Headline Verdana Bold Finance Bill Event Wednesday, 5 December

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Raymond Rose
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1 Headline Verdana Bold Finance Bill Event Wednesday, 5 December

3 Domestic Corporates & Entrepreneurs David Shanahan Tax Partner

5 Introduction Global Domestic Global Brexit US Tax Reform BEPS Economy Growth of 7.5% in 2018 and 4.2% in 2019 Approaching full employment Strong tax receipts Exports increasing by c.9% EU State Aid cases Anti Tax Avoidance Directive (ATAD) Digital Tax Infrastructure & housing Need for investment in infrastructure Housing crisis Rainy Day Fund Scope for targeted measure to support domestic businesses? 2018 Deloitte Ireland LLP. All rights reserved.

6 Finance Bill 2018 Real Estate Measures Interest Relief on residential property restored to 100%

7 Finance Bill 2018 Real Estate Measures Interest Relief on residential property restored to 100% Transfer of site to a child relief available for house construction

8 Finance Bill 2018 Real Estate Measures Interest Relief on residential property restored to 100% Transfer of site to a child relief available for house construction Rent a room relief minimum rental period of 29 days*

9 Finance Bill 2018 Real Estate Measures Interest Relief on residential property restored to 100% Transfer of site to a child relief available for house construction Rent a room relief minimum rental period of 29 days* No measures which will impact on housing crisis No measures to incentivise landowners to bring vacant property to market

10 Finance Bill 2018 Real Estate Measures Interest Relief on residential property restored to 100% Transfer of site to a child relief available for house construction Rent a room relief minimum rental period of 29 days* No measures which will impact on housing crisis No measures to incentivise landowners to bring vacant property to market How will the funds allocated to housing will be deployed and at what pace?

11 Measures for Entrepreneurs? Entrepreneurs Small increase in earned income credit from 1,150 to 1,350 (vs PAYE credit of 1,650) No change to tax rate OR lifetime limit for claiming entrepreneurial relief Changes to the Employment and Investment Incentive Scheme (EIIS) Changes to the Start-Up Relief for Entrepreneurs (SURE)

12 Measures for Entrepreneurs? Entrepreneurs Small increase in earned income credit from 1,150 to 1,350 (vs PAYE credit of 1,650) No change to tax rate OR lifetime limit for claiming entrepreneurial relief Changes to the Employment and Investment Incentive Scheme (EIIS) Changes to the Start-Up Relief for Entrepreneurs (SURE) Other Measures Start-Up Capital Incentive: New measures introduced to target early stage companies (micro-companies) Increase in Group A tax-free threshold: Important in terms of transfers to the next generation Capital allowances: Relief available for gas vehicles/refueling equipment and fitness/childcare facilities Start-up exemption for companies: Period of eligibility extended

13 Overhaul of Employment and Investment Incentive Scheme (EIIS) Comparison of Schemes Up to 2018 Scheme Current EIIS Relief Rate 30% in Y1; 10% after 4 years Eligibility Test Company Limit Largely applied a commencement to trade requirement 5m p.a. subject to 15m lifetime cap Investor Limit 150k p.a. Qualifying companies Approval process Micro, small and medium sized enterprises apart from those carrying on excluded trades Revenue certify Minimum holding period 4 years Capital Gains Normal rules but losses are restricted End date 31 December 2020

14 Overhaul of Employment and Investment Incentive Scheme (EIIS) Comparison of Schemes Up to 2018 From 2019 Scheme Current EIIS Updated EIIS Relief Rate 30% in Y1; 10% after 4 years 30% in Y1; 10% after 4 years Eligibility Test Largely applied a commencement to trade requirement Spend min. of 30% of amount raised on a qualifying purpose Company Limit 5m p.a. subject to 15m lifetime cap 5m p.a. subject to 15m lifetime cap Investor Limit 150k p.a. 150k p.a. Qualifying companies Micro, small and medium sized enterprises apart from those carrying on excluded trades Micro, small and medium sized enterprises apart from those carrying on excluded trades Approval process Revenue certify Self-certify Minimum holding period 4 years 4 years Capital Gains Normal rules but losses are restricted Normal rules but losses are restricted End date 31 December December 2021

