Personal Income Tax
Income Tax
An increase of €3,200 in the income tax standard rate band cut-off point for all earners:
• Single, widowed or surviving civil partner from €36,800 to €40,000.
• Single, widowed or surviving civil partners, qualifying for the Single Person Child Carer Credit from €40,800 to €44,000.
• Married couples or civil partners (one income) from €45,800 to €49,000.
➢ An increase of €75 in the Personal Tax Credit from €1,700 to €1,775.
➢ An increase of €75 in the Employee Tax Credit from €1,700 to €1,775.
➢ An increase of €75 in the Earned Income Credit from €1,700 to €1,775.
➢ An increase of €100 in the Home Carer Tax Credit from €1,600 to €1,700.
USC
The ceiling for the 2% rate of USC will be increased by €1,625 from €21,295 to €22,920.
The increase in the 2% rate band ceiling will ensure that a full-time adult worker who benefits from the
increase in the hourly minimum wage rate from €10.50 to €11.30 will remain outside the top rates of USC.
The USC Rates & Bands from 1 January 2023 will be:
Incomes of up to €13,000 are exempt.
Otherwise:
• €0 – €12,012 @ 0.5%
• €12,013 – €22,920 @ 2%
• €22,921 – €70,044 @ 4.5%
• €70,045+ @ 8%
• Self-employed income over €100,000: 3% surcharge
The USC concession for medical card holders is being extended for a further year to 31 December
2023. Reduced rates of USC apply to individuals who have a full medical card and whose income is
€60,000 or less. The reduced rates of USC are 0.5% on the first €12,012 and 2% on the balance.
Small Benefit Exemption
It is proposed to increase the limit of the “Small Benefit Exemption” to €1,000 and an increase in the number of benefits in a year that an employer can give from one to two per year (to a maximum annual total of €1,000).
Sea-going Naval Personnel Tax Credit
This tax credit is being extended to 31 December 2023. It applies where a permanent member of the Irish
Naval Service spends at least 80 days at sea on board a naval vessel in the previous tax year. In such
circumstances, he/she is entitled to a tax credit of €1,500. The cost of the extension of the credit is
estimated to be €500,000.
The tax credit is being extended to 31 December 2023
Measures to Support Enterprise/SMEs
Foreign Earnings Deduction (FED)
This scheme is being extended for a further three years to end-2025. It provides relief from income tax on up to €35,000 of income for employees’ tax-resident in Ireland who travel out of the State to temporarily carry out duties of employment in certain qualifying countries.
Key Employee Engagement Programme (KEEP)
KEEP is being further extended following a review until 31 December 2025. It is also being modified to provide for the buy-back of KEEP shares by the company from the relevant employee. Also, the lifetime company limit for KEEP shares is being raised from €3 million to €6 million.
Following a period of consultation with the European Commission (DG COMP), changes to KEEP rules made in Finance Act 2019 about group structures and qualifying employees are being brought into effect.
Special Assignee Relief Programme (SARP)
This Programme is being extended for a further three years until 31 December 2025. The threshold income to avail of the scheme is being increased from €75,000 to €100,000. Existing claimants are not affected by the change.review of the measure in 2019, a number of other jurisdictions have similar measures in place.
Section 481 Film Relief
Section 481 of the Taxes Consolidation Act 1997 provides relief in the form of a corporation tax credit related to the cost of production of certain audiovisual productions. The scheme is intended to act as a stimulus to the creation of an indigenous film industry in the State, creating quality employment opportunities and supporting the expression of the Irish culture. The credit is granted at a rate of 32% of qualifying expenditure which is capped at €70 million.
Following an evaluation of the relief by the Department this year, Section 481 will be extended from its current end date of 31 December 2024 to 31 December 2028. This will provide certainty regarding the availability of the relief and foster further confidence in Ireland as a centre of excellence for screen production.
Research and Development Tax Credit
The Research and Development (R&D) tax credit provides a 25% tax credit for all qualifying R&D expenditure. The R&D tax credit was reviewed this year, along with the KDB. In order to align with new norms in international tax, a number of changes to the operation of the R&D tax credit are being announced in Budget 2023. The changes are all adjustments to the timing of payment of the credit, no changes are being made to the quantum of credit that a company may earn. As a result, the changes are net neutral in budgetary terms.
The current system of offset against corporation tax liabilities and payment in three payable instalments is being changed to a new fixed three-year payment system. A company will have an option to call for payment of their eligible R&D tax credit or to request for it to be offset against other tax liabilities, and existing caps on the payable element of the credit are being removed. The first €25,000 of a claim will now be payable in the first year, to provide a cash-flow benefit for smaller research & development projects and to encourage more companies to engage with the regime.
Transitional measures will be in place for one year, to smooth the transition to the new payment system for companies that are already engaged in research & development activities.
Knowledge Development Box (KDB)
The Knowledge Development Box (KDB) is an intellectual property (IP) regime which provides for an effective 6.25% rate of corporation tax on certain income from qualifying IP assets. It is currently available for accounting periods commencing before 1 January 2023. The KDB was reviewed this year, along with the R&D tax credit.
Budget 2023 provides for the extension of the KDB for 4 years, to allow the relief to be available for accounting periods commencing before 1 January 2027.
The KDB will be impacted by changes in the international tax environment, specifically the Subject to Tax Rule (STTR), which is part of the OECD Pillar Two agreement. In order to prepare for implementation of the agreement, legislation for an increase in the effective rate of the KDB to 10% is being introduced, to be brought into effect by Ministerial commencement order once agreement is reached at the OECD/G20 Inclusive Framework on STTR implementation.
