Tax Developments Promoting Growth of Indigenous Business and Attracting Foreign Direct Investment

Transcription

1 Tax Developments Promoting Growth of Indigenous Business and Attracting Foreign Direct Investment Jackie Masterson Liam Kenny

2 Overview of Presentation Tax Developments Promoting Growth for Indigenous Business Tax Developments Attracting Foreign Direct Investment

3 Tax Developments Promoting Growth for Indigenous Business Jackie Masterson

4 Agenda Corporation Tax Exemption New & Back to Work Hires EIIS VAT update

5 Tax Exemption for Start-Ups

6 Corporation Tax Exemption Relief from corporation tax for 3 years New company carrying on new trade Total profits: 320,000; CT may reduce to Nil > 320, ,000 CT rate <12.5% 2011 onwards relief linked to PRSI contributions

7 Corporation Tax Exemption Qualifying Trade: Commenced by new company 1 st January st December 2014 New = incorporated on / after 14 th October 2008

8 Corporation Tax Exemption Excludes: Trades previously carried on in Ireland by another person Excepted Trades s.21a Professional Services Companies s.441 Certain trades specified in EU Regs Anti-avoidance -associated companies

9 The Relief Corporation Tax Exemption Total corporation tax 40,000 Relief lesser of: CT referable to qualifying trade Specified contributions Specified contributions per employee lesser of: PRSI paid 5,000 NB PRSI ceiling change retrospective (1 Jan 2011) Marginal relief CT > 40,000 < 60,000

10 Example-Tax Exemption for Start- Ups Case I income Shop A (new) 100,000 Case I income Shop B (previously carried on as sole trader) 50,000 Case V rents 20,000 Total Income 170,000 Tax Payable 12.5% 18,750 25% 5,000 23,750

11 Example Total Corporation Tax < 40,000 Relevant Corporation Tax ( 23,750-5,000) 18,750 Referable to Income from Qualifying Trade 18,750 x 100,000/ 170,000-20,000) = 12,499 Relief Available = 12,499 Specified Contributions > 15,000 Net Corporation Tax Payable = 11,250

12 New & Back to Work

13 New & Back to Work Hires 1. Employer Job (PRSI) Incentive Scheme Introduced 2010; extended to 2012 Employer PRSI Exemption for up to 18 months Scheme Criteria Include as contribution for s.486c

14 New & Back to Work Hires 2. Revenue Job Assist / Long Term Unemployed Unemployment > 12 months In receipt of certain benefits Employer and employee incentive Employer Double deduction to employer Emoluments/PRSI for 36 months Worth 2,500 p.a to company / 8,000 p.a to sole trade (at min. wage)

15 New & Back to Work Hires Employee Personal allowance for individual Additional tapering allowance for 3 years Individual plus each qualifying child 20% rate payer worth 1,524 over 3 years

16 New & Back to Work Hires 3. Back to work enterprise allowance (BTWEA) Aimed at certain unemployed, lone parents, social welfare recipients Pursue self employment Retain social welfare payments up to 2 years Benefit not taxed Form BTW2

17 New & Back to Work Hires 4. Back to work short term enterprise allowance Become unemployed / immediate support Pursue self employment Retain job seekers benefit Allowance = jobseekers benefit Max period of 1 year Benefit is taxed Business Plan must be approved Form STEA1

18 New & Back to Work Hires 5. Job Bridge Internship of 6-9 months Individual sign on for at least 3 months 50 per week additional to participants

19 New & Back to Work Hires 6. Succeed in Ireland Finders fee Online referral network 1,500-3,000 per sustainable job

20 EIIS

21 EIIS Replaces BES Replaces seed capital relief New legislation Some provisions retained Key differences

22 EIIS Key Changes Qualifying Trade Broader range than BES Some exclusions remain e.g. Dealing in shares Dealing in land Forestry Hotels Nursing Homes Professional service companies Easier for green energy companies

23 EIIS Cap on total EIIS investment 10m (previously 2m) 2.5m per annum (previously 1.5m) Holding Period 3 years (from 5 years)

24 EIIS Income Tax Relief Maximum investment 150,000 per annum 30% relief (from 41%) 11% additional after 3 year period Employment levels/r&d HIE 30% only

25 EIIS Provisions Retained Investor connection with the company Qualifying company size: Micro/small located anywhere Medium: Assisted area or Start up stage located anywhere Qualifying company Control Subsidiaries

26 Seed Capital

27 Seed Capital Encourage employees to set up own business Maximum subscription 600,000 Maximum relief in any year 100,000 Refund of tax in previous 6 years Individual requirements: Employment with company Share capital new and other companies Income sources Schedule E

28 Seed Capital Key Changes Removal of limitation on qualifying trades Permitted limit of non schedule E income 50,000 (previously 25,000)

29 VAT Update

30 VAT Update Alternative to bi-monthly returns? Turnover dropping de-register? Cash receipts basis Continuous supplies RFPs Bad debts VAT 13B Conference accommodation /CO2 vehicles

31 VAT Update Place of supply of services Temporary 9% VAT rate Revised Pharmacists Scheme Ebrief 41/12 Receiverships Electronic Invoicing Mandatory E-Filing

32 Tax Developments Attracting Foreign Direct Investment Liam Kenny

33 Topics to be Covered Foreign Earnings Deduction (FED) Special Assignee Relief Programme (SARP) R&D Tax Credits FA 2012 Essentials Group Losses Recent Developments