15 Overhaul of Employment and Investment Incentive Scheme (EIIS) Comparison of Schemes Up to 2018 From 2019 Scheme Current EIIS Updated EIIS Relief Rate 30% in Y1; 10% after 4 years 30% in Y1; 10% after 4 years Eligibility Test Largely applied a commencement to trade requirement Spend min. of 30% of amount raised on a qualifying purpose Company Limit 5m p.a. subject to 15m lifetime cap 5m p.a. subject to 15m lifetime cap Investor Limit 150k p.a. 150k p.a. Qualifying companies Micro, small and medium sized enterprises apart from those carrying on excluded trades Micro, small and medium sized enterprises apart from those carrying on excluded trades Approval process Revenue certify Self-certify Minimum holding period 4 years 4 years Capital Gains Normal rules but losses are restricted Normal rules but losses are restricted End date 31 December December 2021

16 Overhaul of Employment and Investment Incentive Scheme (EIIS) Comparison of Schemes Up to 2018 From 2019 Scheme Current EIIS Updated EIIS Relief Rate 30% in Y1; 10% after 4 years 30% in Y1; 10% after 4 years Eligibility Test Largely applied a commencement to trade requirement Spend min. of 30% of amount raised on a qualifying purpose Company Limit 5m p.a. subject to 15m lifetime cap 5m p.a. subject to 15m lifetime cap Investors Anti-avoidance measures introduced to deny relief where limits in place to reduce risk for investors Investor Limit 150k p.a. 150k p.a. Qualifying companies Micro, small and medium sized enterprises apart from those carrying on excluded trades Micro, small and medium sized enterprises apart from those carrying on excluded trades Approval process Revenue certify Self-certify Minimum holding period 4 years 4 years Capital Gains Normal rules but losses are restricted Normal rules but losses are restricted TradeCo Can now issue preference shares Companies can now float shares Restrictions on designated funds or nonres investors now lifted End date 31 December December 2021

17 Measures for Entrepreneurs? Deloitte Perspective Ease and efficiency changes to EIIS are welcome to make investment easier Significant changes? No significant inherent change to EIIS and no changes to Entrepreneur relief. Missed opportunity? Competitiveness with the UK regimes?

18 Measures for Entrepreneurs? Deloitte Perspective Ease and efficiency changes to EIIS are welcome to make investment easier Significant changes? No significant inherent change to EIIS and no changes to Entrepreneur relief. Missed opportunity? Competitiveness with the UK regimes? What could have made a real impact?

19 Measures for Entrepreneurs? Deloitte Perspective Ease and efficiency changes to EIIS are welcome to make investment easier Significant changes? No significant inherent change to EIIS and no changes to Entrepreneur relief. Missed opportunity? Competitiveness with the UK regimes? What could have made a real impact? Improvements to Entrepreneur Relief

20 Measures for Entrepreneurs? Deloitte Perspective Ease and efficiency changes to EIIS are welcome to make investment easier Significant changes? No significant inherent change to EIIS and no changes to Entrepreneur relief. Missed opportunity? Competitiveness with the UK regimes? What could have made a real impact? Improvements to Entrepreneur Relief Lower rate of tax on certain dividends

21 Measures for Entrepreneurs? Deloitte Perspective Ease and efficiency changes to EIIS are welcome to make investment easier Significant changes? No significant inherent change to EIIS and no changes to Entrepreneur relief. Missed opportunity? Competitiveness with the UK regimes? What could have made a real impact? Improvements to Entrepreneur Relief Lower rate of tax on certain dividends Lower rate of tax on interest earned from lending to SMEs

