Earlier today, the Department of Finance released the first draft of Finance Bill 2022. This Bill sets out the proposed legislative changes required in order to implement the Budget Day announcements of 27 September. In addition to what was announced in the Budget, the Bill also proposes to introduce a number of new measures.
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 from €36,800 to €40,000 for single individuals, and from €42,800 to €49,000 for married couples / civil partners with one earner.
- Increase of €75 in the personal tax credit, employee tax credit and earned income credit.
- Increase in the Home Carer Tax credit from €1,600 to €1,700.
- Increase in the 2% USC threshold from €21,295 to €22,920, and extension of the reduced rate of USC for full medical card holders under 70 until the end of 2023.
- Extension of the Sea-going Naval Personnel tax credit to 31 December 2023.
- Introduction of a new Vacant Homes Tax.
- Extension of the Help-to-Buy scheme to 31 December 2024.
- Increase in the eligible expenditure limit for pre-letting expenses for landlords to €10,000 and halving of the vacancy period to 6 months.
- Introduction of a new €500 tax credit for private tenants who are not in receipt of other State housing supports.
- Extension of the Living City Initiative to 31 December 2027, acceleration of relief and carry forward of relief for owner-occupiers.
- Extension of the Residential Development Stamp Duty Refund Scheme to end-2025.
- Extension of the Foreign Earnings Deduction (FED) to 31 December 2025.
- Extension of the Special Assignee Relief Programme (SARP) to 31 December 2025, and an increase in the minimum income limit for new entrants to €100,000.
- Extension of Section 481 Film Relief to 31 December 2028.
- Introduction of changes to the payment provisions for the R&D tax credit, to align with new international definitions of refundable tax credits.
- Extension of the sunset clause of the Knowledge Development Box (KDB) for 4 years, and the introduction of a new effective rate of 10%.
- Increases in excise on tobacco products, as announced in the Budget.
- Reduction in the Flat Rate Farmers compensation scheme from 5.5% to 5.0%.
- Application of the zero rate of VAT for newspapers and news periodicals, including digital editions, automatic external defibrillators, certain period products, all non-oral Hormone Replacement Therapy, and all non-oral Nicotine Replacement Therapy.
- Extension of the Bank Levy to the end of 2023.
- Increase in the limit of the Small Benefit Exemption to €1,000 and an increase in the number of benefits in a year that an employer can give from one to two per year.
- Introduction of the Defective Concrete Products Levy, but at a rate of 5%, rather than the 10% rate announced in the Budget.
- Introduction of the Temporary Business Energy Support Scheme.
Measures Not Announced on Budget Day
Some of the additional measures in the Finance Bill, not announced on Budget Day, include:
- Introduction of an exemption from Income Tax, USC and PRSI in respect of the ex-gratia payment for an incorrect birth registration of €3,000 per individual.
- To provide an exemption from Income Tax for a payment known as Covid-19 Related Lay-off Payment.
- Extension of the BIK exemption for employer provided bicycles and/or safety equipment to cargo bicycles and e-cargo bicycles, and provides for an increased threshold of €3,000 for same.
- Proposal to introduce new reporting requirements for certain tax-free employment benefits, subject to a commencement order.
- Introduction of a number of provisions to give effect to the EU regulations on the creation of Pan European Pensions Plans (PEPPs). The Bill provides for a new form of approved pension product (the PEPP) which will be very similar to existing Irish Personal Retirement Savings Accounts (PRSAs). The tax treatment of benefits and contributions to PEPPs will be the same as applies to other pension products currently available in Ireland.
- Exemption of employer contributions to an employee’s PRSA or PEPP from BIK.
- Introduction of an exemption from Income Tax of up to €20,000 for profits arising from the production, maintenance and repair of early Irish harps, Irish lever harps and uilleann pipes.
- Amendments to the treatment of capital sums received for the sale of patent rights. This includes a technical amendment confirming that the outright sale of a patent or a patent pending is not a sale of patent rights. This confirms that the sale of a patent is chargeable to CGT, whereas the sale of patent rights for a capital sum is subject to tax as income. The amendments also allow for group relief on an intra-group transfer of patent rights.
- Technical amendments in respect of Relief for Investments in Corporate Trades.
- Application of the 2022 version of the OECD Transfer Pricing Guidelines for periods commencing on or after 1 January 2023.
- Amendment to the treatment of certain Irish unit trusts as interests in an offshore fund.
- Introduction of new reporting requirements for exempt unit trusts, common contractual funds, and investment limited partnerships.
- Amendment to the treatment of foreign exchange gains and losses arising on certain trading items.
- A number of technical amendments to the interest limitation rules to ensure that the rules operate as intended.
- A number of technical amendments to the digital gaming tax credit to ensure compliance with State Aid rules and to make minor corrections.
- Removal of section 110 companies, holding qualifying assets in the form of plant and machinery, from the VAT exemption for fund management.
- Clarification that EU UCITS and AIF funds are exempt from VAT, similar to their equivalent Irish funds.
- Removal of the VAT exemption for agency services related to the management of investment funds.
- Introduction of a new Stamp Duty repayment scheme for residential property acquired and sold within 12 months for the purpose of affordable home arrangements.
- Introduction of a number of amendments to the CAT acts to take account of recent amendments to the Succession Act 1965 made by the Birth Information and Tracing Act 2022.
Measures Announced on Budget Day Not Included in Finance Bill
In addition, there are a number of measures which were announced on Budget Day but are not included in this first draft of the Finance Bill:
- Extension of the Key Employee Engagement Programme (KEEP) to 31 December 2025, facilitation of the buy-back of KEEP shares by the issuing company, and increase of the company limit to €6 million.
- Extension of the Young Trained Farmer, Farm Consolidation, and Farm Restructuring stamp duty reliefs to 31 December 2025.
- Extension of the Young Trained Farmer and Registered Farm Partnerships stock reliefs to 31 December 2024.
- Introduction of accelerated capital allowances for the construction of slurry storage facility so that 50% of expenditure is claimed over two years.
The Department of Finance have stated that due to the nature and extent of issues for which provision is being made in the Finance Bill, and the very complex nature of certain drafting requirements, and the need to align certain provisions with EU legislation, the draft legislative provisions relating to the above matters have been held over for introduction at Committee Stage of the Bill.
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.
Finance Bill Stages
The expected timetable for the various stages of the Finance Bill is as follows:
Publication of Finance Bill: 20 October 2022
Second Stage: 25-27 October 2022
Committee Stage:10, 15-16 November 2022
Report Stage: 23-24 November 2022
Seanad: 29-30 November, 7-8, 13-14 December 2022
It is expected that Finance Act 2022 will be signed into law before the end of 2022.
Department of Finance Documents
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