Budget 2012 TAX FA TS & FIGURES CChartered Certified Accountants & Registered AuditorsSky Business Centre, Plato Business ParkDamastown, Dublin 15, Irelandph: +353 1 821 0300email: email@example.com
Budget 2012Rates & Credits 2012Personal tax credits 2012 € 2011 €Single persons 1,650 1,650Married persons 3,300 3,300Additional one-parent family 1,650 1,650PAYE 1,650 1,650Age credit single 245 245Age credit married 490 490Home carer 810 810Dependent relative tax credit 70 70Rent relief: (not available to claimants after 7 December 2011) Under age 55 single persons 320 320 Under age 55 married persons 640 640 Over age 55 single persons 640 640 Over age 55 married persons 1,280 1,280Incapacitated child 3,300 3,300Blind persons: Single 1,650 1,650 Married (only if both blind) 3,300 3,300Widowed additional credit 540 540Widowed person bereaved in year of assessment 3,300 3,300Widowed parent: 1st year after year of bereavement 3,600 3,600 2nd year after year of bereavement 3,150 3,150 3rd year after year of bereavement 2,700 2,700 4th year after year of bereavement 2,250 2,250 5th year after year of bereavement 1,800 1,800Exemption limit age 65 and over single / widowed 18,000 18,000Exemption limit age 65 and over married 36,000 36,000Standard rate bands 2012 € 2011 €Single / widowed 32,800 32,800Married couple – one income 41,800 41,800Married couple – two incomes (non-transferable excess) 65,600 65,600One-parent / widowed parent 36,800 36,800Tax rates 2012 € 2011 €Standard 20% 20%Top rate 41% 41%PRSI 2012 € 2011 €Employee ceiling None NoneEmployee PRSI rate 4% 4%Employer PRSI rate 10.75% 10.75%Universal social charge 2012 € 2011 €Total income exemption 10,036 4,004Income up to €10,036 pa (income up to €4,004 pa in 2011) 2% 2%Income between €10,037 & €16,016 pa 4% 4%Income over €16,016 – under age 70 7% 7%Income over €16,016 – over age 70 4% 4%Self-employed income > €100,000 – under age 70 10% 10%Self-employed income > €100,000 – over age 70 7% 7%
Budget 2012Personal TaxPersonal rates and bandsAll existing tax credits, rates and bands were maintained by the Minister in his budget speech.Household chargeA charge of €100 is introduced in 2012. Waiver from the charge applies to those living inunfinished housing estates and those on mortgage interest supplement.Mortgage interest reliefThis is only available on taxpayer’s main residence. Rate of relief increased to30% for first timebuyers who purchased homes between 2004 & 2008. Non first time buyers relief remains at 15%.First time buyers in 2012 get relief at 25%. Relief will no longer be available on loans taken outon or after 1st January 2013, and will be fully abolished from 2018.Tax on savingsDeposit Interest Retention Tax (DIRT) increased to 30% (27% in 2011).Exit tax applying to lifeinsurance policies and investment funds increased to 33% (30% in 2011). Both increases are witheffect from 1st January 2012.PRSI relief on employee pension contributionsCurrent 50% relief for employer PRSI on employee pension contributions eliminated with effectfrom 1st January 2012. PRSI base will be broadened with effect from 2013 to include other incomeincluding rental & investment income.Property based reliefA 5% surcharge is introduced on certain individuals sheltering income either in Section 23 typerelief, or in Accelerated Capital Allowance schemes: 5% surcharge is applicable to individuals with gross income > €100,000, and will only apply to the amount sheltered (owner-occupier relief for residential properties remains unaffected) Investors in accelerated capital allowance schemes will no longer be able to use the allowances beyond the tax life of that scheme where the tax life expires after January 2015 (where the tax life of a scheme has ended before 1st January 2015 no carry forward of allowances into 2015 will be allowed)Domicile levyIn an attempt to broaden the base for application of the levy, the citizenship condition has nowbeen removed. The levy applies (regardless of the taxpayer’s residence status) to worldwideincome exceeding €1m, an Irish income tax liability of less than €200,000, and Irish propertyvalued in excess of €5m as at 31 December in the relevant tax year (not allowing for attacheddebts or encumbrances).Business TaxCorporation tax ratesStandard rate on trading income remains at 12.5%. Investment & Rental income is 25%.Start-up companiesThe start-up scheme which allows three year’s tax-free profits up to specified limits and subject tocertain conditions, has been extended to include companies which commence to trade during2012, 2013 or 2014. The relief from corporation tax during the first three years of trade is linked tothe amount of employer’s PRSI paid by the company subject to a maximum of €5,000 peremployee in an accounting period.
