BUDGET 2016 – KEY POINTS

October 13, 2015

Income Tax

Marginal tax rate for those earning up to €70k reduced to 49.5%.

From 1st January 2016, the entry threshold for Universal Social Charge (“USC”) will be increased from €12,012 to €13,000.

Otherwise, rates of USC will be reduced as follows:

  • Income up to €12,012 -Rates reduced from 1.5% to 1%.
  • Income from €12,013 to €18,668-Rates reduced from 3.5% rate to 3%.
  • Income between €18,669 -70,044 -Rates reduced from 7% to 5.5%
  • Income between €70,045 -€100,000 -8% (no change)
  • PAYE Income in excess of €100,000 -8% (no change)
  • Self-employed income in excess of €100,000 -11% (no change)
  1. Introduction of a tapered PRSI tax credit for employees up to €624 per annum.
  2. The ceiling for the higher rate of employers PRSI of 10.75% to be increased to €376 per week.
  3. Home carer tax credit increased by €190 to €1,000 p.a. This credit is available to “stay at home” parents earning less than €7,200 per annum.
  4. Top rate USC exemption to be retained for all medical card holders and individuals aged 70 and older whose total income does not exceed €60,000.

Self-Employed.

Income tax credit of €550 to be introduced for the self-employed. This credit will be similar to the PAYE credit of €1,650. Minister Noonan has mentioned that still in power he may increase the credit if finances permit. So we still have some way to go.

Employers

  1. Minimum wage has increased to €9.15 per hour, up from €8.65.
  2. Employers PRSI has improved but only marginally. The lower rate of 8.75% will now apply to all employees earning less than €376 per week. This is an increase from €356 per week previously.
  3. Fathers will now be entitled to 2 weeks paternity leave, this will come into force from September 2016.

Business Tax

  1. Introduction of a Knowledge Development Box to provide for a 6.25% corporation tax rate on profits arising to certain IP assets which are the result of qualifying R&D activity that is carried out in Ireland.
  2. Amendments to EIIS announced in Budget 2015 to take effect from midnight 13th October 2015. They have been pending EU State Aid approval for the past year.
  3. Start-up relief from corporation tax being extended for new start-ups commencing to trade over the next three years.
  4. Country-by-Country reporting to be introduced in the Finance Bill.
  5. The scheme of capital allowances for the construction of facilities used in the maintenance, repair, and overhaul and dismantling of aircraft is being amended to comply with State Aid rules. The scheme is also being commenced with effect from Budget night.

Capital Taxes

  1. New CGT rate of 20% on the sale of whole or part of a business applying to capital gains of up to €1m. The new relief sees the capital gains tax rate on disposals of businesses reduced to 20%. However there is a lifetime limit of €1m on the amount of proceeds one can receive. We welcome this relief but it is still a long way off the UK regime where the maximum lifetime proceeds are €10m and the rate of tax is 10%. We also note that the lifetime limit for the UK relief began at £1m in 2008 and has increased over the years – potential for our limit to increase.
  2. The Group A threshold (typically applies to transfers between parents and their children) for capital acquisition tax will be increased from €225,000 to €280,000 with effect from 14 October 2015.

Stamp Duty

  1. Existing €5 Stamp Duty on Debit/ATM cards to be replaced with a 12c charge for ATM transactions, subject to a cap of €2.50 or €5 depending on card type. This will be reviewed by the government as the assumption here is that the reduced costs will be passed on to the consumer by the banks. Watch this space!

Indirect Tax

  1. Confirmation of the reduced 9% rate for the tourism and hospitality sector will be retained.
  2. No changes to the reduced VAT rate of 13.5% or the standard VAT rate of 23% in 2016.
  3. Duty on a packet of 20 cigarettes will be increased by 50 cent (including VAT) from midnight 13th October 2015 with a pro rata increase on other tobacco products.
  4. No change to the Duty rates on beer, cider or other alcohol products.

Other Matters

  1. The Home Renovation Incentive is being extended until 31 December 2016. This is a tax credit for works done on family homes and on rental properties.
  2. Qualifying spend for film relief increased to €70m.
  3. The pension levy of 0.15% will expire at the end of 2015.
  4. Commercial Road Tax to be simplified and reduced. This will have the greatest benefit for larger haulage carriers with the annual rate being reduced to €900 for vehicles in excess of 12,000kgs.
  5. Bank Levy extended to 2021.
  6. Child benefit is to increase by €5.
  7. Free pre-school childcare is to be increased from 1 year to effectively 2 years.
  8. Free GP care for under 12s is also to come in, subject to discussions with GPs.

Farming

  1. An income tax credit worth up to €5,000 per annum for five years for family farming partnerships to facilitate the transfer of family farms to the next generation.
  2. Extension of general and young farmers’ stock relief for a further 3 years.
  3. Profits or gains from the occupation of woodlands are being removed from the High Earners’ Restriction.

Property

  1. NAMA to deliver 20,000 houses between now and 2020. 90% of these in the Dublin area and 75% of the overall total will be starter homes.

Local Property Tax revaluation date postponed until 2019.

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