22 Headline Verdana Bold Employment Tax Update 15 November 2018

23 Finance Bill 2018 Employment Tax Issues

24 Finance Bill 2018 Highlights Target Areas Measures 1. PAYE Modernisation 2. SARP relief Effective 1 January 2019 Employer PAYE Compliance Project in 2019 ( 50M yield) New monthly USC return No changes in Finance Bill 2018 Committee Stage debates re-introduction of income cap, to be 1million Effective for new entrants from 1 January 2019 Effective for existing beneficiaries from 1 January Share Based Remuneration Amendments to KEEP Introduction of 300,000 lifetime limit

25 Finance Bill 2018 Highlights Target Areas Measures 4. Increase to employers National Training Fund Levy Employer PRSI increase of 0.1% to 10.95% - Class A and H contributions 0.1% increase in 2020 to come 5. Company cars Three year extension to 0% BIK rate for electric cars New 50,000 threshold for exemption 6. Exempt benefits Applicable to members of the Permanent Defence Forces Healthcare, certain qualifying accommodation 7. Capital allowances Favourable changes to capital allowances on childcare facilities and fitness centres Complements existing BIK relief

26 Finance Bill 2018 Income Tax Band Increases Income Tax Bands Change Single Person 34,550 35, Married, Single Income 43,550 44, Married, 2 Incomes 69,100 70,600 1,500

27 Finance Bill 2018 USC Cuts USC Bands (Employees) 2019 Change 0-12, % 12,013-19,874 * 2% 19,875-70, % 0.25% > 70,044 8% Marginal rate on incomes up to 70,044 reduced from 48.75% to 48.5% * Increased by Deloitte. All rights reserved

28 Other Tax Cuts Home Carer s Credit increase of 300 p.a. to 1,500 Earned Income Credit increase of 200 p.a. to 1, % relief for landlords on mortgage interest

29 PAYE Modernisation

PAYE Modernisation RTI system for payroll 1 January 2019 Notification to Revenue on or before paying employees Abolish current P30, P45, P46, P60 and P35 forms Each

30 PAYE Modernisation RTI system for payroll 1 January 2019 Notification to Revenue on or before paying employees Abolish current P30, P45, P46, P60 and P35 forms Each monthly filing will be considered a statutory return, i.e. a monthly P35 For PAYE purposes, providing a benefit = making a payment 2018 Deloitte Ireland LLP. All rights reserved.

Non-compliance Adjustments and corrections are immediately visible to Revenue Penalties under review Current penalty regime: o o up to 4,000 per error for the company 3,000 per error personally for

31 Non-compliance Adjustments and corrections are immediately visible to Revenue Penalties under review Current penalty regime: o o up to 4,000 per error for the company 3,000 per error personally for the company secretary In-year interventions based on risk analysis of submissions Budget 2019 noted Revenue s expectation of 50 million from PAYE compliance in Deloitte Ireland LLP. All rights reserved.

32 New Terminology Pre-2019 PAYE Modernisation Tax Credit Certificate / P2C Revenue Payroll Notification ( RPN ) P30 / P35 Revenue Payroll Submission

New process Download latest RPN Submit a Payroll Submission on or before paying your employees Revenue issue a statement on 5 th day of the following month Accept or amend this statement The

33 New process Download latest RPN Submit a Payroll Submission on or before paying your employees Revenue issue a statement on 5 th day of the following month Accept or amend this statement The statement is deemed as a statutory return on 14 th day of the following month Tax liability is settled by 23 rd day of the following month (unchanged) 2018 Deloitte Ireland LLP. All rights reserved.

2019 RPN file Ensure controls are adequate to ensure benefits/notional items are reported

34 2018 Pre-work List of employees Contact your software provider Assign a Unique Staff Identifier to each employee Assign an Employment Identifier to each employee Download the 2019 RPN file Ensure controls are adequate to ensure benefits/notional items are reported accurately and on time Communications to the business 2018 Deloitte Ireland LLP. All rights reserved.

