effective from 1 January Finance Bill 2018, with a view to simplifying
themes, including the changing international tax 2019. The Finance Bill includes CFC rules that and overhauling the text of the legislative
environment, further “Brexit proofing” of the go beyond the standard required by the ATAD provisions, and introducing a range of
economy and reducing the personal tax burden; in certain areas, which we have highlighted changes to the operation of the Employment
all whilst being bound by EU budgetary rules previously should be considered from a Investment Incentive (EII) and the Start-up
and asserting prudence on policy decisions and competitiveness perspective. Relief for Entrepreneurs (SURE). A Start-
spending given greater levels of uncertainty from up Capital Incentive to allow tax relief to Lorraine Griffin
a global economic perspective. •• A number of amendments to the Key Partner, Head of Tax
qualifying persons who invest in early stage
Employee Engagement Programme T: +353 1 417 2992
start up ventures has also been included,
A brief overview of key highlights in Finance Bill (KEEP) have been included in Finance Bill E: lorgriffin@deloitte.ie
which will run, along with the EII and SURE, to
2018 can be summarised as follows: 2018, following on from the Budget 2019
the end of 2021.
announcements. Amendments have been
•• The legislation to reflect changes to Ireland’s
made to the maximum ceiling on the annual •• The Finance Bill reflects changes to the tax
exit tax regime, which became effective for
market value of shares that may be awarded relief on borrowings for landlords, such that
transactions on or after 10 October 2018, is
so that it is equal to 100% of the employee interest relief on residential property lettings
contained within the Finance Bill. It reflects
salary (up from 50%). In addition, the three- has been restored to 100% from 85% with
that an exit tax of 12.5% will be charged on
year limit has been extended to a lifetime effect from 1 January 2019 (accelerating
unrealised capital gains where a company
limit and the amount of share options that restoration of the tax relief by 2 years).
migrates its tax residence from Ireland or
can be granted under the scheme has been Accordingly, this will allow full tax relief for
where a company transfers certain assets
increased from €250,000 to €300,000. These interest incurred on a loan to purchase,
outside of Ireland. Prior to this amendment,
changes are designed to assist indigenous improve or repair a rented residential
certain companies could leave Ireland and the
SME companies attract and retain talent by property.
01
Finance Bill 2018 |
Overall comments
•• The 9% VAT rate for the hospitality sector, For further details on the above and other new
which was introduced in 2011, was increased measures not included in Budget 2019, we
to 13.5% with effect from 1 January 2019. The invite you to view our articles and commentary
increase will mainly impact hotels, other short analysing the Finance Bill on our website. If you
term guest accommodation and restaurants, have any questions on what the Finance Bill
but it will also apply to other areas including means for you, your business or your family,
cinemas, theatres, hairdressers, museums please do not hesitate to speak with your usual
and art galleries. However, newspapers and Deloitte tax adviser or any member of the
sporting facilities have been excluded from Deloitte tax team.
the increase and will remain at the 9% rate.
•• Finance Bill 2018 has amended rent-a-room Finally, as in previous years, we will hold
relief included in section 216A TCA 1997 of our Finance Bill event later in the year (on 5
the legislation whereby a room must be let December 2018) and hope to see many of you
for a period of greater than 28 consecutive there.
days in order to qualify for this relief (subject
to certain exceptions). This may impact
individuals renting rooms on a short term
basis.
•• In line with recent years, the Finance Bill
contains a range of targeted anti-avoidance
measures, as well as a number of technical
amendments to existing provisions. Lorraine Griffin
Head of Tax
02
Finance Bill 2018.
Captured in full.
Get our perspective here | deloitte.ie
Measures not announced in Budget 2019
Finance Bill 2018 contains some measures that were
not announced on Budget Day, which include:
Amendment to income tax relief
for investment in certain corporate Extension of CGT relief
Technical amendments trades under the Employment on disposal of a site to
to facilitate PAYE Investment Initiative (EII) and a child to include the
modernisation Start-Up Relief for Entrepreneurs child’s spouse or civil
(SURE) partner
Increase in the value of Extension of anti-avoidance Measures to ensure
specific tax credits, reliefs measures applying to compliance of
and rate bands to resolve certain loans made by close certain agri-taxation
“Week 53 payday” issues companies provisions with EU
State Aid rules
Introduction of minimum Technical amendments to clarify Extension of 4 year
continuous rental period the operation of the relief for time limit on tax
of 29 days to qualify for capital expenditure on certain assessments in cases
Rent-a-Room relief intangible assets (S291A) of bilateral Mutual
Agreement Procedures
between Ireland and
its tax treaty partners
03
Finance Bill 2018 |
Ireland Inc., FDI and Transfer Pricing
Ireland Inc., FDI and Transfer Pricing
As expected, following the announcement of In summary, it is expected that the exit tax It is welcome that some updates to the draft
Budget 2019, there were a number of corporate change could impact multinational groups who legislation in the CFC Feedback Statement have
tax measures included in Finance Bill 2018 may have been engaged in group restructuring been adopted into the Finance Bill.
