The favourable provisions introduced in the Budget and as outlined in the Update on Ireland’s International Tax Strategy:
- Further increase the attractiveness of Ireland as a location to carry on business; and
- Detail the commitment of the Irish Government to actively contribute to the OECD and EU efforts to tackle harmful tax competition
A summary of the favourable measures detailed by the Minister are laid out below.
Commitment To The Irish 12.5% Corporation Tax Rate
The Irish Government remains committed to the Irish corporation tax rate of 12.5% and the BEPS project will not alter this.
The Minister explained that “the OECD BEPS reports do not affect Ireland’s 12.5% corporation tax rate. The OECD has explicitly stated that taxation is at the core of countries’ sovereignty, and that each country is free to set up its corporate tax system as it chooses, including charging the rate it chooses”.
Knowledge Development Box (KDB)
The KDB has been introduced to nurture the development by Irish companies of intellectual property in Ireland. The KDB will provide for a corporation tax rate of 6.25% on the profits generated from certain intellectual property assets where the research and development activity is carried out in Ireland.
The Minister mentioned that the “KDB will be the first and only box in the world to meet the tough new standards of the OECD’s ‘modified nexus’ approach” and that the Irish Government’s “commitment to the OECD standard provides long-term certainty to taxpayers at a time when many international businesses are re-evaluating their structures and investment choices to compete and succeed in a post BEPS world”
Further details on the KDB will be provided in the 2015 Finance Bill.
Country by Country Reporting (CBCR)
In line with the recommendations of the OECD, the Minister announced plans to introduce CBCR reporting into the Irish tax legislation.
As Ireland will be one of the first jurisdictions to introduce CBCR, this proposal shows that Ireland remains committed to ensuring that its tax system is open and transparent.
Related: Ireland's Attractive Regime For Innovatice Companies [Webinar]
- The 3 year corporation tax relief for start up companies has been extended to 2018.
- The cap on qualifying expenditure under the film tax credit will increase from €50 million to €70 million.
- The introduction of a reduced Capital Gains Tax rate of 20% for entrepreneurs on the disposal of a business, subject to an overall limit of €1 million.
- Further advantageous measures to the Enterprise and Investment Incentive Scheme.
- A reduction in the Universal Social Charge rates for income up to €70,044.
- An earned income credit is being introduced for self employed individuals.
- Reduction in PRSI rates for lower paid workers.
- The Home Renovation Incentive is being extended until December 2016.
- Increase in the capital acquisition tax threshold for gifts and inheritances provided by parents to their children.
Ireland's Bright Future
Currently Ireland has the fastest growing economy in the EU and it is expected that the Irish economy will grow at a rate of 4.3% in 2016.
Budget 2016 allows Ireland to develop its economy even further with the objective of attracting international businesses to set up operations in Ireland where an open and transparent tax regime exists.