Tax Announcements In Ireland’s 2022 Budget

Tax Announcements In Ireland's 2022 Budget

Tax Announcements In Ireland’s 2022 Budget

On October 12, 2021, Minister of Finance Paschal Donohoe announced the Government’s Budget for 2022 which included some positive changes for entrepreneurs, investors, and firms attempting to bounce back from the pandemic.

Tax Rates

There were certain tax adjustments benefiting individuals. First, the standard rate income tax bands increase by EUR1,500 for all taxpayers. Additionally, the work-from-home tax deduction scheme is enhanced to provide an income tax deduction of 30 percent for heat, electricity, and broadband expenses in respect of days worked from home.

Start-up Company Relief

There was good news for those thinking of starting a business, with the start-up tax relief scheme extended until the end of 2026. This scheme, introduced by the second 2008 Finance Act, provides tax relief for corporation tax payable on profits and gains on the disposal of any assets used for the purposes of a new trade. The amount of tax relief is linked to how much the new company pays in employers’ Pay-Related Social Insurance (PRSI).

Budget 2022 also extends the period for which tax relief is available to the first five years of trading, up from the first three years previously.

Employment Investment Incentive (EII)

Ireland also intends to expand the EEI so that a broader range of investments are available.

The EII scheme allows individuals to claim tax relief on equity investments in certain micro, small and medium-sized trading companies, subject to various restrictions.

Certain other changes to the EEI scheme are intended to allow investors to redeem their capital without being penalized. The stipulation that investors must spend at least 30 percent of an investment in an EII company before relief can be claimed is also removed.

Digital Games Tax Credit

For those in the computer games sector, Budget 2022 provides a new tax relief in the form of a refundable corporation tax credit for expenditure incurred on the design, production, and testing of a digital game. Tax relief amounts to 32 percent of eligible expenditure, up to a maximum of EUR25m per project.

However, companies hoping to avail themselves of this credit must meet certain conditions, including that a digital game has been issued with a cultural certificate from the Minister for Tourism, Culture and Arts. Also, this relief will not be available for games produced mainly for the purposes of advertising or gambling.

Employment Wage Subsidy (EWSS)

For companies with depressed revenues in 2021 due to the pandemic, the wage subsidy scheme is being extended until April 30, 2022, although with upcoming changes.

The scheme will remain in its current form until November 30, 2021. However, for the period from December until the end of February 2022, the original two-rate subsidy per employee per week (EUR151.50 and EUR203) will apply. Then, in the months of March and April 2022, a flat rate of EUR100 per week will apply.

To benefit from this scheme, taxpayers must have suffered a 30 percent loss in revenue in 2021 compared to 2019. However, note that the EWSS will close to new entrants from January 1, 2022.

Next Steps

These Budget measures were included in Finance Bill 2021, released on October 22. At the time of writing, the bill is making its way through parliament, and must be approved by both houses of parliament before becoming law.

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