that will have significance for Irish and inbound on the back of last year’s US tax reform, the
multinationals and large private groups. adoption of ATAD measures across the EU as In particular, the specific removal of reference to
well as preparing for Brexit. the CFC rules applying to ‘cash box’ companies Gerard Feeney
As a result of the financial resolutions published is welcome, as this was not provided for in ATAD. Head of Transfer Pricing
following Budget 2019, changes to the exit tax Finance Minister Paschal Donohoe published The updated CFC legislation now provides for T: +353 1 417 2403
provisions took effect from 10 October 2018. In Ireland’s Corporation Tax Roadmap in double tax relief and exemptions for CFC’s with E: gfeeney@deloitte.ie
line with ATAD Article 5, the exit tax will seek to September. Since the publication of the low profits or a low profit margin. In addition,
tax unrealised gains arising where a company Roadmap and the subsequent CFC Feedback the definition of accounting profit provides
migrates or transfers assets offshore such Statement, taxpayers have been aware that CFC welcome clarification in terms of the charge not
that they leave the scope of Irish taxation. As rules in line with Option B under ATAD Article 7 being applicable to capital gains / capital losses
confirmed in the financial resolutions, the rate of will take effect from 1 January 2019. The Minister or certain distributions. Finance Bill 2018 also
the exit tax is 12.5%. However, the legislation also confirmed as part of his Budget speech that includes a grace period for the application of
includes an anti-avoidance provision that seeks the CFC rules will apply for accounting periods the CFC rules for newly-acquired CFC’s where
to apply the capital gains tax (CGT) rate (currently beginning on or after 1 January 2019, therefore specific conditions are met.
33%) rather than the 12.5% rate where the providing companies with non-calendar year
transfer / migration forms part of a transaction ends some additional time to assess the While all these measures, many of which
to dispose of the asset and the purpose of the impact of the new CFC regime and take action are provided for in the ATAD provisions, are Karen Frawley
transaction is to benefit from the 12.5% rate accordingly. welcome, there are still certain aspects of the Partner - Tax
rather than the CGT rate. CFC legislation that go beyond what is in ATAD. T: +353 1 417 2613
As was expected, the CFC rules have been E: kfrawley@deloitte.ie
There were no amendments to the above included in the Finance Bill. A number of areas In particular, Finance Bill 2018 provides, like the
provisions in the Finance Bill. However, in line in the CFC Feedback Statement went beyond draft legislation in the CFC Feedback Statement
with the ATAD provisions, the Finance Bill also ATAD and it was hoped that comments made did, that the CFC rules will apply where not only
provides that in cases where the exit is to an EU by taxpayers and stakeholders as part of a controlling company carries out significant
/ EEA State, the payment of the exit tax may be the subsequent consultation process last people functions in the State, but where a
deferred and paid in instalments over 5 years. month would be taken on board and further controlling company or a ‘connected company’
This development is welcome. clarification provided in Finance Bill 2018. carry out significant people functions in the
State. Thus, this is wider than the provisions
04
Finance Bill 2018 |
Ireland Inc., FDI and Transfer Pricing
of ATAD. In addition, the control test includes introduced in Finance Act 2017. In particular, this transfer pricing documentation requirement.
both a present and future right to direct the is relevant where a company has incurred capital 3.Application of transfer pricing rules to non- Both discussion drafts are intended to
company’s affairs, unlike ATAD which only looks expenditure on a specified intangible asset or trading and capital transactions. supplement the new OECD Transfer Pricing
for a present right to control. While engaging assets both before and on or after 11 October 4.Aligning Ireland’s transfer pricing law to the Guidelines and will be incorporated into the next
in “best practice” is essential to maintain 2017. latest version of the OECD Transfer Pricing consolidated update of the Guidelines.
our international reputation, by agreeing to Guidelines which were issued in July 2017
non-mandatory or more onerous provisions While the Finance Bill did not contain specific which include the principles in Action 8-10 The OECD issued a further non-consensus
such as these may be seen as contrary to our transfer pricing measures, it had been flagged of the BEPS project dealing with aligning draft in September 2018 dealing with financial
competitive offering as a location for FDI. in advance that Ireland is committed to a transfer pricing outcomes where value is transactions. It is the first specific guidance
review and update of its transfer pricing rules created and Action 13 enhanced transfer provided by the OECD on the transfer pricing
In summary, and in particular given that there in line with international best practice. A public pricing documentation standards. aspects of financial transactions including
are still some deviations from the provisions consultation will commence in early 2019 to 5.Introduction of transfer pricing rules for the treasury activities, intra-group lending, hedging,
of Article 7 of ATAD, multinational groups will allow stakeholder input into the proposed taxation of branches in Ireland in line with the cash-pooling, guarantees and captive insurance.
