Earlier today, the Department of Finance released the first draft of Finance Bill 2021. This Bill sets out the proposed legislative changes required in order to implement the Budget Day announcements of 12 October. In addition to what was announced in the Budget, the Bill also proposes to introduce a number of new measures.
Please click below for our detailed breakdown of these changes.
Finance Bill 2021 Highlights
Measures Announced on Budget Day
The key measures included in the Finance Bill, which were announced on Budget Day, are:
- Increase in standard rate band by €1,500 and €50 increase in personal tax credit, employee tax credit and earned income credit.
- Increase in the 2% USC threshold from €20,687 to €21,295, and extension of the reduced rate of USC for full medical card holders under 70 until the end of 2022.
- Income tax relief for remote workers of 30% of the cost of vouched expenses for heat, electricity and internet services.
- Introduction of an Income Tax exemption for certain non-resident international flight crew.
- Introduction of a new Zoned Land Tax.
- Tax exemption for the first €200 of income arising from the domestic generation of electricity supplied to the grid.
- Extension of the Help-to-Buy scheme to 2022.
- Extension of pre-letting relief for landlords for a further 3 years.
- Extension of Employment Investment Incentive (EII) for a further 3 years to the end of 2024, as well as a number of enhancements to the scheme, as announced on Budget Day.
- Extension of the Employment Wage Subsidy Scheme (EWSS), in graduated form, until 30 April 2022.
- Introduction of a new tax credit for digital games.
- Extension of the corporation tax relief for certain start-up companies for 5 years, and enhancement of the relief for small start-up companies from 3 years to 5 years.
- Extension of the accelerated capital allowances scheme for gas vehicles and refuelling equipment until 31 December 2024, in addition to an amendment to allow hydrogen powered vehicles and refuelling equipment to also qualify for the scheme.
- Introduction of a new Interest Limitation Rule in line with Article 4 of the EU Anti-Avoidance Directive.
- Introduction of Anti-Reverse-Hybrid rules as required in the second EU Anti-Tax Avoidance Directive.
- Increases in excise on tobacco products, and alcohol, as announced in the Budget.
- Changes to VRT as announced in the Budget.
- Reduction in the Flat Rate Farmers compensation scheme from 5.6% to 5.5%.
- Extension of the Young Trained Farmer stamp duty relief for 1 year.
- Extension of the Bank Levy for a further year, with exclusion for Ulster Bank and KBC, who are exiting the Irish market.
Measures Not Announced on Budget Day
Some of the additional measures in the Finance Bill, not announced on Budget Day, include:
- A range of International Tax measures, including:
- amendments to existing Transfer Pricing rules;
- application of OECD-developed mechanism for the attribution of profits for Irish branches;
- defensive measures towards non-cooperative jurisdictions for tax purposes;
- double taxation agreements; transposition of DAC7;
- and updated Revenue powers to ensure proper application of DAC6.
- A technical amendment to Film Relief to confirm the existing practice of including expenditure on individuals providing a labour-only service on the production of a qualifying film.
- Changes to the tax treatment of non-resident corporate landlords to bring them within the charge to Corporation Tax, rather than Income Tax.
- A range of technical amendments to certain anti-tax avoidance provisions.
- Technical amendments to ensure the mergers by absorption (both domestic and cross-border) do not give rise to chargeable gains.
- Increase in time allowed to the Tax Appeal commission to complete and sign a “case stated” for the purposes of an appeal of a determination to the High Court.
- Grant of tax exemption to the Approved Housing Bodies Regulatory Authority and the Western Development Commission.
- Modernisation of Revenue’s pay and file system for the collection of stamp duties on insurance policies, financial cards and cheques.
- Technical amendments to the 10% stamp duty charge to the multiple purchase of properties (10 or more) in order to reinforce the fact that apartments are outside the scope of the charge, address an inadvertent charging of the 1% stamp duty rate to transactions that should be exempt, and reinforce the underlying intent of the mortgage to rent and social housing leasing provisions.
- Introduction of a requirement to file a return in respect of agricultural or business relief, upon request from Revenue.
- Amendment as to how a gift or inheritance for the free use of money is valued.
- Amendment to remove a double taxation charge on deposit interest earned by trusts.
- Exemption of the Pandemic Placement Grant for student nurses and student midwives from tax.
- Extension of the tax credit for Naval Service personnel to the end of 2022.
- Extension of General Stock Relief measures for a further 3 years, and Young Farmers Stock Relief and Registered Farm Partnership measures for 1 year.
- A number of pension related amendments to implement some of the recommendations for the Interdepartmental Pensions Reform and Taxation Group.
- Amendments to the penalties and publication rules for tax defaulters.
- Extension of the tax debt warehousing scheme to allow self-assessed income taxpayers with certain employment income.
If you have any questions on what the Finance Bill means for you or your business, please contact a member of the BDO Tax Team.
Digital Gaming Tax Credit
The Bill confirms that a Digital Gaming Tax Credit will be made available in an effort to encourage job growth in the sector. The relief will be provided for at a rate of 32%, subject to a minimum spend of €100,000 and a spend cap of €25 million.
Some of the key points set out in the Bill include:
- Expenditure across the design, production and testing of a digital game should be considered as qualifying expenditure.
- The tax credit will not be available in respect of digital games produced mainly for the purpose of advertising or gambling.
- There will be a requirement that a cultural certificate is attained for any games to be considered under this tax credit regime.
- The company must be resident in Ireland, or resident in another European Economic Area State and be carrying on activities in Ireland through a branch or agency.
- The tax credit will not be available to companies who are part of an undertaking in difficulty.
- It should be possible to make a reclaim for costs incurred either on an annual basis, or on completion of the development effort.
- The credit will be available for offset against corporation tax liabilities of the company, with any excess then repayable as a cash refund.
The exact date of implementation of this new tax credit is unknown at present as European State aid approval is required but we would expect that this should be done in 2022.
Finance Bill Stages
The expected timetable for the various stages of the Finance Bill is as follows:
Publication of Finance Bill
21 October 2021
2/3 November 2021
16-18 November 2021
30 November & 1 December 2021
7, 14/15 December 2021
It is expected that Finance Act 2021 will be signed into law before the end of 2021.
Department of Finance Documents