Irish Finance Bill 2013

13 February 2013

The Finance Bill 2013 was published today in Ireland by the Minister for Finance. The Bill puts in action most of the measures announced in the December 2012 Budget. While most of the measures have been flagged previously, the Bill also introduced a number of new changes.

Our Irish Tax team analysed the Bill and have summarised the main points below.

1. USC – full rate of USC will now apply to over 70s and those with medical cards where their income is over €60,000
2. Amendment to definition of ‘‘key employee’’ for the R&D tax credit scheme by reducing from 75 per cent to 50 per cent the minimum amount of time that an employee must devote to his or her employer’s research and development (R&D) activities and by reducing from 75 per cent to 50 per cent the minimum amount of that employee’s emoluments that qualify as expenditure on R&D.
3. Introduction of a new anti avoidance measure in respect of the remittance basis in relation to the transfer of income between spouses
4. Capital Gains Tax, Capital Acquisitions Tax and DIRT increased to 33%.
5. The taxation of Maternity benefit, Adoptive Benefit and Health and Safety Benefit payments will commence with effect from 1 July 2013.
6. Foreign Earnings Deduction scheme is being extended to include Algeria, the Democratic Republic of the Congo, Egypt, Ghana, Kenya, Nigeria, Senegal and Tanzania
7. The thresholds for tax relief on third-level fees are being increased in line with the rises in the Student Contribution.
8. Anti avoidance legislation on Employee Benefit Trusts is being introduced to prevent employees from receiving tax-free loans from a trust provided or funded by their employer.
9. Amendments to BIK rules will mean that public sector workers pay tax on benefits on the same basis as those in the private sector.
10. The lifetime limit of €200,000 for tax-free employment termination or ex gratia payments and ex-gratia compensation payments made on account of death or disability has been introduced.
11. Foreign Service Relief is being abolished entirely for ex-gratia payments made on retirement or removal from office.
12. The Revenue Job Assist scheme is being abolished and is to be replaced by a new scheme to encourage employers to hire long-term unemployed workers.
13. Losses on foreign rentals can no longer be offset against other foreign income. Such  rental losses will continue, however, to be allowable against foreign rental profits.
14. The “young trained farmers” Stamp Duty relief on agricultural land transfers will apply for a further three years to 31 December 2015.
15. A number of additional conditions are being added to the special 100% rate of stock relief for young trained farmers.
16. The Bill includes amendments to the scheme of tax relief for donations to approved bodies including certain charitable and educational bodies. The amendments give legislative effect to the announcement in the Budget that donations made by individuals to approved bodies would be subject to a simplified scheme from 1 January 2013. All donations will be treated the same, with the tax relief in all cases being refunded to the approved body. A blended rate of tax relief of 31 per cent is introduced and, as the benefit of the relief is being removed from the donor, the scheme is also being removed from the scope of the high income individuals’ restriction.