need to carefully consider the impact of the CFC changes to Ireland’s transfer pricing law as Authorised OECD Approach (“AOA”). Although this is a non-consensus draft, the
legislation. proposed by The Coffey Review. principles contained therein provide insight on
Other aspects which may be dealt with in next how the transfer pricing aspects of financial
The Bill also brought about the extension of the Aspects of transfer pricing regulations that are year’s legislative changes include incorporating transactions will be dealt with within the
start-up relief regime until the end of 2021 which subject to review and potential updates in next OECD guidance issued in 2018 relating to: framework of the 2017 OECD Transfer Pricing
is welcome as it is often of benefit to MNCs year’s Finance Bill may include: Guidelines going forward.
setting up operations in Ireland for the first time. 1. The latest, (and probably final), OECD
1. Removal of grandfathering for transactions discussion draft dealing with the application
In relation to the existing intellectual property the terms of which were entered into before of the transactional profit split method which
amortisation provisions, additional clarifications 1 July 2010. was issued in June 2018.
have been provided for in Finance Bill 2018 2. Removal of the SME exemption which allows 2.Guidance for tax authorities dealing with hard
in terms of the application of the 80% cap certain companies to fall outside Ireland’s to value intangibles issued in June 2018.
05Finance Bill 2018 |
Ireland Inc., FDI and Transfer Pricing
Our view await further details of the consultation transfer pricing is one of the main tax
processes outlined in the Roadmap and issues facing companies with new OECD
The Irish tax landscape is changing and look forward to engaging in this process in guidance, local country practice and
aligning with all European Member States the coming months. We urge taxpayers to heightened controversy part of the day-to-
as a result of the EU ATADs and therefore in continue to participate in these processes day matters which stretch the resources of
respect of CFC rules, anti-hybrid rules, exit through ourselves or industry groups. many companies. The public consultation,
tax, interest limitation rules and GAAR. as discussed in the Roadmap will
Whilst the Finance Bill issued does not
As multinational companies manage the commence in early 2019. This will provide
contain any specific transfer pricing
adoption of these changes across multiple an opportunity for stakeholders to provide
changes, the introduction of the new CFC
jurisdictions, obtaining certainty is key. input before next year’s Finance Bill and
regime will apply transfer pricing principles
In relation to the adoption of CFC rules, it also provide a sense of what changes are
to determine the charge to tax where
is important that taxpayers continue to likely to happen. It is likely that most of the
significant people functions relating to
assess the potential implications of such proposed changes in the Coffey Report will
underlying assets and income have a nexus
rules on their groups and in particular given be implemented and therefore companies
in Ireland.
some of the provisions in Finance Bill 2018 need to review their current arrangements
go beyond ATAD. Next year’s Finance Bill will be the and put in place a plan to identify risk areas
first fundamental change to Ireland’s in their businesses and deal with them
For other measures that will be domestic transfer pricing regime since the accordingly.
implemented in the coming years, we introduction of the law in 2010. Globally,
06Finance Bill 2018 |
Individuals and Entrepreneurs
Individuals and Entrepreneurs
Finance Bill 2018 makes provision for the These appear to be sensible changes and should plan. Although the specific qualifying criteria
measures announced in Budget 2019 in the area simplify matters in many cases. have not been altered, current legislation
of personal taxation and entrepreneurs in a refers the reader to the relevant EU Directive,
manner that has resulted in few surprises. These In respect of the operation of the scheme, whereas the revised legislation specifically
measures are included in our Budget summary. there have been a number of further changes, includes the condition that investment must
including: have been foreseen in the original business
plan. The revised legislation also goes one Joanne Whelan
There were, however, a number of measures that
step further than the Directive and sets Partner - Legal
have been included in the Finance Bill that were •• The scheme will now allow for the issuance of
out what should be included in this original T: +353 1 417 2463
not announced on Budget day. As was flagged in preference shares to investors,
business plan. E: jwhelan@deloitte.ie
the Budget, detailed changes to the Employment
and Investment Incentive (EII) and Start-up Relief •• Anti-avoidance provisions will apply to deny
•• Finally, provision is also being made to allow
for Entrepreneurs (SURE) schemes are being relief where there are mechanisms put in
for relief for certain investments in micro
introduced with a view to addressing a number place to limit the risk of the investor in making
companies/small start-up enterprises by
of issues, namely: the investment,
certain connected persons. A lifetime limit of
•• The administration of the scheme, •• The trigger point at which claims can be made €500,000 is to be applied to such companies
are to be tied to the use of at least 30% of the under this provision.