Notional pay taxi Notional pay can be reported:

The earlier of the next pay day or 31 December

Are notional items provided close to your pay

each payroll submission Any adjustments should

Revenue expect notional pay to be reviewed

36 Notional pay taxi Notional pay can be reported: o o The day the notional payment is made; or The earlier of the next pay day or 31 December in the year When is your pay date? Are notional items provided close to your pay date? A best estimate should be included in each payroll submission Any adjustments should be included in the next payroll submission Revenue expect notional pay to be reviewed regularly (at least quarterly) 2018 Deloitte Ireland LLP. All rights reserved.

Company credit cards Considered notional pay Reported in the next payroll submission

37 Taxable expenses Cash reimbursement Requires a payroll submission on or before a payment is made How often do you reimburse expenses? Company credit cards Considered notional pay Reported in the next payroll submission after the expenses was incurred Not aligned to when the credit card bill is settled 2018 Deloitte Ireland LLP. All rights reserved.

PAYE Modernisation in the context of Global

payroll date A best estimate of benefits,

payroll submission A best estimate of workdays

period Revenue expect a regular review of all items

included in the next payroll submission Tick the

38 PAYE Modernisation in the context of Global mobility Align payroll submissions to your local payroll date A best estimate of benefits, allowances and expenses should be included in each payroll submission A best estimate of workdays should be used to prepare the calculations for each period Revenue expect a regular review of all items (at least quarterly) Any adjustments should be included in the next payroll submission Tick the box for inbound shadow payroll 2018 Deloitte Ireland LLP. All rights reserved.

39 Short Term Business Travellers

40 Inbound Short term business visitors Common Misconceptions There is a double tax treaty, so we don t need to worry As long as they spend less than 183 days in a country there are no tax issues They are paid by the home country employer so we have no issue We called John s contact in our local tax office and he says we will be ok They are paid by the home country employer so we have no issue Non-residents aren t liable to tax 2018 Deloitte Ireland LLP. All rights reserved.

Inbounds - Short term business visitors Revenue Guidance Up to 31 December 2016 No Irish payroll withholding if: From DTA country and less than 60 workdays in Ireland, or From non-dta country and

41 Inbounds - Short term business visitors Revenue Guidance Up to 31 December 2016 No Irish payroll withholding if: From DTA country and less than 60 workdays in Ireland, or From non-dta country and less than 30 workdays in Ireland DTA Country between 60 and 183 days: Application required for dispensation Generally successful provided treaty conditions satisfied Increasing level of refusals in the period from 1 January Deloitte Ireland LLP. All rights reserved.

42 Inbounds - Short term business visitors Revenue Guidance Initial change 1 January 2017 Remuneration is paid by, or on behalf of, an employer who is not a resident of Ireland Condition not satisfied IF: Integral duties of an Irish employer, or Replacing a member of staff of an Irish employer, or Gaining experience working for an Irish employer, or Supplied and paid by an agency (or other entity) outside the State to work for an Irish employer. The release from the obligation to operate PAYE would not be granted where the remuneration is paid by a foreign employer and then recharged to an Irish employer 2018 Deloitte Ireland LLP. All rights reserved.

43 Inbounds Short term business visitors from an DTA country Revised Revenue Guidance April 2018 Resident in a DTA country Presence in the State during: Number of workdays in Ireland: Payroll treatment One tax year Up to 60 workdays in the tax year No payroll obligation, but consideration will need to be given to where the employee will return to Ireland in a subsequent year One tax year 61 workdays or more No automatic release from payroll obligation, application to Revenue required Two consecutive tax years Up to 60 workdays across two consecutive tax years No payroll obligation, but consideration will need to be given to where the employee will return to Ireland in a subsequent year Two consecutive tax years More than two tax years 61 workdays or more across two consecutive tax years No threshold applies No automatic release from payroll obligation, application to Revenue required No automatic release from payroll obligation, application to Revenue required 2018 Deloitte Ireland LLP. All rights reserved.

