|Niamh Keogh, of counselT: +353 1 614 5000E: firstname.lastname@example.org||John Gulliver, tax partnerT: +353 1 614 5007E: email@example.com|
The budget was announced on October 10 2017 and draft legislation is expected to be published on October 19 2017. Changes to rates of Irish stamp duty and tax relief for onshoring of intellectual property (IP) will take effect from midnight tonight.
Key features relevant to inward investment and international tax include the following:
- Continued unwavering commitment to Ireland’s 12.5% corporate tax rate. An update to Ireland’s international tax strategy has also been published (http://www.budget.gov.ie/Budgets/2018/Documents/Update_International_Tax_Strategy_Consultation.pdf).
- A restriction on the tax relief for tax amortisation on intangibles and interest cost associated with the purchaser to give a base tax rate of 2.5% on intangible income. The OECD BEPS project has driven non-US IP from being owned offshore to onshore by Irish tax resident companies and Irish branches of non-resident companies. The recent review of Ireland’s corporate tax code (the Coffey report) highlighted that in 2015 there has been a €26 billion ($30.7 billion) increase in gross trading profits attributable to intangible assets. In an effort to balance the desire for groups to onshore IP to Ireland but ensure a minimum tax rate on income from the exploitation and management of intangible assets, it is proposed that tax amortisation on intangible assets and related interest expense will be limited to 80% of the income arising from the intangible asset that can be taxable at 12.5%.
- Increase in the rate of stamp duty to 6% on commercial Irish real estate. Following on from the introduction of a tax charge on certain previously tax exempt funds invested in Irish real estate in budget 2017, the minister has sought to tap the increase in commercial property values by lifting stamp duty to 6% on Irish property conveyances. Stamp duty on residential property remains at 1% for the first €1 million of consideration and 2% thereafter. Conscious that the purchase of brown field and other sites without the benefit of a residential building contract would be stampable, a stamp duty refund scheme for sites put to residential development will be introduced. Unlike gains tax, the mere entering into commercial real estate contracts before October 11 2017 is unlikely to avoid the increased rates.
- Introduction of a new share incentive for “key employee engagement” for non-quoted companies that will cause gains to be taxed at 33% rather than subject to income tax, pay-related social insurance and universal social charge at rates of up to 40%, 4% and 8%, respectively.
- Relief from Irish capital gains tax on certain property transactions. Currently, Irish and other European economic area real estate purchased between December 7 2011 and December 31 2014 and held for seven years, is exempt from Irish capital gains tax at 33% in respect of the portion of the gain attributable to the seven-year period. It is proposed to reduce this holding period to four years.
- Issue of a consultation paper on stamp duty on share transactions, possibly with a view to abolishing or reducing the rate of stamp duty on share transactions. Currently, Ireland applies stamp duty of 1% on transfers of shares in Irish incorporated companies but certain deposit receipt programmes for shares listed on overseas markets are outside the scope of the charge. There is also an exemption for shares purchased on the Enterprise Securities Market of the Irish Stock Exchange.
- Introduction of a sugar tax on soft drinks at €0.20 per litre with a sugar content of between five and eight grams per 100 millilitre (ml) and €0.30 per litre on higher than eight grams per 100ml.
This article was written by John Gulliver, Maura Dineen, Niamh Keogh and Eilis Griffin of Mason Hayes & Curran.
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