•• Small enterprise exceptions,
funds for relevant
•• Accessibility of the provisions.
•• Where a company raises funds via EII, the
David Shanahan
limitation on that company being able to list
An on-going criticism in recent years has been Partner - Tax
its shares publicly is to be removed,
that the legislation and administration were T: +353 1 417 2598
not seen as being user friendly and prolonged •• Certain restrictions on investors in the E: dshanahan@deloitte.ie
delays in obtaining approvals from Revenue form of designated funds or non-resident
were often reported. With a view to streamlining individuals from investing in such companies
the operation of the scheme, a self-certification operating an EII scheme are to be removed to
process for companies and investors is being allow a greater scope for company investment
introduced. Where it is found that a company even where such investors may not benefit
has incorrectly self-certified, any clawback of the from tax relief.
relief would apply at the company, rather than •• The revised legislation provides more detail
the investor, level. Whereas, to the extent that on the requirement that both initial and follow
an investor incorrectly self-certifies then any tax on investments must be based on a business
recouped would be from the individual investor.
07Finance Bill 2018 |
Individuals and Entrepreneurs
Individuals •• Changes are to be made to the rent a room the conditions necessary to avail of the relief
On the area of individual taxation, the following relief provisions. Currently, relief of up to or exemption have been satisfied. This is a
€14,000 for rental income on the letting of considerable departure from the current
Our view additional points should be noted:
a room in your home is available, subject to position and puts a much greater obligation
certain conditions being met. As a result of on taxpayers to retain relevant records
Any measures to simplify and increase •• Changes have been announced in respect of
the change, restrictions on the relief are to should they need to challenge any such
the efficiency of these schemes to the Capital Acquisitions Tax dwelling house
apply in the case of short term lettings of additional Revenue assessment. In effect, for
make investment easier are welcomed. exemption. The exemption was hugely
less than 29 consecutive days. This is seen as taxpayers where relief is claimed it extends
In particular, the introduction of self- curtailed in recent years and broadly only
a measure to target short term leisure type the time limit to 10 years after the benefit.
certification is a positive development applies to inheritances of homes where the
lettings, largely arranged via online booking
which should now avoid the time beneficiary was residing with the owner of the •• In certain cases where a CGT liability and a
sites. There are certain exemptions from the
delays which many were experiencing property at the time of their death (with some CAT liability arise on the same event, (e.g. a
short term lettings provisions to allow for
under the current approval process. minor exceptions). A further, albeit much parent making a gift of shares to a child), a
respite care arrangements, foreign students
However, although there is a more minor restriction is now proposed. In credit for the parent’s CGT is available as an
and “digs” arrangements.
significant body of new legislation in order to avail of the relief, the beneficiary offset against the CAT liability of the child. The
the Bill, there do not appear to be any cannot have an interest in another dwelling at •• A lifetime cap of €70,000 is to apply to young relief is clawed back if the asset is disposed of
significant inherent changes. Given the the date of an inheritance of the home. The trained farmers who avail of stamp duty relief, within 2 years of the transfer. This restriction
frequent comparisons which are made proposed change will deem the individual stock relief for income tax purposes and will now not apply in the case of a gift of a life
with the UK equivalent schemes, there to have a beneficial interest of a house that relief under the Succession Farm Partnership assurance policy where that policy must be
is still much work to be done to bring is held on a discretionary trust, where the provisions in line with EU legislation. encashed within the 2 year period.
the Irish regime in-line with those individual is a settlor and beneficiary under
•• In the case of CAT reliefs and exemptions, •• CGT relief on the disposal of a site to a child
across the water. the trust. Legally, a beneficiary under a
the 4 year time limit for raising additional for the purposes of that child constructing
discretionary trust would not ordinarily be
assessments is to change such that the 4 a principal residence is to be extended to
so entitled to the assets but this legislation
years will run from the latest date on which include spouses or civil partners of that child.
deems them to be.
08Finance Bill 2018 |
Individuals and Entrepreneurs
This amendment is to deal with a practical of an average sized farm to a young trained
issue where a couple are likely to need to farmer will use up most or all of the threshold in
raise a mortgage to build a house on the site. one transaction making transition much more
Banks would require such mortgages to be challenging.
taken out in joint names, and thus require the
site to be held in joint names.
The additional matters provided for in the
Finance Bill that were not announced in the Our view
Budget will not impact a great number of people
The Budget and subsequent Finance
but could have significant consequences for
Bill made a number of minor
those to whom they do apply. The extension
provisions to the area of personal
of powers to Revenue to raise assessments in
taxation. However, most of the
the area of capital acquisitions tax beyond the
measures have limited impact. There
normal 4 year limit puts further restrictions on
has been no movement in relation to
the ability of families to transition wealth and add
key personal taxation areas such as
to the significant restrictions imposed in recent
CAT thresholds, CGT entrepreneur
years. By granting Revenue the ability to raise
relief and the additional USC levy for
additional assessments beyond the standard 4
self-employed individuals. The failure
years puts an additional burden on taxpayers
to introduce changes in these areas is
and will require such individuals to retain records
disappointing but it is hoped measures
for much greater periods.
might be introduced in the near future
perhaps following the conclusion of
The purpose of young trained farmers’ relief is
the USC/PRSI review.
to incentivise young farmers to get involved in
farming and support them in the earlier years.