Budget 2012Research & development tax creditChanges to the existing regime include: The first €100,000 of qualifying expenditure will benefit from the 25% credit 25% credit applies to the incremental expenditure in excess of €100,000 as compared with base year 2003 Relief for sub-contracted work is increased to the greater of existing 10% / 5% limit, or, €100,000 An option to reward employees involved with the R&D work with a portion of the creditCapital gains taxAnnual exemption per individual remains at €1,270. Rate increased from 25% to 30% with effectfrom 7th December 2011.Retirement reliefIntra-family transfers: Full retirement relief is maintained for individuals aged 55 to 66 A €3m upper limit will apply where the individual transferring the asset is aged over 66 A transitional period of two years, allowing unlimited relief will apply to individuals aged 66, or who will reach that age before 31st December 2013Outside family transfers: Upper limit of €750,000 is maintained for individuals aged 55 to 66 Upper limit is reduced to €500,000 for individuals age over 66 A transitional period of two years, allowing the upper limit of €750,000 will apply to individuals aged 66, or who will reach that age before 31st December 2013Capital gains tax exemptionExemption introduced for property bought between 7th December 2011 and 31 December 2013 andmust be held for at least seven years before being disposed of. This is with effect from 7thDecember 2011.Capital acquisitions taxParent-to-child gifts & inheritances after 7th December will be subject to a lower group threshold of€250,000 tax-free (previously €332,084). All other groups remain at existing levels.Value added taxWith effect from 1st January 2012: Standard rate increased from 21% to 23% District heating is reduced from standard rate to the reduced rate of 13.5% 2nd reduced rate of 9% introduced part-way through 2011 is now extended to include Open Farms. From 1st January 2014 the 9% rate will revert to its former 13.5% rate.Relevant contracts taxA withholding system operates on a revenue-neutral basis, based on 0% for subcontractors who arefully tax-compliant, 20% for subcontractors registered with an established significantly compliantrecord and 35% for unregistered subcontractors.
Budget 2012Stamp dutyDuty on stocks and shares remains at 1%. Duty on land, goodwill & commercial buildings reducedfrom 6% to 2% with effect from 7th December 2011. The new 2% rate also applies to premiumspaid on commercial building leases.The special 50% duty reduction for transfers within families (which was removed in respect ofresidential property transfers in Budget 2011) is to be fully abolished with effect from 1st January2015.Farming taxation50% stock relief will apply to farmers for registered farm partnerships until 31 st December 2015(subject to approval by the EU Commission). This relief is extended to 100% for certain youngtrained farmers.VAT refund order for flat rate farmersThe existing refund order is extended to include a refund on the purchase of wind turbinespurchased on or after 1st January 2012. The current order had already provided for a VAT refund ofunregistered farmers on the construction of fencing, drainage, farm buildings, and reclamation offarm land.Special Assignment Relief Programme (SARP)The SARP is to be enhanced with the aim of attracting key talent to Ireland to create more jobs andfacilitate development & expansion of business here. This should be a welcome step for businesstrying to secure increased investment for Irish projects.Foreign earnings deductionA new deduction is to be introduced to aid companies seeking to expand into emerging markets,and will apply for individuals spending 60 or more days a year developing markets in the BRICzone (Brazil, Russia, India & China) as well as South Africa. Details will be outlined in theFinance Bill.Redundancy rebateThe current insolvency scheme is amended to reduce the employer rebate on statutory redundancypayments from 60% to 15%.Employment and Investment Incentive (EII), andSeed Capital Scheme (SCS)The European Commission recently granted approval for the introduction of the EII and SCS witheffect from 25th November 2011. Qualifying companies can avail of the former BusinessExpansion Scheme (BES) provided the fundraising of capital is completed no later than 31stDecember 2011.
Budget 2012Possible future measuresIncentives for supplementary pension provision have been flagged by the Minister as beingtargeted for reform. These may include: Further reductions in the standard fund threshold Reductions in tax relief on pension contributions Possible retention of the pensions levyRelief for investment in renewable energy projectsTax relief provided to companies for investment in certain renewable energy projects is extendedto 31st December 2014. This measure is aimed at increasing the volume of electricity produced inIreland from sources such as solar, wind, ocean, wave, tidal, and biomass.Vehicle registration taxA consultation process will commence during 2012 in order to review options open for increasingrevenue streams from VRT and Motor tax.CommentaryThe impact of the 23% VAT rate on business and retail spending remains to be seen, although whatis certain is the increased demand it will have on individuals and business already struggling withcash flow.The measures introduced to encourage property movement are welcome, but without sufficientcash in circulation, the effects of these may well become limited.Two significant initiatives are the enhancement of the R&D tax credit regime and the new foreignearnings deduction for employees of export-driven companies. It is hoped that these will combineto entice overseas companies to invest in Ireland thereby injecting badly needed cash into theeconomy, and also increase Irish exports to existing and new markets, which in turn should lead topositive cash inflow to the country.Various property reliefs, which have been flagged in previous Budgets as being targeted forgradual phasing out, have been granted a stay of execution until the findings of an EconomicImpact Assessment have been published in the Finance Bill. It is only a matter of time however,before the shelters that many investors have found to be so generous in recent years are removed,and the investors look elsewhere for homes for their funds. It is important that future Budgetsconsider the effect of not having such investment funds available to help support the economy.Hanley Morgan CooperThis leaflet is only a summary of the Budget Speech and is not intended to be a comprehensive guide or be taken as professionaladvice – please consult Hanley Morgan Cooper in relation to specific issues and queries