44 Inbounds Short term business visitors from a non DTA country Revised Revenue Guidance April 2018 Resident in a non-dta country Presence in the State during: Number of workdays in Ireland: Payroll treatment One tax year Up to 30 workdays in the tax year No payroll obligation, but consideration will need to be given to where the employee will return to Ireland in a subsequent year One tax year 31 workdays or more Irish PAYE must be operated on income earned while working in Ireland Two consecutive tax years Up to 30 workdays across two consecutive tax years No payroll obligation, but consideration will need to be given to where the employee will return to Ireland in a subsequent year Two consecutive tax years 31 workdays or more across two consecutive tax years Irish PAYE must be operated on income earned while working in Ireland More than two tax years No threshold applies PAYE must be operated 2018 Deloitte Ireland LLP. All rights reserved.

Problems with the new guidance Subjectivity De minimus

46 Special Assignee Relief Programme ( SARP )

Special Assignee Relief Programme ( SARP ) First introduced in 2012 A qualifying employee may make a claim for 30% of their total compensation in excess of 75,000 (including bonuses, BIKs and share

47 Special Assignee Relief Programme ( SARP ) First introduced in 2012 A qualifying employee may make a claim for 30% of their total compensation in excess of 75,000 (including bonuses, BIKs and share remuneration) to be excluded from PAYE The exemption does not apply to USC or PRSI Employers can also provide the following tax free: one return trip for the employee and family to their home country school fees of up to 5,000 per annum per child Finance Bill 2018 Committee Stage introduction of income cap of 1million for SARP To be effective for new entrants from 1 January 2019 To be effective for existing beneficiaries from 1 January 2020 Application must be made with 30 days of arriving in Ireland to perform duties strict deadline (FB extends to 90 days) 2018 Deloitte Ireland LLP. All rights reserved.

48 Key Employee Engagement Programme ( KEEP )

49 KEEP One Year on.. Minister for Finance: I am aware that take-up has been less than expected and I have decided to take early action now No published numbers but really low level possibly less than 10 Action taken: Increase max annually from 50% of remuneration to 100% Changed limit of 250,000 over 3 years to a lifetime limit of 300,000 These changes don t address the main challenges which remain: Shares need to be in the employer company rather than the parent company Valuation requirement at grant Cap of 3M of options unexercised (test at grant) 2018 Deloitte. All rights reserved

50 KEEP: Areas to watch / Issues to consider Annual limit on employee award and Lifetime limits Cannot exceed 100% of remuneration or 300K lifetime Excluded Activities: extensive list as defined in the legislation Financial activities Professional services Must be an employee/director of the company granting the shares Restrictive in terms of corporate structuring Reporting obligation annually Valuation required on date of grant Tracking of awards to ensure don t breach 3M limit 2018 Deloitte Ireland LLP. All rights reserved.

51 Questions?

52 Corporation Tax Changes Tom Maguire Tax Partner

56 Taxpayer Associated Enterprises >50% direct /indirect Voting rights Capital Profits Ownership 1 Foreign 1 2 Actual entity tax paid not < Irish rules CT x Actual CT (x) Difference y Tax Deloitte Ireland LLP. All rights reserved.

Reasonable to consider Tax essential purpose Yes 6. Arrangements subject to Irish TP rules No 7.

57 No No No Yes No Yes Yes No No No 2018 Deloitte Ireland LLP. All rights reserved. 1. Control and 50% Ownership Yes 2. Undistributed income (as defined) Yes 3. SPFs etc performed by chargeable company Yes 4. Reasonable to consider - TP No 5. Reasonable to consider Tax essential purpose Yes 6. Arrangements subject to Irish TP rules No 7. Neglible undistributed income / 750k or 75k No 8. Reasonable to consider Tax essential purpose Yes 9. Reasonable to consider Non-genuine arrangement Yes 10. Effective rate test Yes

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The Home Carer Tax Credit has been increased from 1,200 to 1,500 per annum.

The Home Carer Tax Credit has been increased from 1,200 to 1,500 per annum. 1 Income Tax Personal Taxes Budget 2019 made only minor changes in the area of personal taxes. We have set out below details of the changes to Income Tax and USC which will take effect from 1 January 2019.