It is also to encourage the early transfer of lands
to the next generation. With the change in the
commercial rate of stamp duty to 6% last year,
this lifetime threshold will mean the transfer
09Finance Bill 2018 |
Financial Services
Financial Services
The Irish economy continues to perform taxed in accordance with the Irish corporation relation to the foreign company and (4) it is
strongly with growth rates that are higher tax system. The proposed rules can attribute reasonable to consider that the arrangements
than elsewhere in the EU and a decreasing undistributed income arising from non genuine would be entered into by persons dealing at
unemployment rate. However, there are many arrangements put in place for the essential arm’s length or the arrangements are subject to
challenges including Brexit, US tax and many purpose of obtaining a tax advantage. Broadly, Ireland’s transfer pricing legislation.
Irish domestic challenges including housing. an arrangement is regarded as non genuine to Conor Hynes
Against that backdrop, Ireland needs to vigilantly the extent that a company would not own the In a number of respects, the proposed rules go Partner - Tax
seek to maintain and enhance its international assets or would not have undertaken the risks beyond ATAD for example, the broader definition T: +353 1 417 2205
competitiveness while also cooperating with tax which generate its income if it were not for the of control and in our view it is important that the E: chynes@deloitte.ie
reform which is taking place internationally. controlling company undertaking the significant rules do not extend beyond the ATAD in order to
The Department of Finance published the people functions or key entrepreneurial risk maintain Ireland’s competitiveness.
Finance Bill today which includes a number taking functions (KERTs) relevant to those assets
of proposed changes which are important to and risks. The income to be included in the tax (ii) As a result of the ATAD Ireland is required to For more Finance Bill
the financial services industry. Some of those base of the taxpayer entity shall be limited to introduce a more extensive exit tax. The ATAD commentary visit our
changes are addressing amendments required amounts generated through the assets and risks requires Member States to introduce the exit dedicated Finance Bill
under the Anti-Tax Avoidance Directive (ATAD) which are linked to significant people functions tax no later than 1 January 2020. Given this, the 2018 webpage.
and were flagged in our recent Budget. Those or KERTs carried out by the controlling company. decision to accelerate the introduction of the
changes include: The proposed rules provide for foreign tax credit legislation to 10 October 2018 was a surprise, as
relief in respect of the tax paid by the foreign taxpayers would have assumed that the exit tax
(i) As was expected, the Finance Bill includes entity on its chargeable income in its country of would be introduced on 1 January 2020.
the detail in respect of the proposed Controlled residence / location. While Ireland has an existing exit tax regime, the
Foreign Company (CFC) rules which will be introduction of the ATAD exit tax regime will see
effective from 1 January 2019, in line with The proposed legislation includes a number a significant widening of the application of exit
requirements of the ATAD. of exemptions / exclusions, including (1) where tax. A 12.5% tax rate will apply to latent market
the accounting profits of the controlled foreign value gains on asset transfers including, for
Broadly in order to be considered a CFC, an Irish company are less than 10% of its relevant example, where a taxpayer transfer assets from
resident company (or companies) must control operating costs, (2) (a) the accounting profits are a permanent establishment to its head office
more than 50% of the relevant foreign entity. less than €750,000 and non trading income is (or vice versa) or to another foreign permanent
Also the actual corporate tax paid by the relevant less than €75,000 or (b) the accounting profits establishment, or transfers the business
entity for an accounting period must be less than are less than €75,000, (3) in certain instances carried on by a permanent establishment
half the corporate tax that would have been paid there will a 12 month exempt period beginning outside of Ireland or alternatively migrates its
by the relevant entity on its profits if they were when a company first becomes controlling in tax residence out of Ireland. While the timing of
10Finance Bill 2018 |
Financial Services
the introduction of this law will be a surprise, it
was lobbied for that the rate of exit tax be set at Our view
12.5% and therefore the proposed rate is in line do not extend beyond the ATAD in order
with what industry would have hoped for. As a result of ATAD, in this year’s Finance to maintain Ireland’s competitiveness.
