Budget 2013 TaxandLegal.ie TaxandLegal.ie - Budget 2013
The Budget Process On the afternoon of the first Wednesday in December, the Minister for Finance delivers his Budget speech. The Minister outlines details of taxation and public expenditure for the coming year. Certain aspects (e.g. increases in tax on petrol, alcohol and cigarettes) need to take effect at midnight so temporary legislation is put in place. The Budget will be debated in the Dail over the following 7 to 8 weeks until the Finance Act 2013 converts its provisions into law. Increases to income taxes, PRSI and USC usually take effect from 1st January. Most payroll software providers will have distributed updates to account for the Budget changes. Also, in January and February 2013, the Revenue Commissioners will distribute Tax Credit Certificates to employees and employers. The following is a summary of the measures announced in Budget 2013. Income Taxes The minimum annual PRSI contribution by self-employed individuals will be increased from 253 to 500. Up to now, the first 127 of an employee s weekly earnings was ignored. This will now be abolished resulting in employees contributing an additional 5 per week. Unearned income (e.g. rent and dividends) will be subject to PRSI from 2014. From 1 January 2013, the standard rate of universal social charge (USC) will be applied to earnings over 60,000 per annum for the over-70s. Top-slicing relief (whereby the taxpayer s average effective rate of tax is applied to the taxable element of termination payments on redundancy or retirement) is to be eliminated in respect of lump sums over 200,000. The Foreign Earnings Deduction which excludes from Irish tax income earned while working in developing countries (i.e. Brazil, Russia, India and China) is to be extended. From 1 January 2013, relief for charitable donations is to be reduced to 31%. The Employment and Investment Incentive Scheme (EIIS) is to be extended to 2020 subject to EU approval. This scheme provides tax relief for investing in an SME for 3 years. Film relief (also known as Section 481 Relief) for investing in film production is to be extended to 2020. However, the system is to be overhauled in 2016. TaxandLegal.ie - Budget 2013 2
Capital Taxes From midnight, the rates of capital gains tax (CGT), capital acquisitions tax (CAT) and deposit interest retention tax (DIRT) will be increased to 33%. From midnight, the Capital Acquisitions Tax thresholds will be reduced. An individual can receive aggregate gifts or inheritances up to the thresholds during their lifetime without incurring gift or inheritance tax. Different thresholds apply depending on the relationship between the individual and person giving the gift or inheritance. Relationship Pre Budget Post Budget Parent to Child 250,000 225,000 Relatives 33,500 30,150 Strangers 16,750 15,075 Subject to EU approval, disposals of farmland in the years 2013 to 2015 will be exempt from capital gains tax where the proceeds are reinvested in farmland within 24 months. Value Added Tax The cash receipts basis allows businesses to account for VAT on the basis of cash they actually spend and receive as opposed to invoices issued but not yet paid. The threshold below which the cash receipts basis applies has been increased from 1 million to 1.25 million. This measure may provide cash flow breathing space for some SMEs. The 9% reduced VAT rate for the hospitality industry is to continue. Corporation Tax The 12.5% corporation tax rate remains untouched. The credit for Research and Development has been increased to 25% of R&D expenditure up to 200,000. This threshold was previously 100,000. Above this amount, the credit must be computed by reference to expenditure incurred in 2003. The de minimis amount for the close company and service company surcharges has been increased from 635 to 2,000. A close company can earn and retain investment income up to this level before the surcharge will apply. Currently, a limited exemption from corporation tax exists for trading profits earned in the first 3 years of a company s life. It is proposed that any unused exemption may be carried forward. The exemption is limited to the amount PRSI paid by the company during the years in question. The net effect of this measure in 2013 is noted in the Budgetary papers as Nil (i.e. it is meaningless). TaxandLegal.ie - Budget 2013 3
