Measures Announced on Budget Day
The key measures included in the Finance (No.2) Bill 2023, which were announced on Budget Day, are:
- Increase in standard rate band from €40,000 to €42,000 for single individuals and from €49,000 to €51,000 for married couples / civil partners with one earner.
- Increase of €100 in the personal tax credit, employee tax credit and earned income credit.
- Increase in the Home Carer Tax credit from €1,700 to €1,800.
- Increase in the 2% USC threshold from €22,920 to €25,760, the reduction in the 4.5% rate to 4%, and extension of the reduced rate of USC for full medical card holders under 70 for a further 2 years until the end of 2025.
- Extension of the Help-to-Buy scheme to allow access to purchasers that are availing of the Local Authority Affordable Purchase Scheme, and the extension of the scheme to 31 December 2025.
- Extension of the temporary reduction of €10,000 in the Original Market Value for the purposes of BIK on company cars, along with the extension of the tapering relief for electric vehicles to 2027.
- Increase in the rent tax credit from €500 to €750 for 2024 and 2025. It also extends the eligibility for the credit to parents who pay for their student children’s rental accommodation in the case of Rent a Room accommodation or “digs” for private tenants who are not in receipt of other State housing supports. This extension applies for 2024 and 2025, as well as retrospectively to 2022 and 2023. The Bill also includes an amendment to restrict claims for the credit by members of the Oireachtas in receipt of certain allowances.
- The introduction of a temporary one-year mortgage interest tax relief.
- Introduction of a new income tax relief for individual landlords of rented residential property.
- Increase in the exemption from €200 to €400 for profits arising on the domestic generation of electricity which is supplied to the national grid.
- Extension of the accelerated scheme of capital allowances for energy-efficient equipment to 31 December 2025.
- Changes to the Employment Investment Incentive scheme.
- Increase in the aggregate lifetime amount of relief claimed under young trained farmer stock relief and the succession farm partnerships from €70,000 to €100,000. Stock relief has also been increased from €15,000 to €20,00.
- Amendments to the Research and Development Tax Credit, including the increase in the rate from 25% to 30%, as well as some other technical amendments not announced on Budget Day.
- Increase in the current project cap on qualifying expenditure for the Film Tax Credit from €70 million to €125 million (subject to State Aid approval).
- Increase in the age limit for retirement relief from 66 years to 70 years, and the introduction of a new maximum limit of €10 million for disposals to a child up until the age of 70.
- Extension of the temporary Mineral Oil Tax rate reductions on auto diesel, petrol and marked gas oil until 31 March 2024, with a phased restoration taking place in two stages on 1 April 2024 and 1 August 2024.
- Increase in excise on tobacco products, as announced in the Budget.
- Increase in the VAT registration thresholds from €37,500 to €40,000 for services, and from €75,000 to €80,000 for goods.
- Extension of the 9% VAT rate for electricity and gas until 31 October 2024.
- Reduction in the flat-rate addition for farmers from 5% to 4.8% from 1 January 2024.
- Reduction in the VAT rate for e-books and audiobooks to 0%.
- Reduction in the VAT rate for the supply and installation of solar panels installed in primary and post-primary schools to 0%.
- Extension of consanguinity relief to 31 December 2028.
- Introduction of a revised form of bank levy for 2024.
- Extension of Group A threshold for Capital Acquisitions Tax to foster children on gifts/inheritances from foster parents, and Group B threshold in respect of gifts/inheritances from wider family members of the foster carer.
- Increase in the rate of Vacant Homes Tax from 3 times to 5 times the property’s LPT liability.
- Removal of pouring concrete used in the manufacture of precast concrete products from the Defective Concrete Products Levy.
- Introduction of Pillar Two minimum effective tax rate for large groups and companies by transposing the EU Minimum Tax Directive into Irish law. The bill also contains technical amendments to other areas of tax law to account for the introduction of Pillar Two.
Measures Not Announced on Budget Day
Some of the additional measures in the Finance (No.2) Bill 2023, not announced on Budget Day, include:
- Introduction of an exemption from Income Tax, USC and PRSI in respect of payments of clinical placement allowances to undergraduate supernumerary nursing and midwifery students.