The Finance Bill provides that where an asset Bill we are seeing the introduction of CFC The acceleration of the introduction of
is transferred into Ireland from another EU law in Ireland for the first time. CFC rules the ATAD exit tax to midnight on Budget
Member State and the ATAD exit tax has been are traditionally a feature of territorial night was certainly unexpected. Public
charged in that country, the base cost of the regimes. As Ireland currently has a consultations will be held on many of the
asset for Irish tax purposes shall be the market worldwide tax regime, CFC law has not other proposed changes as a result of
value base cost as established under the laws of been introduced to date, however, the ATAD over the coming months and it is
the other EU Member State. corporation tax Roadmap has flagged up important that all interested stakeholders
that a consultation period will be launched actively contribute to the debate.
The Bill also provides that the exit tax can be in early 2019 seeking input on the options
paid in 6 instalments over a 5 year period where of moving to a territorial regime or a
certain conditions are satisfied. In addition, simplification of our double tax relief rules.
provision is made so that the exit tax due from In a number of respects, the proposed
a company can be recovered from another Irish rules go beyond ATAD and in our view it is
resident company within the same group or important that the rules
from a controlling director who is resident in
Ireland for tax purposes.
11Finance Bill 2018 |
Real Estate
Real Estate
Landlords - Interest Relief on residential Rent a room relief Local property tax and vacant site levy
property restored to 100% The existing relief provides for the exemption The Minister announced in the Budget in relation
The restriction on interest relief on money used of payments up to €14,000 in a year received by to the local property tax, which is to be rebased
to buy residential property has been eliminated. individual householders for room rental in their on 2019 valuations, next year, that any future
Accordingly, from 1 January 2019, 100% of own homes, known as “rent-a-room relief”. changes will be moderate and affordable. So far,
interest payable will be available as a deduction no changes have been included in the Finance
Pádraic Whelan
against rental income from residential property It is proposed to introduce a minimum rental Bill.
Partner - Tax
whereas currently it is 85% of interest payable. period of 29 days. The proposal will not affect
T: +353 1 417 2848
the relief for respite care, exchange language The Vacant Site Levy which can apply to sites
Tax relief on transfer of site to a child for E: pwhelan@deloitte.ie
students or where the person uses the room as which have the potential to provide housing to
house construction digs for a minimum of 4 consecutive days per meet local housing need and demand was not
This is an amendment proposed to a relief from week for not less than 4 consecutive weeks. mentioned.
Capital Gains Tax on the transfer of a site by a
parent (or both parents simultaneously) to a Stamp Duty relief on transfer of farmland This is a serious issue for developers and for the
child of the parents or one of the parents or on A number of amendments are proposed to this purchasers of houses who will end up paying
the transfer of a site by a civil partner (or both existing relief including a provision in relation to the levy through the cost of their house. The
civil partners simultaneously) to a child of either the qualifying conditions applying to a person Minister had previously announced in his last
civil partner, where the transfer is to enable the who is to be treated as a ‘young trained farmer’ Budget that the levy rate of 3% which will apply
child to build his or her home on the site. after the date of execution of the instrument from 1 January 2019 for property which has Frank Murray
transferring the land and who can claim a been held in 2018, will be increased to 7% for Director - Tax
The area of the site must not exceed 1 acre and repayment of stamp duty. each subsequent year. The vacant site levy rules T: +353 1 417 2438
the value of the site must not exceed €500,000, are contained in the Urban Regeneration and E: fmurray@deloitte.ie
and the relief is clawed back if the child has not It is proposed to extend the period for which Housing Act 2015.
constructed the house and lived in the house as the stamp duty relief will apply for an additional
his or her main residence for a period of 3 years. 3 years. Subject to a Commencement Order,
The amendment is proposed so that both a child the relief will apply to conveyances executed
and his or her spouse/civil partner may avail of on or before 31 December 2021 instead of 31
the relief. The amendment will apply to disposals December 2018.
made on or after 1 January 2019.
12Finance Bill 2018 |
Real Estate
Our view
and some commentators had called for a
Given the budgetary constraints, there low capital gains tax rate to be considered
were no significant measures in terms of to free up some units into the market. This
taxation on property announced in the has not materialised in the Finance Bill.
recent Budget and this has been borne out
in the Finance Bill 2018 as initiated. In terms of attracting labour back from
abroad, there are no incentives or help to
The previously announced restoration of attract people back and the reality is that
100% interest relief for landlords against in order to deliver so many units, we will
rental income from houses, and the need more tradesmen and some of these
amendment to the relief from capital gains people are those who left some years ago.
tax on a site transfer to a child for house At a minimum, some have called for the
construction are unlikely to significantly costs of relocation (perhaps capped) to be
impact the housing crisis. tax deductible from future income.
In relation to rent a room relief, which There had been calls for some other
Revenue state is an incentive to increase incentives around VAT reduction / refunds
the supply of residential accommodation to those who invest but likewise hasn’t
for rent, there is a proposal to introduce been included in the Finance Bill as
a minimum rental period of 29 days, initiated.
designed to expressly exclude short-term
lettings (presumably Airbnb and the like), So on balance, no significant changes in
from the incentive. the market from a tax perspective and
it remains to be seen how the funds
There has been a lot of discussion around allocated to housing will be deployed and
bringing vacant property into the market at what pace.