Local Property Tax From 1 July 2013, a local property tax (LPT) will be levied on the owners of all properties. The rate of tax will be 0.18% of the market value of a property up to 1 million and 0.25% of the market value in excess of 1 million. The following table illustrates how the tax will apply: Market Value LPT Market Value LPT 100,000 to 150,000 225 650,000 to 700,000 1,215 250,000 to 300,000 495 950,000 to 1 million 1,755 350,000 to 400,000 675 1.8 million 3,440 450,000 to 500,000 855 5 million 17,200 Half of the annual amount will be due in 2013. Where the value is within a range, the halfway point in the range is used for the purposes of calculating the tax. A full table of values and the corresponding tax payable is included at the end of this document. The owner of the property (i.e. not a tenant) will be liable to pay the tax. The Revenue Commissioners will be responsible for collecting the tax. It may be paid directly or deducted from wages. Initially, the property owner will be responsible for determining the market value of a property. The Revenue Commissioners will provide guidance and an independent professional valuer may be employed. The initial value will apply until 2016. From 2015, local authorities will have the power to vary LPT to 15% above or below the national rate. Exemptions will apply: new or previously unoccupied properties purchased in 2013 will be exempt up to 2016 as will properties in ghost estates. Individuals earning less than 15,000 per annum and couples earning less than 25,000 will be allowed to defer tax. When this is done, the deferred LPT together with interest must be paid when the property is sold. For those earning within 10,000 of the thresholds, deferrals of up to 50% of the tax due will be permitted. The household charge will cease on 1 January 2013. The non-principal private residence (NPPR) charge will cease on 1 January 2014. Arrears are to be pursued via the LPT system. Pensions From 1 January 2014, the maximum tax relieved pension fund will be that amount which will give rise to a pension of 60,000 per annum on retirement. A crude calculation would give: 60,000 x 20 years = 1,200,000. The details of how this cap will operate in practice are to be ironed out over the coming year. Importantly, relief for contributions to pensions will continue to be at marginal rates. The Jobs Initiative pension levy will not be extended beyond 2014. TaxandLegal.ie - Budget 2013 4
Real Estate Investment Trusts A Real Estate Investment Trust (REIT) is a look-through vehicle to facilitate collective investment in property. It is look-through in the sense that the trust itself is exempt from tax but returns investors receive will be taxed in their hands. While structures which achieve the same ends already exist in Ireland, the REIT is an internationally recognised concept and, presumably, it will attract more investment in Irish property. Motor Tax & VRT Fuel The revised rates of motor tax and VRT are set out in the pages which follow. A diesel rebate for hauliers is being introduced from 1 July 2013. There is no increase in excise duty on petrol and diesel. Carbon taxes will be imposed on solid fuel - 10 per ton in May 2013 increasing to 20 in May 2014. Cigarettes & Alcohol From midnight, the excise on a packet of 20 cigarettes will increase by 10c. The excise on a 25g pouch of tobacco will increase by 50c. From midnight, the excise duty on a pint of beer or cider or a standard measure of spirits will increase by 10c. The excise duty on a 75cl bottle of wine will increase by 1. TaxandLegal.ie - Budget 2013 5
TaxandLegal.ie Attention to detail. The Irish tax system is complex and intricate. It is important to receive advice from an experienced, qualified and insured professional. At Tax and Legal, we take the time to understand your needs and concerns and to explore and explain your rights, obligations and options. Contact us today for a no-obligation discussion about your circumstances.
Revised Motor Tax Rates with effect from 1 January, 2013. PRIVATE CARS registered before 1 July 2008 Engine Capacity (c.c.) Not over 1,000 Old rate New rate Difference 185 199 14 1,001 to 1,100 278 299 21 1,101 to 1,200 307 330 23 1,201 to 1,300 333 358 25 1,301 to 1,400 358 385 27 1,401 to 1,500 384 413 29 1,501 to 1,600 478 514 36 1,601 to 1,700 506 544 38 1,701 to 1,800 592 636 44 1,801 to 1,900 626 673 47 1,901 to 2,000 660 710 50 2,001 to 2,100 843 906 63 2,101 to 2,200 885 951 66 2,201 to 2,300 925 994 69 2,301 to 2,400 962 1,034 72 2,401 to 2,500 1,005 1,080 75 2,501 to 2,600 1,204 1,294 90 2,601 to 2,700 1,251 1,345 94 2,701 to 2,800 1,294 1,391 97 2,801 to 2,900 1,342 1,443 101 2,901 to 3,000 1,390 1,494 104 3,001 or more 1,683 1,809 126 Electrical 157 120-37 B.29
