Finance Bill 2023: Key Details

Finance Bill 2023 (the Bill), published on 19 October, includes the legislative provisions for the tax measures announced as part of Budget 2024 as well as introducing new measures and amendments to the Irish tax code.  Here we focus on the measures not announced as part of Budget 2024 and the more significant measures contained in the Bill.

The Bill runs to 98 sections and over 270 pages. The scale of the Bill is primarily a result of the signalled new legislation required to transpose the EU Minimum Tax Directive and OECD Model Rules and guidance relating to the implementation of the Pillar Two minimum effective tax rate for large groups and companies.

Certain measures announced in Budget 2024, including notably the Capital Gains Tax Relief for Angel Investors, are being deferred with the introduction to be at Committee Stage of the Bill.

Corporation Tax and measures impacting business

Pillar Two

The Bill provides for the implementation of the Pillar Two minimum effective tax rate for large groups and companies by transposing the EU Minimum Tax Directive on ensuring a global minimum level of tax for MNE groups and large domestic groups into Irish law. The key points are:

  • The 15% minimum effective tax rate will apply to both multinational and domestic businesses with a global annual turnover of €750 million in at least two of the preceding four years.
  • The main Pillar Two charging rules examined in the Bill are:
    • Income Inclusion Rule (IIR)
    • Undertaxed Profit Rule (UTPR)
    • Qualified Domestic Top-Up Tax (QDTT)
  • The rules for computing the 15% rate include a “substance-based income exclusion”, which excludes certain income calculated by reference to payroll costs and tangible assets in the jurisdiction.
  • Transitional and permanent Safe Harbour provisions are further features under Pillar Two.
  • Pillar Two will be administered under the care of Revenue on a self-assessment basis.

R&D Credit

  • The Bill provides for an increase in the rate of the R&D Tax Credit to 30% which will maintain the current level of the credit for companies within scope of Pillar Two while providing an additional benefit to companies (the vast majority) not subject to the minimum tax rules.
  • The first year payment threshold has been increased from €25,000 to €50,000 in a further boost to SME businesses.
  • A pre-notification requirement is to be introduced for companies intending to claim the R&D credit for the first time, or those who have not claimed the credit in the prior 3 years.

Employment Investment Incentive (EII)

  • The Bill provides that the minimum holding period to obtain the relief will be standardised to four years to all investments from 1 January 2024 and the limit that investors can clam relief on will increase to €500,000.

Outbound Payments

  • The Bill includes new measures applying to outbound payments of interest, royalties and distributions to countries on the EU non-cooperative list. This is aimed at the prevention of double non-taxation.

Interest Deductibility

  • The Bill introduces a new section of legislation allowing interest deductibility for qualifying non-trading group financing companies.
  • This will impact companies obtaining third-party finance which they advance to a subsidiary for business purposes and will be subject to anti-avoidance provisions.

Film Relief

  • The cap on qualifying expenditure for the purposes of the corporation tax credit will increase from €70 million to €125 million.

Real Estate Measures

Vacant Homes Tax

  • The Vacant Homes Tax will take effect from 1 November 2023. The Bill will increase the rate at which the tax is charged from three times to five times a property’s current Local Property Tax liability.

Residential Zoned Land Tax (RZLT)

  • The Bill provides amendments to the existing legislation to extend the liability date of RZLT by one year from 1 February 2024 to 1 February 2025.
  • This will allow landowners another chance to make submissions on the inclusion of their land on local authority maps.

Defective Concrete Products Levy

  • The Bill confirms the Minister for Finance’s previously announced intention to remove ready-to-pour concrete used in the manufacture of precast concrete products from the scope of the Defective Concrete Products Levy.

Other Key Measures in the Bill

Share Options

  • The collection of tax realised on the exercise, assignment or release of a share option will be collected through the PAYE system with effect from 1 January 2024 meaning employers will be required to collect and remit income tax, USC and PRSI to the Revenue Commissioners as part of the payroll process. 

Benefit in Kind – Company Vehicles

  • The temporary reduction of €10,000 in the Original Market Value (OMV) of vehicles in categories A-D will remain in place until 31 December 2024.
  • The tapering relief for electric vehicles will also be extended to 31 December 2027 i.e. OMV reductions of €35,000 will apply for 2025, €20,000 for 2026 and €10,000 for 2027.
  • Electric vehicles will benefit from both OMV reductions for the year 2024 i.e. a total OMV reduction of €45,000. 

Stamp Duty

  • There is to be an exemption from stamp duty on certain transfers of Irish shares in Canada or the US.
  • This exemption will apply to shares listed on recognised stock exchanges in those countries.

 Capital Acquisitions Tax

  • Beneficiaries of interest free or reduced interest loans from certain connected persons will be obliged to file a CAT return where the outstanding balance on the loan is greater than €335,000 at any point in a reporting year.
  • This would include loans from close relatives as well as loans from company to individual or company to company, which involved close relatives.

Next Steps

The Bill is scheduled to be debated in the Dáil over the coming weeks and is due to pass to the Seanad at the end of November. A common budgetary timeline applies to all EU Member States, which means that this Bill will be enacted by the end of the year. In recent years the president has signed the Bill into law shortly before Christmas.