The Minister for Finance delivered his Budget speech for the coming year on 8th October 2019, with a key focus on preparation for a potential 'No Deal' Brexit between the EU and UK as well as the introduction of changes related to the reduction of environmental pollutants.
The principal taxation features of the Budget, which will be included in the forthcoming Finance Bill, are as follows:-
Corporation Tax Rate
- No change to the 12.5% rate for trading companies
- Extension of the three year 0% Corporation Tax rate until the end of 2021, for profit-making start-up companies that create and maintain jobs
Dividend Withholding Tax (DWT)
- Irish residents: The current rate DWT of 20% in respect of resident shareholders will increase to 25% from 1st January 2020. From January 2021 a modified DWT scheme for residents will be introduced through the real-time PAYE system, allowing a personalised rate of DWT to be applied to each individual taxpayer, based on their actual rates of tax. These provisions will not affect the DWT exemptions which currently apply to non-resident shareholders.
- Non residents: As before, subject to certain conditions and declarations there are exemptions from Irish DWT for foreign shareholders where dividends are paid to companies or individuals resident in a treaty country or another EU member state.
Anti-Tax Avoidance Directive (ATAD)
- Exit Tax: As part of Ireland's commitment to implementing the ATAD, a new ATAD compliant exit regime has been introduced with immediate effect. It will tax unrealised capital gains where companies migrate or transfer assets offshore where the effect is to leave the scope of Corporation Tax. The rate for the new ATAD compliant exit tax will be set at 12.5%
- Controlled Foreign Company (CFC) Rules: The Finance Bill will also introduce a CFC regime as required by ATAD. This anti-abuse measure, not previously part of the Irish corporate tax regime, is designed to prevent the diversion of profits to offshore entities (the CFCs) in low or no-tax jurisdictions.
- Commercial property: the stamp duty rate on commercial property has been increased from 6% to 7.5% with immediate effect. The existing 6% rate will apply to instruments signed before 1st January 2020 where a binding contract existed prior to 9th October 2019.
- Residential property: the stamp duty on residential property remains at 1% of the selling price up to €1 million, with any balance over €1 million chargeable at 2%.
- Shares: A new 1% stamp duty charge is being introduced where a scheme or arrangement involving a 'cancellation scheme' under the Companies Act 2014 is used to effect the sale of a company. Prior to this change it was possible to transfer owbnership of a company through a Court approved process without incurring a charge to stamp duty.
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.