34 Foreign Earnings Deduction (FED) FED reintroduced by FA 2012 to support companies' efforts to expand into BRICS countries BRICS countries (Brazil, Russia, India, China, South Africa) Operate for three years with effect from 1 January 2012 Available where individuals work 60+ days in a 12 month period in any of the BRICS countries The individual's taxable income is reduced accordingly

35 Foreign Earnings Deduction (FED) Deduction of taxable salary, not USC Deduction = No. Qualifying Days x Qualifying Income 365 Qualifying days = 1 of at least 4 consecutive days 35,000 deduction Max income tax saving 41% = 14,350

36 Foreign Earnings Deduction (FED) - Example Mary is Irish resident She is working on a project in Brazil throughout 2012, spending at least 3 weeks at a time working in Brazil, therefore 90 qualifying days in total Annual remuneration package: salary of 150,000, taxable share award of 20,000 and share option gain of 10,000 FED available: - Qualifying income 180,000 * 90/365 days = 44,380 - Deduction capped at 35,000 - Reduction of taxable salary of 35,000 and repayment of income tax of 14,350 (not USC)

37 Foreign Earnings Deduction (FED) FED is regarded as a specified relief' Not applicable to Benefit-in-Kinds (BIKs) Employee/director must make claim for FED in personal income tax return to obtain relief each year FED cannot be claimed where the following reliefs apply: - Special Assignee Relief Programme (SARP) - New Employee R&D Tax Credit Relief

38 Special Assignee Relief Program (SARP) Objective - attract key talent to Ireland Persons arriving in Ireland in 2012, 2013 and 2014 Employers incorporated and tax resident in treaty country ("relevant employer") N/a branches & unincorporated entities Employed by relevant employer for 12 months prior to arrival in Ireland Employee must perform substantially all duties in Ireland for 12 consecutive months

39 Special Assignee Relief Program (SARP) Employee - not ROI tax resident in 5 tax yrs pre-arrival Max 30 overseas working days Min base salary of 75,000 Tax free deduction from remuneration (A-B) x 30% A = total remuneration (cap 500k) B = 75k Max annual relief ( 500k - 75K) x 30% x 41%= 52,275 Claim max of 5 years only N/A to USC or PRSI

40 Special Assignee Relief Program (SARP) If claiming SARP Cannot claim : Can claim : Remittance basis R&D key employee relief Cross border worker relief FED Travel costs return trip School fees max 5k

41 Research & Development (R&D) Positive changes enacted by Finance Act 2012 to R&D tax credit regime: 1. Employee Remuneration 2. Base Year Relaxation 3. Outsourcing Rules Relaxed

42 Employee Remuneration Option now to reward "key" employees involved in the R&D process Key Employee: Not director or director of a connected company Not holding material interest or connected to person who has material interest 75% duties of employment are R&D Credit can't reduce the employee's effective rate of tax to below 23% - employee claim required The aggregate surrendered to employees must not exceed the company's CT liability for the period (prior to any R&D tax credits)

43 Base Year Positive changes for SMEs 1st 100k of qualifying spend ignore base year Tax credit will continue to apply to incremental R&D expenditure in excess of 100k Therefore additional 25,000 per annum of tax credit (effectively cash) available to reinvest

44 Outsourcing Positive changes for SMEs who may not have capacity to undertake all R&D activities in-house Previously sub-contracted spend restricted to 10% of total spend (or 5% of total spend where sub-contracted to third level institutions) Limit now increased to greater of: 5%(universities)/10%(others) of total R&D spend; or 100,000 Company must notify third party provider it cannot claim R&D tax credit also

45 Research & Development (R&D) Other Recent Developments: Substantial amount of Revenue Audits being conducted: - self review approach adopted by Revenue Significant focus on contemporaneous back-up documents Claim for R&D Tax Credits must be made within 1 year of the end of the accounting period in which expenditure is incurred Claim for year ended 31 December 2011 must be made by 31 December 2012 only 3 months left!

46 Group Loss Relief Two companies are members of a group if one is a 75% subsidiary of the other or both are 75% subsidiaries of a third company Group relief is available to Irish companies, in respect of certain losses incurred by their non-irish subsidiary companies Losses to be surrendered between group companies: - Trading Losses; - Certain excess capital allowances; - Management expenses; and - Charges on income

47 Group Loss Relief Current year losses only No capital losses surrendered Losses only grouped against profits of a corresponding accounting period Restriction on group loss relief if Corporation Tax Returns filed late: - 25% restriction delay is less than 2 months - 50% restriction delay is greater than 2 months

48 Group Losses - Recent Development The previous corporation tax group relief provision required all members of a loss group to be resident in: - Ireland; - the EU; or - an EEA member state (with which Ireland had a tax treaty) Group relief provisions have been extended such that a group will now include a company tax-resident in a double tax treaty country or listed on a recognised stock exchange, i.e. ownership may be traced through such group companies Ireland has DTA s with 66 jurisdictions

49 Group Losses - Recent Development Principal class of shares must be substantially and regularly traded on a recognised stock exchange Amendment only applies to companies with accounting periods ending on or after 1 January 2012 Apportionment rules are applicable for accounting periods which straddle this date

50 Questions

51 Thank You