- Introduction of an exemption from Income Tax, USC and PRSI in respect of payments of a maternity support allowance to local authority elected members.
- Extension of the existing Sea-Going Naval Personnel tax credit by one further year to 2024.
- Changes to the taxation of gains realised on the exercise, assignment, or release of a right to acquire shares to move from self-assessment to the PAYE system. Therefore, employers will be responsible for accounting for the tax arising as part of their payroll process. This change will only apply to gains realised on or after 1 January 2024.
- Extension of the charitable tax exemption to include income arising to charities from the provision of professional services. The Bill also allows for the Revenue to revoke the exemption from charitable bodies, where satisfied that a charity has ceased to be eligible.
- The insertion of the definition of “sport” provided in the Sport Ireland Act 2025 into the section which provides for an exemption from income tax for certain approved sports bodies. Any sports body already granted the tax exemption will retain that exemption.
- Revenue will no longer approve any applications for new Retirement Annuity Contracts (RACs) from 1 January 2024.
- The introduction of a tax charge on the owner of an Approved Retirement Fund (ARF) where the assets of an ARF are used as a loan or as security for a loan to a close company, and the ARF owner or connected person is a participator in that company. A similar tax charge will also apply to the beneficiary of an occupational pension scheme, a Personal Retirement Savings Account (PRSA) and a Pan-European Personal Pension Product.
- Allowing for initial withdrawals from a PRSA beyond the current upper age limit of 75 years.
- Amendment to ensure that the exemption from income tax of rental income derived from properties owned by pension funds is dependent on registration of the tenancies with the Residential Tenancies Board.
- Introduction of new measures to apply to outbound payments of interest, royalties, and distributions to jurisdictions on the EU list of non-cooperative jurisdictions, no-tax and zero-tax jurisdictions aimed at the prevention of double non-taxation.
- Changes to the rules regarding the taxation of leases.
- Introduction of new rules for certain financing companies.
- A number of technical amendments to pre-trading expenditure, group relief, CFC, and anti-hybrid rules.
- Increase in the excise rate applicable to cider and perry exceeding 8.5% abv to ensure our domestic legislation is compliant with the requirements in the EU Alcohol Directive.
- Extension of VRT relief for electric vehicles to 31 December 2025.
- Introduction of provisions to address VAT treatment of Deposit Return Scheme to be introduced on 1 February 2024.
- Increase in the stamp duty exemption on certain short-term leases from €40,000 to €50,000.
- Stamp Duty exemption on certain transfers of Irish shares which are listed on a recognised stock exchange in the US or Canada.
- Introduction of new reporting requirements for certain interest-free loans for Capital Acquisitions Tax purposes.
- Technical amendments to address inconsistencies and anomalies in the provision, providing for the clawback of CAT agricultural and business reliefs.
- Elimination of the need to report the opening of a foreign bank account in certain circumstances.
- Several amendments to the Digital Games tax credit.
Measures Announced on Budget Day, Not Included in the Finance (No.2) Bill 2023
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 (No.2) Bill:
- The introduction of a new tax relief for angel investors.
- Amendments to Land Leasing Income Tax Relief so that the relief only becomes available when the land has been owned for 7 years, so that it is better targeted to active farmers.
The draft legislative provisions relating to these measures has been held for introduction at the Committee Stage of the Bill.
For more specific changes included in the Finance (No.2) Bill 2023, read the following expert insights:
Finance (No.2) Bill 2023 Stages
The expected timetable for the various stages of the Finance (No.2) Bill 2023 is as follows:
Publication of Finance (No.2) Bill 2023
19 October 2023
24/25 October 2023
7-9 November 2023
21-22 November 2023
Seanad Second Stage
28 November 2023
Seanad Committee Stage
5 December 2023
Seanad Report Stage
12 December 2023
It is expected that Finance (No.2) Act 2023 will be signed into law before the end of 2023.
Department of Finance Documents
If you have any questions on what the Finance (No.2) Bill 2023 means for you or your business, please contact a member of the BDO Tax Team.