Act XII of 2023 contains amendments to implement some of the Budget Measures for 2023. We highlight the salient Income Tax and VAT measures enacted.

Following the last budget speech and the parliamentary debates on Bill No. 24, the Budget Measures Implementation Act, 2023 ('the Act') was issued on 4th April 2023. The Act contains amendments to several laws including the Income Tax Act, the Income Tax Management Act and the Value Added Tax Act.

Following the publication of the Act, the Office of the Commissioner for Revenue published a note providing a summary of the direct tax amendments.

We highlight hereunder the salient changes to these fiscal laws.

Amendments to the Income Tax Act and Income Tax Management Act

Tax deduction of fees paid for sports, artistic and cultural activities

As announced in the last budget speech, the tax deduction currently available to parents paying fees for sporting, cultural and creative courses for their children has been increased from €100 to €300per child, with effect from year of assessment 2024.

Taxation of royalties on qualifying literary works

In terms of article 31F of the Income Tax Act, authors and co-authors deriving royalties from qualifying literary works may opt to be charged a final tax on the gross amount of royalties received. The Act reduces such final tax rate from 15% to 7.5%, effective for royalties derived on or after 1st January 2023.

Tax treatment of mergers, divisions of companies, transfers of assets between companies and exchange of shares

Article 27A of the Income Tax Act which empowers the Minister to make rules on the tax treatment of companies and other bodies/persons concerning, mergers, divisions, transfers of assets between companies and exchange of shares concerning companies has been broadened to include transfers between a company and a person who is related to it in such manner as may be prescribed.

Whilst currently there are Rules regulating the tax treatment of certain restructuring transactions, the note issued on the website of the Office of the Commissioner for Revenue states that new rules are intended to be published to implement these measures, which rules would be applicable as from the date of publication.

Provisional tax on transfer of interest in a partnership

This amendment clarifies that the provisional tax of 7% payable upon a transfer of securities or a transfer of value in securities shall also apply on a transfer of a full or partial interest in a partnership and on a deemed transfer of an interest in a partnership.

As a consequential amendment, the possibility to reduce the 7% provisional tax rate to a lower rate if certain conditions are satisfied, has also been accorded to transfers of an interest in a partnership.

Interest chargeable for the late payment of tax

Pursuant to legal notice 228 of 2022, the interest chargeable to taxpayers for their late payment of income tax increased from 0.33% (applicable as from 1 January 2020) to 0.6% per month or part thereof during which the tax remains unpaid, capped at the amount of tax due. Such increased rate applies on tax that became / becomes payable after 30th August 2022. For tax that was payable by 30th August 2022, it is the previously applicable rates of interest which remain enforceable.

Act No. XII amends the clauses that grant empowerment to the Commissioner to change the rate of interest.

Interest chargeable on the payment of disputed tax

Consequent to the aforementioned increase in interest rate for the late payment of tax, an amendment was passed to align the applicable rate of interest chargeable on the payment of disputed tax that is determined on objection/appeal. Such rate is similarly dependent on whether the date when the tax fell due was before or after 31st August 2022.

Interest chargeable for the late payment of tax refunds

The Act has increased the interest rate payable by the Commissioner on the late repayment of tax due to the taxpayer, for any period or part thereof commencing on or after 1st September 2022, to 0.6% per month or part thereof. The interest is capped at the tax refundable amount. The new rate applies irrespective of the statutory repayment date of the refund.

Extension of time limit for the payment of tax refunds

The 14-day statutory period allowed for the Revenue to pay tax refunds claimed under Article 48 of the ITMA has been extended by 12 months in instances when the Commissioner requires to carry out further verifications for due diligence purposes.

Amendments to the Value Added Tax Act

Increase in penalties for failure to submit recapitulative statements

The Act has raised the penalties for failure to submit recapitulative statements from €10 to €50 for every month or part thereof. The maximum penalty for each recapitulative statement has been increased from €120 to €600.

Recapitulative statements are required to be filed within the prescribed timeframes by taxable persons making intra-Community supplies of goods or supplies services that are taxable in the Member State of the recipient

New obligation for information upon request

A new article 55A has been introduced in the Value Added Tax Act, empowering the Minister to prescribe requirements for any person to retain and furnish the Commissioner such information as may be required in order to achieve the objective of combating VAT fraud.

Failure to provide such information would attract penalties at €50 for every month or part thereof, capped at €600.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.