Toggle

If you worked in any of these countries, you could be due a Tax Refund

Irish Finance Bill (No.2) 2011

#TaxTipsIreland

Michael Noonan recently announced the Jobs Initiative. The scheme is an attempt to boost economic growth and incentivise job creation. The minister announced several measures they hope will thrust the economy forward. The Finance Bill (No.2) 2011 was published today setting out the legislative provisions of some of the new measures. We have outlined the key points below:

Air Travel Tax

Air Travel tax is set to be abolished. This is a welcome measure, aiming to attract tourism to Ireland. The tax currently stands at 3% and is set to be reduced to 0%. The Bill empowers the minister to appoint a day from which passenger departures would not be subject to tax. It will be up to the airlines if they pass this saving on to customers, e.g. by putting a blanket price reduction on flight prices. However, we are still awaiting a date that this measure will become effective from.

Pension Levy

This is the most controversial measure. The pension levy is said to raise €470 million and will be used to fund the Jobs Initiative. The Finance Bill offers clarity on the operation of the levy. It inserts a new section charging an annual levy of .06% stamp duty on the market value of assets under management in pension schemes approved by the Revenue (under certain conditions).

The duty will be payable twice a year, with .03% payable at each due date. The levy is effective from 1 January 2011 and will remain in place until 2014.

The levy will not apply to the assets of certain pension funds where the employees exercised their employment duties outside the state and in certain cases where a scheme is being wound-up.

Those responsible for remitting the levy to the Revenue are the pension trustees, administrators or insurers who manage the schemes. A provision has been made which allows the trustees to make the decision as to whether they are going to pass the cost onto the pension holder. It remains to be seen whether the ordinary employee will bear the cost of the levy through reduced benefits.

The section also changes certain conditions for pension providers outside the state. Where such pension providers were discharged from certain taxes, they are now brought into the pension levy net.

The introduction of the levy has not been well received. Pension schemes have been hit heavily in the downturn and the charge to the levy won’t make pension funds any healthier. Pension funds that are struggling are not been given the chance to recover, however there is some comfort to be gained by the fact that the levy is a temporary measure only and is not here to stay.

R&D Credit

Finance Act 2004 introduced a tax incentive to companies to carry on research and development (R&D) in Ireland. The incentive works by allowing a tax credit of 20% of the incremental expenditure on certain items related to R&D to be offset against a company’s corporation tax liability in the year in which it is incurred. Changes introduced in Finance (No.2) Bill 2011 primarily affect the way companies account for the R&D credit and will be seen as a welcome move by many companies as it gives them greater flexibility in accounting for this often very valuable credit.

VAT

Section 3 of the Finance (No.2) Bill 2011 relates to VAT and provides for a second reduced VAT rate of 9% in respect of certain goods and services, mainly related to tourism. The new 9% rate will be introduced with effect from 1 July 2011 and, subject to review, will remain in place until 31 December 2013 after which the rate will revert to 13.5%. The amendment provides that the 9% rate will apply mainly to restaurant and catering services, hotel and holiday accommodation, admissions to cinemas, theatres, certain musical performances, museums and art gallery exhibitions, fairgrounds or amusement park services, the use of sporting facilities, hairdressing services, printed matter such as brochures, maps, programmes, leaflets, catalogues, magazines and newspapers. It will be up to the providers if they pass this change on to consumers.

This Finance Bill has introduced some welcome changes particularly in the form of the abolition of the Air Travel Tax and the temporary provision of a second reduced rate of VAT. One can only hope that these savings are passed on to the man on the street, adding to the money in his back pocket and thereby stimulating some much needed economic activity. Surprisingly, this Finance Bill neglected to address the area of civil partnerships. Perhaps a third Finance Bill will be in the pipeline and who knows what changes that will bring. Only time will tell.