The Minister presented his first budget in two years from Leinster House amid a period of post pandemic uncertainty with rising cost of living pressures, a continuing housing crisis and the need for action on climate change. He outlined his plans of helping the nation recover from the pandemic, by restoring our public services and living standards, and repairing the public finances.
The Employment Wage Subsidy Scheme (EWSS)is being extended in a graduated form until 30 April 2022, and the eligibility criteria will remain unchanged. There will be no change in rates until December 2021, after which there will be a two rate structure with payments of €151.50 and €203 per week out to February 2022. For March and April 2022 there will be a flat rate subsidy of €100 per week. However, the reduced rate of employers PRSI (0.5%) will cease from February 2022.
The scheme will close for new employer entrants from 1 January 2022.
The tax debt warehousing scheme will be expanded to allow certain directors or participators to warehouse their income tax liabilities in line with the existing corporate warehousing arrangements.
To reflect the impact of inflation over recent years, the standard rate band of income tax will increase by €1,500 for all earners.
There will also be a €50 increase in each of the Personal Tax Credit, the Employee Tax Credit, and the Earned Income Credit. Each credit will now be worth €1,700.
To reflect the increase in the national minimum wage to €10.50 per hour, the weekly income threshold for the higher rate of employer’s PRSI will increase from €398 to €410.
In a welcome support for remote workers, taxpayers will now be entitled to an income tax deduction of 30% of the vouched cost of expenses for light, heat, and broadband in respect of time spent working at home.
The Help-to-Buy Scheme, which was enhanced in Budget 2021 to allow for relief of up to €30,000, is being continued in its current enhanced form until 31 December 2022, with a review of the scheme scheduled for 2022.
The relief for landlords on certain pre-letting expenses of up to €5,000 per property is to be extended by further three years, to the end of 2024, to encourage landlords to return properties to the market.
In a further effort to encourage residential development, the existing vacant site levy will be replaced by a Zoned Land Tax, which will apply at a rate of 3% of the market value of land which is zoned suitable for residential development. There will be a two year lead in time for land zoned pre January 2022 and three years thereafter.
As widely covered earlier this week, Ireland has signed up to the OECD Agreement to introduce a minimum effective Corporate Tax rate of 15% for large multinationals, where global group turnover exceeds €750m. Following successful negotiations by the Irish Government with the OECD and EU, Ireland’s long-standing 12.5% Corporate Tax rate will continue to apply for groups that do not exceed this turnover threshold.
Ireland is continuing its implementation of the EU Anti-Tax Avoidance Directive measures. The forthcoming Finance Bill will include legislation addressing:
The relief for start-up companies is being further extended out to 2026 and may now be claimed during the first five years of trading.
The Accelerated Capital Allowances Scheme for gas vehicles and refuelling equipment has been extended to 2024 and extended to include hydrogen powered vehicles and equipment. Equipment directly operated by fossil fuels will now be restricted from the scheme.
The Employment Investment Incentive (EII) scheme is extended for a further three years along with certain enhancements to the scheme to make it more attractive to investors.
With a view to boosting the Irish digital gaming sector, a new tax credit of 32% of eligible expenditure incurred in the development of digital games is being introduced. This will apply for qualifying projects subject to a limit of €25m per project, but is subject to EU State Aid approval before implementation.
The annual increase in carbon tax of €7.50 per tonne will bring the overall rate to €41 per tonne of CO2 on fossil fuels. This increase will take effect from midnight for petrol & diesel, and from 1 May 2022 for all other fuels, and will result in a 60 litre tank of diesel increasing by €1.50 and a tank of petrol by €1.30.
To further drive buyers towards the purchase of cars with lower CO2 emissions, vehicle registration tax is being increased for vehicles from 1 January 2022, based on a sliding scale from 1% to 4% depending on the levels of emissions.
The €5,000 relief for Battery Electric vehicles is further extended to 31 December 2023.
In a welcome boost for the hospitality sector, the reduced VAT rate of 9% for the sector is being extended to 31 August 2022.
For the first time the farmers Flat Rate Addition will be reduced f from 5.6% to 5.5% with effect from 1 January 2022.
The excise duty on a package of 20 cigarettes is to increase by 50c with pro-rata increases for other tobacco products.
As was widely signposted the Minister will extend the timeline of the 9% VAT rate in the hospitality sector to 31 August 2022. It was due to end on 31 December 2021. Such a reduction should stimulate activity in this labour intensive industry resulting in the protection of long term sustainable employment in a sector which has been disproportionately impacted by the current Covid pandemic.
Obviously the full potential of the reduction in the VAT rate will not be felt until the various ‘lockdown’ measures introduced due to the pandemic are relaxed in full.
We invite you to join us via webinar 13 October to hear our Tax team and guests discuss the impact of the budget on you and your business, together with the wider economic impact.