Finance Bill 2012 - Supporting Ireland's Continued Economic Recovery
On Wednesday 8 February 2012 Ireland’s Minister for Finance, Michael Noonan T.D., published Finance Bill 2012, to give effect to the tax, and other measures, announced in the Budget of 6 December 2011, and to introduce other tax measures not already outlined on Budget day. While Finance Bill 2012 runs to 124 sections, this article focuses on the features of the Bill most relevant to Ireland’s economic recovery and of interest in the context of international tax matters.
Extension Of 12.5% Rate On Foreign Dividends
The 12.5% rate on dividend income received by Irish-resident companies is extended to dividends received on, or after, 1 January 2012 where the dividends were paid out of trading profits received from companies that are resident in territories which have ratified the OECD Convention on Mutual Assistance in Tax Matters.
Foreign Earnings Deduction For Overseas Assignees
Income tax relief will be available where an Irish tax resident spends periods of at least 10 days working on assignment in any of the BRICS (Brazil, Russian, India, China and South Africa) countries, and these periods amount to at least 60 days in a year.
New SARP Regime
A Special Assignee Relief Programme, designed to attract high-level personnel to Ireland, is being introduced. The relief exempts from Irish Income Tax 30% of earnings between €75,000 and €500,000. The relief is subject to a number of strict qualifying conditions.
Start-Up Relief Extended
The scheme of corporation tax relief for start-up companies has been extended to include start-up companies that commence a trade in the years 2012-2014. It should be noted that detailed qualifying conditions are attached to this relief.
Improvements To R&D Relief
The Bill contains the amendments to the R&D tax credit regime announced in the Budget, together with a number of new changes. The Budget changes relate principally to the volume of expenditure relieved, limits to relief for outsourced work, and provision for sharing of the tax relief with key employees involved in the qualifying R&D activities.
The new provisions refer to the exclusion from relief of R&D activities carried on by other parties and not qualifying under the outsourcing provisions, and expenditure supported by grant assistance. There are also provisions allowing for the use by group companies of unused credits generated by a dissolved group entity.
Corporation Tax Group Relief
For accounting periods ending on, or after, 1 January 2012, group relief is extended to allow surrender of losses between Irish resident companies, where both companies are members of the same 75% group, and the group contains companies which are resident in a double tax treaty country, or quoted on a recognised stock exchange. Until now it was a requirement that the group companies be either an EU company, or an EEA company resident in a tax treaty state.
CGT Relief For Property Purchased Before 2014
Capital Gains Tax (CGT) exemption for a gain arising on property bought between 7 December 2011 and 31 December 2013, where the property is held for more than seven years.
Stamp Duty Flat Rate Of 2% On Commercial Property
A single flat rate of Stamp Duty of 2% has been introduced for sales of non-residential property, i.e. industrial and commercial property.
Mergers Where A Company Is Dissolved Without Liquidation
On foot of a recent EU Directive, the Bill has provisions to allow dissolution of a company without going into liquidation. A subsequent transfer of assets and liabilities to a parent company may be made without triggering a disposal of shares for CGT purposes.
The Bill also contains an exemption from Stamp Duty on mergers, including cross-border mergers.
Foreign Tax On Royalties
Amendments have been made to the rules for relief for foreign tax suffered on royalty payments paid to Ireland from abroad. The amendments are designed to assist the software industry in particular.
Interest Payments To Non-Treaty Countries
Provision is being made to allow certain companies pay interest to connected persons resident in non-treaty countries without the re-characterisation of the interest as a distribution. This provision is aimed at cash-pooling businesses in the corporate treasury industry, and is subject to a number of qualifying conditions.
The Bill also contains a number of technical provisions affecting securitisation companies, Irish funds, EFTs, UCITs, and cross-border leasing companies.
It should be noted that the Bill confirms the following important tax rate changes:
- The rate of CGT and CAT is 30% for transactions on / after 6 December 2011.
- With effect from 1 January 2012 Deposit Interest Retention Tax (“DIRT”) is 33%.
Disclaimer
Please note that this commentary does not purport to be a comprehensive review of Finance Bill 2012. Detailed appropriate advice should be taken before any particular transaction is entered into.
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