13Finance Bill 2018 |
Global Mobility & Employment taxes
Global Mobility & Employment taxes
Key Employee Engagement Programme
The Key Employee Engagement Programme Our view excluded from KEEP and the need for the
(KEEP) for SMEs was introduced in Finance Act options to be over shares in the employing
It is welcomed that the Minister has taken company rather than the parent company.
2017. This scheme allows employees to defer
some action to seek to make the KEEP
the tax point on share options from exercise to
scheme more attractive to employers It was also hoped that the Minister would
the point of sale whereby the gains is taxed at
by increasing the maximum value of introduce a mechanism to agree the Daryl Hanberry
Capital Gains Tax rates instead of Income Tax
share options that may be granted to valuation of a company with Revenue and Tax Partner and Head of
rates.
an employee in one year to 100% of the thereby reduce the current administration Global Employer Services
employee’s emoluments. However, this costs for SMEs. Overall, it is difficult to T: +353 1 417 2435
In Budget 2018, the Minister acknowledged that
is still not in line with the equivalent see the changes introduced leading to an E: dhanberry@deloitte.ie
the take up of the scheme by SME employers
UK scheme which does not restrict the increased take up of the scheme.
was less than expected. The lack of take up is
award to a percentage of an employee’s Yet again the Minister has not taken the
due to the legislation governing the scheme
emoluments. opportunity to announce any broader
proving to be unworkable for many SMEs. In an
effort to increase the take up of the scheme to The replacement of the 3 year limit of changes to the taxation of share schemes
assist SMEs attract and retain talent the Minister €250,000 with a lifetime limit of €300,000 which will be disappointing for domestic
announced changes to KEEP in Budget 2019. The is a puzzling move and will make the and foreign MNCs who do not meet
Finance Bill confirms these changes: scheme less attractive to SMEs. the SME thresholds. One such area of
• the ceiling on the maximum annual market consideration would be to remove the
Disappointingly, the Finance Bill does Colin Forbes
value of share options that may be granted application of USC and PRSI from Revenue
not contain any additional measures in Partner - Tax
is increased to 100% of the employees approved share plans to encourage
relation to KEEP. The Minister has not T: +353 1 4172993
emoluments (up from 50%) but subject to an greater take up of these all-employee
addressed some of the other conditions E: cforbes@deloitte.ie
overall lifetime cap; plans. It is hoped that there would be a
which have proved to be the main blockers continued focus by the Government on
• the three year limit of €250,000 has been
in relation to the take up of the scheme; the area of reward in 2019.
removed and replaced by a lifetime limit; and
namely the broad definition of companies
• the overall value of KEEP options that may be
given to a director or employee is €300,000.
• Implementation of these changes remains
subject to Ministerial Order.
14Finance Bill 2018 |
Global Mobility & Employment taxes
Other areas increase in employer’s PRSI from the current rate
Revenue’s real-time payroll reporting initiative, of 10.85% to 10.95%. This rate will increase by a Our view With respect to the reductions in tax and
known as PAYE Modernisation, is addressed in further 0.1% in 2020 to 11.05%. USC, the combined effect of these changes
It was hoped that the Finance Bill for a single person paying the marginal tax
the Finance Bill to the extent that the legislation
would contain some additional clarity rate is worth €290 per annum, or less than
is being updated to refer to the new Income Tax The Minister also announced that the 0%
with respect to PAYE Modernisation, €6 per week. Unfortunately, the marginal
(Employments) Regulations 2018, as opposed benefit-in-kind rate introduced in last year’s
particularly in respect of the penalty tax rate of 52% is unchanged, and remains
to the predecessor regulations. There is also a Budget for electric vehicles is being extended
regime that may apply to any reporting among the highest in the OECD. The
new requirement for employers to file a monthly for a period of 3 years. Interestingly, a threshold
errors or omissions, and the ability to Minister has yet to provide any update
Universal Social Charge (“USC”) return, in line is being introduced on the Original Market
self-correct without penalty. As things on the work of the group announced in
with the current requirement to file an income Value (“OMV”) of the electric vehicle of €50,000,
currently stand, the level of penalty is Budget 2018 to consider the merger of
tax return. meaning that electric vehicles with an OMV
€4,000 per reporting failure. This is PRSI and USC, and it is unclear if or when
of greater than €50,000 will be subject to
effectively on a per employee basis, we will see the marginal rate addressed.
