Summary of Budget 2020

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Budget 2020

Summary of Budget 2020

On the 8th of October Minister for Finance Paschal Donohue released his third budget as a minister. There have been tax and spending changes, as well as a significant fund put aside in the event of a hard No-Deal Brexit. In general, there were no great surprises with Budget 2020.

Our experts in CityTrust breakdown Budget 2020 and its key takeaways.

Income Tax

  • Earned income credit has seen an increase of €150. It now stands at €1,500.
  • Home carer credit is now at €1,600. An increase of €100
  • The 0% BIK charge on qualifying electric vehicles has been extended to 2022.
  • There have been extensions for the SARP and FED schemes of 2 years. This is up until 31 Dec 2022.
  • The Help to Buy scheme has been extended by a further 2 years. First-time buyers can now avail of the scheme until 31st Dec 2021.
  • There have been amendments made to the KEEP scheme. It now allows group companies to qualify. Also, the definition of qualifying employees extended to include part-time workers.
  • EIIS rules have been changed to now allow full income tax relief in the year of investment, as opposed to over years one and four. There is also an increase in the annual investment limit from €150k to €250k. Furthermore, there is a further increase to €500k for investors who commit to investment for ten or more years.

Corporation Tax

  • Budget 2020 had a view to addressing income tax avoidance on investment income. So, the dividend withholding tax for Irish companies is being increased from 20% to 25%. This will come into effect on 1st Jan 2020. 
  • In 2021 the DWT rate will be linked to the shareholder’s marginal income tax rate. This is based on information available under the newly modernised PAYE system.
  • Increase from 25% to 30% on the R&D tax credit rate for small and micro-companies. Also, R&D relief will now be available for pre-trading expenditure against VAT and payroll tax liabilities. The existing 5% expenditure limited to outsourcing to 3rd-level institutes will increase to 15%.
  • Under the EU Anti-Tax Avoidance Directive, anti-hybrid mismatch rules will be introduced on Jan 1st 2020.
  • Transfer pricing rules in Ireland will be updated to bring them into line with the latest OECD guidelines. These will come into effect in January 2020 and will extend our rules to SMEs and non-trading transactions.

Capital Taxes

  • The Group A CAT threshold, which covers and applies to gifts and/or inheritances from parents to children will see an increase from €320,000 to €335,000.
  • The CGT Entrepreneur Relief has seen no changes made but consideration is to be given to output from the recent Indecon external review of the relief to determine whether changes may be appropriate in the future.
  • The extension was made to CGT farm restructuring relief up until 31st Dec 2022.

Stamp Duty

  • Effective from Budget night, (8th Oct 2019), the rate of stamp duty applicable to non-residential property transfers has been raised from 6% to 7.5%.
  • Amendments have been made to the stamp duty refund scheme for residential developments to take into account the increased stamp duty rate for non-residential property. Thereby, the effective rate would be maintained at 2%.
  • There has been an anti-avoidance measure where stamp duty at 1% rate will now apply to a scheme of arrangement when there is an acquisition of a company by way of a “cancellation scheme”.

Indirect Taxes

  • As expected and mentioned pre-Budget 2020, the Carbon tax has been increased by €6 which brings it to €26 per tonne. This came into effect from Budget Night for auto fuels. The increase in a carbon tax for other fuels including home heating fuels will come in from May 2020.
  • VRT Environmental Health Nitrogen Oxide (NOx) surcharge replaces the 1% diesel car surcharge introduced in 2018. This applies to all passenger cars registered in the State after Jan 2020.
  • Hybrids and plug-in hybrid electric vehicle (PHEVs) VRT reliefs extended to 2020 subject to emissions limits.
  • There is a reduction in qualifying CO2 thresholds for recovering VAT on commercial vehicles.
  • Road haulage and passenger transport operators who use the diesel rebate scheme will be modified to provide relief from the increase in the carbon tax.
  • There is relief from the betting tax introduced. This is for independent bookmakers and betting intermediaries up to and an annual limit of €50,000.
  • 50c increase on a packet of 20 cigarettes from Budget night.
  • The production ceiling for qualification for relief from alcohol products tax for microbreweries. This will be raised to 50,000hl.

Financial Services 

  • Limitations on interest expenses introduced by Irish Real Estate Funds (IREFs), therefore increasing the potential ultimate exposure to IREF Tax.
  • There have been anti-avoidance provisions added for Section 110 securitisation vehicles to strengthen them and ensure they operate as intended.
  • Application of dividend withholding tax to distributions of proceeds from the disposal of rental properties by REITs.
  • Provisions which already exist allowing re-basing of property values when a company ceases to be a REIT have now being limited unless REIT has been in operation for a minimum of 15 years.

Brexit

  • Budget 2020 has seen €1.2 billion allocated for Brexit measures across multiple departments.
  • €650m will be dedicated to supporting the Agriculture, Enterprise and Tourism sectors to assist the most affected citizens and regions. Should there be a No Deal, €220m will be deployed immediately.
  • €100m to be introduced to fund emerging businesses that would be affected by a No Deal Brexit.

Other measures

  • An additional €365m will be provided for Social Protection expenditure on the Live Register and related schemes.
  • €45M being made available for retaining and new employment opportunities.
  • As committed in Budget 2019, €1.5 billion to be transferred from the Ireland Strategic Investment Fund to the Rainy Day Fund, but the additional annual exchequer contribution of €500 million for 2020 will be deferred.

Finally, if you need any further assistance with breaking down how Budget 2020 affects your business. Contact us here or call +353 1 6753140.