i. NEW PRIVATE CARS registered on or after 1 July 2008 ii. NEW PRIVATE CARS registered between 1 January 2008 and 30 June 2008 where motor tax is based on CO 2. Band Emissions Old rate New rate Difference A0 0 160 120-40 A1 1-80g 160 170 10 A2 More than 80g/km up to and 160 180 20 including 100g/km A3 More than 100g/km up to and 160 190 30 including 110g/km A4 More than 110g/km up to and 160 200 40 including 120g/km B1 More than 120g/km up to and 225 270 45 including 130g/km B2 More than 130g/km up to and 225 280 55 including 140g/km C More than 140g/km up to and 330 390 60 including 155g/km D More than 155g/km up to and 481 570 89 including 170g/km E More than 170g/km up to and 677 750 73 including 190g/km F More than 190g/km up to and 1,129 1,200 71 including 225g/km G More than 225g/km 2,258 2,350 92 B.30
GOODS VEHICLES Unladen Weight (kg) Old Rate New Rate Difference Not over 3,000 310 333 23 3,001 to 4,000 391 420 29 4,001 to 5,000 505 543 38 5,001 to 6,000 700 753 53 6,001 to 7,000 948 1,019 71 7,001 to 8,000 1,193 1,282 89 8,001 to 9,000 1,474 1,584 110 9,001 to 10,000 1,755 1,886 131 10,001 to 11,000 2,036 2,188 152 11,001 to 12,000 2,317 2,490 173 12,001 to 13,000 2,598 2,792 194 13,001 to 14,000 2,879 3,094 215 14,001 to 15,000 3,160 3,396 236 15,001 to 16,000 3,441 3,698 257 16,001 to 17,000 3,722 4,000 278 17,001 to 18,000 4,003 4,302 299 18,001 to 19,000 4,284 4,604 320 19,001 to 20,000 4,565 4,906 341 20,001 or more 4,833 5,195 362 Electrical (not over 1,500 kg) 86 92 6 B.31
LARGE P.S.V. AND YOUTH/COMMUNITY BUS Seating Capacity Old Rate New Rate Difference 9 to 20 seats 143 154 11 21 to 40 seats 188 202 14 41 to 60 seats 375 403 28 61 seats or more 375 403 28 TRADE LICENCES Category of Vehicle Initial Trade Licence /Plate Old Rate Initial Trade Licence /Plate New Rate Difference Replacement Trade Licence /Plate Old Rate Replacement Trade Licence /Plate New Rate Difference Motor Cycle only 55 59 (single plate) 4 35 38 (single plate) 3 All other vehicles 328 353 (pair of plates) 25 80 86 (pair of plates) 6 B.32
MISCELLANEOUS VEHICLES Type of Vehicle Old Rate New Rate Difference Off-road dumper 823 885 62 General Haulage tractor 310 333 23 Machine/workshop/contrivance (including recovery vehicle ) 310 333 23 Island Vehicles 95 102 7 Agriculture tractor, trench digger and excavator 95 102 7 Motor Caravan 95 102 7 Hearse 95 102 7 Dumper and forklift truck 95 102 7 Taxi and hackney 88 95 7 School Bus 88 95 7 Cycles and Tricycles: - Electrical - Not over 75cc - 76cc to 200cc - 201cc or over - Pedestrian-Controlled Vehicle 33 46 62 82 82 35 49 67 88 88 2 3 5 6 6 VETERAN AND VINTAGE Motorcycles 24 26 2 All other vehicles 52 56 4 B.33
CURRENT AND REVISED RATES OF VRT Current CO2 Emission Bands g CO2/km Current VRT Rate (% of OMSP) Revised CO2 Emission Bands g CO2/km Revised VRT Rate (% of OMSP) A 0-120g 14% A1 0-80g 14% A2 81-100g 15% A3 101-110g 16% A4 111-120g 17% B 121-140g 16% B1 121-130g 18% B2 131-140g 19% C 141-155g 20% C 141-155g 23% D 156-170g 24% D 156-170g 27% E 171-190g 28% E 171-190g 30% F 191-225g 32% F 191-225g 34% G 226g and over 36% G 226g and over 36% B.34
Table 1 Household Charge/Local Property Tax Charge - Changes from 2012 to 2014 for property values up to 1 m* Valuation band Mid-point of valuation band Household Charge 2012 LPT in 2013 (half year charge) Difference to 2012 charge (100 HC) LPT in 2014 (full year charge) Difference to 2013 charge B25 0 to 100,000 50,000 100 45-55 90 45 100,001 to 150,000 125,000 100 112 12 225 113 150,001 to 200,000 175,000 100 157 57 315 158 200,001 to 250,000 225,000 100 202 102 405 203 250,001 to 300,000* 275,000 100 247 147 495 248 300,001 to 350,000 325,000 100 292 192 585 293 350,001 to 400,000 375,000 100 337 237 675 338 400,001 to 450,000 425,000 100 382 282 765 383 450,001 to 500,000 475,000 100 427 327 855 428 500,001 to 550,000 525,000 100 472 372 945 473 550,001 to 600,000 575,000 100 517 417 1,035 518 600,001 to 650,000 625,000 100 562 462 1,125 563 650,001 to 700,000 675,000 100 607 507 1,215 608 700,001 to 750,000 725,000 100 652 552 1,305 653 750,001 to 800,000 775,000 100 697 597 1,395 698 800,001 to 850,000 825,000 100 742 642 1,485 743 850,001 to 900,000 875,000 100 787 687 1,575 788 900,001 to 950,000 925,000 100 832 732 1,665 833 950,001 to 1,000,000** 975,000 100 877 777 1,755 878 *It is estimated that 85% to 90% of properties will fall within the first five bands. **Properties valued over 1m will be assessed at the actual value (no banding will apply) at 0.18% on the first 1m in value and 0.25% on the portion of the value above 1m
TaxandLegal.ie 2nd Floor, Chase House City Junction Business Park Malahide Road Dublin 17 (01) 687 3777 paul.brady@taxandlegal.ie www.taxandlegal.ie