The Finance Bill confirmed the small the benefit-in-kind rules by reference to the
which means an error for companies with
adjustments announced in the Budget in the amount by which the OMV exceeds the €50,000
a large workforce could have sizeable Ireland’s ability to remain competitive
context of income tax. The standard rate tax threshold.
implications. We do expect additional in attracting talent continues to be
band is increasing by €750 to €35,300 for single
guidance from Revenue in advance of undermined as a result of the retention of
individuals and to €44,300 for married one The Finance Bill includes additional measures
the 1 January 2019 implementation date, a disproportionately high rate.
earner couples. The band ceiling for the 2% USC to exempt members of the Permanent
which may address this issue.
rate is increasing by €502 to €19,874 and the Defence Forces from tax on certain benefits,
4.75% USC rate is being reduced to 4.5% which including healthcare and certain qualifying
applies to income in the €19,875 – €70,044 band. accommodation.
In addition, there is a welcome increase in the
value of the earned income credit from €1,150 There are also favourable changes to the capital
to €1,350 (although there is still some way to allowances regime for employers who provide
go to achieve parity for the self-employed with childcare facilities and fitness centres, which
the €1,650 PAYE credit available to employed complements an existing relief from BIK for
workers) and in the home carer’s credit from employees.
€1,200 to €1,500.
As announced in Budget 2018, the National
Training Fund levy will increase from 0.8% to
0.9% from 1 January 2019. This is in effect an
15Finance Bill 2018 |
Indirect Tax (VAT)
Indirect Tax (VAT)
The main VAT change announced in the The Finance Bill also provides for changes to the
Budget was an increase from 9% to 13.5% in duty on tobacco products (50c on pack of 20 materially affected by an increase in
the VAT rate that applies to hotel and other cigarettes in most popular price category with the VAT rate. The review anticipated
holiday accommodation services, catering a pro rata increase on other tobacco products) that the increase in the VAT rate
and restaurant services, hairdressing services, which took effect the day following the budget. would impact more on profitability of
cinemas, art galleries, theatres and the sale of businesses, rather than prices charged
Pascal Brennan
horses other than sales to farmers. This rate The bill also made various changes to the VRT to customers. Also, the Department
Tax Partner and Head of Indirect Tax
increase will come into effect from 1 January rules including changes to the definition of CO2 stated that the 9% rate was regressive
T: +353 1 417 2443
2019 and was enacted by the Dail by way of a emissions to reflect the introduction of a new benefitting better off households
E: pabrennan@deloitte.ie
financial resolution. The Finance Bill includes a emission measurement system. The changes disproportionately more than worse
technical change to reflect this amendment. also provide for an increase of 1% on each of the off households.
CO2 bands for most diesel vehicles. In addition,
Critically, the increase in the 9%
Additionally, the Finance Bill provides that the car hire businesses and driving schools will
VAT rate will not have any impact
9% rate will apply to books, magazines, and suffer an additional increase in VRT costs as
on the already high rents being
periodicals supplied electronically over the there will be a change to the calculation of their
charged in the residential letting
internet which are currently liable to VAT at the VRT with the removal of a long standing relief
market as, in contrast to holiday type
23% rate. The 9% rate will not apply where the from VRT on VAT on the purchase price of the
accommodation, that accommodation
publication is mainly devoted to advertising or vehicle.
is exempt from VAT. It is also welcome
the content is mainly music or video.
that the 9% rate will continue to apply John Stewart
to newspapers and sporting facilities. Director - Tax
The Bill also contains a number of Excise duty Our view T: +353 1 417 2479
changes. Certain drinks become liable to the The reduction in VAT rate on
E: johstewart@deloitte.ie
Sugar tax unless the calcium content is at least While the tourism industry has reacted e-publications is welcome and will
119 milligrams per millilitres. Betting duty will very strongly to the increase in the mean that magazines and periodicals
increase from 1% to 2%, again effective from 9% VAT rate and has said that it will will be liable to VAT at the same
the 1 January 2019 and the rate of betting have a major negative impact on the 9% rate whether they are supplied
intermediary tax payable by remote betting sector the increase in the rate was electronically or in print form.
intermediaries will increase from 15% to 25%. not unexpected following a review However, in contrast books sold over
of the rate by the Department of the internet will be vatable at 9% while
Finance which stated that demand for books in print format will be liable at
hotel accommodation and restaurant 0%. We would suggest that the VAT
services was not expected to be rate on e-books is reduced to 0%.
16Contacts
Dublin
29 Earlsfort Terrace
Dublin 2
T: +353 1 417 2200
F: +353 1 417 2300
Cork
No.6 Lapp’s Quay
Cork
T: +353 21 490 7000
F: +353 21 490 7001
Limerick
Deloitte & Touche House
Charlotte Quay
Limerick
T: +353 61 435500
F: +353 61 418310
Galway
Galway Financial Services Centre
Moneenageisha Road
Galway
T: +353 91 706000
F: +353 91 706099
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