Tax Developments Promoting Growth of Indigenous Business and Attracting Foreign Direct Investment. Peter Vale Tax Partner & Sasha Kerins Tax Director

Transcription

1 Tax Developments Promoting Growth of Indigenous Business and Attracting Foreign Direct Investment Peter Vale Tax Partner & Sasha Kerins Tax Director

2 Slide Overview of Presentation Overview of Presentation heading Tax Developments Promoting Growth for Indigenous Business Corporation Tax Exemption for Start-up Companies Understanding Tax for New & Back to Work Hires EII Scheme VAT the Essential Update Tax Developments Attracting Foreign Direct Investment FED in 2012 R&D Tax Credits Recent Developments with Group Losses

3 Tax Developments Promoting Growth for Indigenous Business

4 Corporation Tax - Startup Exemption S.486C 3 year exemption claimed in CT1 Relief extended to new companies set-up in 2011 Trade not previously carried on & not liable to close company surcharge Full exemption if CT < 40,000, marginal relief 40,000-60,000 Linked to employer's PRSI

5 Corporation Tax Start-up Exemption Example Employers PRSI paid - 5,000 (A) Case I trading income - 80,000 Total taxable profits - 80, % = 10,000 CT referable to income from qualifying trade - 10,000 (B) Max relief lower of A and B thus max relief 5,000 Revised tax payable - 5,000

6 Tax for New and Back to Work Hires Employer Incentives - Revenue Job Assist Scheme Revenue Job Assist allows employers take a double wage deduction if they employ a person who has been unemployed for 12 months or more Can last for a 3 year period! No limit on the number of employees provided that they take qualifying jobs 30 hrs pw, capable of lasting > 12 mths

7 Tax for New and Back to Work Hires Employer PRSI Incentive Scheme Employers not liability to pay Employer s PRSI for 18 months from date of approval for the scheme Scheme is available to any employer who creates a new and additional job in 2012 Limited to a maximum of 5% of your existing employees or five employees

8 Tax for New and Back to Work Hires Employee Benefits Revenue Job Assist Scheme An additional allowance is granted to an individual who has returned to work following unemployment Tax relief is due at the individual s marginal rate of tax In order for this allowance to be granted the employment must be a qualifying employment (30 hours a week/capable of lasting more than 1 year)

9 Employment & Incentive Investment Scheme (EIIS) Employment and Investment Incentive Scheme ("EIIS") replaced BES Introduced Budget 2011 EU approved 25/11/11 Maximum Company Funding 10M Annual limit 2.5M. For individual 150k Most SME trades qualify (some exemptions) Tax Relief 30%, specified relief. Further 11% (not H.E.R.), if employment targets met Holding period 3 years Investor cannot be connected with the company

10 VAT Essential Update 23% std rate 1 Jan 2013 Finance Act 2012 defined bread for purposes of 0% v 13.5% - e-brief 23/2012 9% for admission to open farms and heritage buildings Mandatory e-filing for all VAT cases since 1 June 2012

11 VAT Essential Update Construction services connected parties not within RCT net reverse charge provisions effective 1 May 2012 Amend invoicing procedure and ensure self account for VAT on these services Welcome change for admin & cashflows Rise in e-audits- use of IDEA identifying incorrect rates with greater ease

12 Tax Developments Attracting Foreign Direct Investment

13 FED 2012 Overview Relief will be calculated on the ratio of qualifying days spent in a BRICS country (Brazil, Russia, India, China or South Africa) to total days in the tax year This ratio will be applied to income earned from the employment in a tax year, including share based benefits but excluding termination payments, company cars, BIK's and preferential loans

14 FED 2012 Overview The maximum deduction available is limited to 35,000 and conditions include: 60 days minimum per annum to be spent in the BRICS country all trips must be for at least 4 consecutive days to be counted towards the 60 threshold will apply for the tax years 2012, 2013 and 2014; and the deduction only reduces income for income tax purposes only (not USC or PRSI)

15 FED 2012 Overview The new provision is inserted in to Schedule 25B (i.e. a specified relief) for the purpose of the High Earners Restriction Relief may not have widespread use due to restricted number of countries it applies and the cap on the level of FED available

16 Research and Development Overview Qualifying R&D expenditure Costs associated with: basic research applied research experimental development Activities must be carried out by company's own employees plus expenditure must be incurred in EEA Includes both revenue and capital expenditure Aim is to achieve scientific & technological advancement and resolve scientific & technological uncertainty

17 Research and Development Overview Relief for revenue expenditure (salaries, overheads, direct and indirect), plant/machinery and qualifying buildings Incremental spend above base year - fixed as 2003 Outsourcing limit 5% and 10% of qualifying expenditure Ability to reclaim 25% of R&D as: current year CT offset/group relief prior year CT offset cash rebate - over max 3 years carried forward to offset future CT

18 Research and Development Overview Overall 37.5% tax relief 300% 12.5% Accounting treatment: EBIT enhancement R&D in nominal ledger Internal back-up: timesheets RTI grants memos detailing activities

19 Research and Development Overview 100K R&D exp - benefit on a volume basis Excess 100K - incremental basis over base year Outsourcing limits - greater of 5%/10% or 100K Reward key employees: portion of R&D credit key employees involved in development of R&D key employees - 75% of time spent of developing R&D can be director/5% shareholder

20 Research and Development Overview R&D tax credit - a valid claim 13 key criteria provided Detail each R&D project separately Submit claim as part of Corporation Tax Return for relevant year Claim must be lodged within 12 months of accounting year-end

21 Research and Development Overview Company incurs R&D spend in 2003 of 100,000 In year ended 31/12/2011 company incurs R&D spend of 600,000 Incremental spend 500,000 Company has paid 50,000 in CT in preceding accounting period Company will not have a CT liability for the next 3 accounting periods

22 Recent Changes re Corporation Tax Group Losses Effective for accounting period ending on or after 1 Jan 2012 time apportion losses Grouping CT Losses -can now also include companies: Resident in a treaty country and Quoted on a recognised stock exchange E.g. now can group losses between 2 Ire cos held directly by a US parent Does not include CGT groups

23 Thank You