Measures to Support the Agri-sector
Accelerated capital allowances for the construction of slurry storage facilities
A three-year scheme of accelerated capital allowances for farmers for the construction of slurry storage facilities is being introduced. Under the scheme, the capital cost of the facilities may be written off over two years rather than seven years
Stock Reliefs
Two special stock relief measures, for registered farm partnerships and for young, trained farmers are being extended until end-2024. The extension is contingent on the update of the Agricultural Block Exemption Regulation (ABER).
Extension of the Young Trained Farmer (stamp duty) Relief.
This relief, which applies a full exemption from stamp duty to young, trained farmers when they acquire (by gift or purchase) farmland, and associated buildings, including farmhouses, and which is due to expire at the end of this year, is planned to be extended so that it expires on 31 December 2025. This is subject to finalisation of issues relating to the Agricultural Block Exemption Regulation at EU level.
Extension of the Farm Consolidation (stamp duty) Relief.
This relief, which provides that a 1% rate of stamp duty (as opposed to the general rate on nonresidential property of 7.5%) can apply to instruments giving effect to acquisitions and disposals of agricultural land where the land transactions involved qualify for a ‘Farm Restructuring Certificate’ from Teagasc, is due to expire at the end of this year, is planned to be extended so that it expires on 31 December 2025. This is subject to finalisation of issues relating to the Agricultural Block Exemption Regulation at EU level.
Farm restructuring (Capital Gains Tax) relief
It is intended the CGT Farm restructuring relief, which provides relief from CGT for land transactions qualifying for a ‘Farm Restructuring Certificate’ from Teagasc, and is currently due to expire at end 2022, will be extended to end December 2025. This is subject to finalisation of issues relating to the Agricultural Block Exemption Regulation at EU level.
Flat-rate compensation percentage for Farmers reduced 5.5% to 5.0%
The flat-rate scheme compensates unregistered farmers on an overall basis for VAT incurred on their farming inputs. Based on macro-economic data received from the CSO and the Revenue Commissioners for the period 2020-2022 this must be decreased from the current 5.5% to 5.0% in accordance with criteria set down in the EU VAT Directive. This change will be introduced from 1 January 2023.
Housing
Help to Buy (HTB)
The HTB scheme is being extended in its current form for a further two years until 31 December 2024.
Living City Initiative (LCI)
The Living City Initiative is being extended for a further five-year period to 31 December 2027.
In addition, the relief available to owner-occupiers is being accelerated so that it may be claimed over seven years in place of the existing ten years. It is also proposed to allow carry-forward of any excess relief by owner-occupiers where it cannot be absorbed in year, up to a maximum of ten years.
Pre-letting Expenses for Landlords
This measure is being amended to increase the eligible expenditure cap from €5,000 to €10,000 per property with effect from 1 January 2023 is being halved from twelve to six months.
Rent Tax Credit
A new tax credit of €500 per annum for renters in the private rented sector is being introduced for those who are not in receipt of any other State housing support. Only one credit may be claimed per person per year, however it is proposed that the value of the credit will be doubled in the case of married couples and civil partners. It is proposed that the credit may be claimed “in year” in the years 2023 to 2025 and that, in addition, it may be claimed for 2022 from early in 2023.
Vacant Homes Tax (VHT)
A new Vacant Homes Tax (VHT) will be introduced in 2023. The VHT will be self-assessed and administered by the Revenue Commissioners. The measure aims to increase the supply of homes for rent or purchase to meet demand, rather than raise revenue. The tax will apply to residential properties which are unoccupied for twelve months or more. A property will be considered vacant for the purposes of the tax if it is occupied for less than 30 days in a 12-month period. The tax will be charged at a rate equal to three times the property’s existing base Local Property Tax liability. There will be a number of exemptions to ensure property owners are not unfairly charged for temporary vacancy arising from genuine reasons.
This will include properties recently sold or currently listed for sale or rent; properties vacant due to the occupier’s illness or long-term care; and properties vacant as a result of significant refurbishment work.
This measure seeks to achieve an appropriate balance between incentivising owners of vacant homes to bring their properties back into use and not penalising home-owners for normal, temporary vacancy, with the primary objective of the tax being to change behaviour rather than raise revenue.
Extension of Residential Development Stamp Duty Refund Scheme.
The date at which projects wishing to avail of this scheme must commence construction is being extended from 31 December 2022 to 31 December 2025. In place since 2017, this is a refund scheme whereby a portion of the stamp duty paid on the acquisition of non-residential land is refunded where that land is subsequently developed for residential purposes (such just to certain conditions). The net minimum stamp duty payable after a refund is 2% (the normal rate for non-residential property is 7.5%). The scheme was previously extended by two years in Budget 2021.
Climate and Environmental Measures
Carbon Tax
The Carbon Tax rate will increase from the current rate of €41 to €48.50 per tonne of CO2. This will apply to auto fuels with effect from 12 October 2022 and all other fuels from 1 May 2023. This measure is estimated to raise an additional €114 million in 2023 and €151 million in 2024. In line with the Programme for Government commitment to ensure the measure is progressive, this additional revenue will be ringfenced for expenditure on the Just Transition, fuel poverty prevention and funding to encourage greener and more sustainable farming.
The impact of the carbon tax increase on auto-fuels will be offset with a reduction in the National Oil Reserves Agency (NORA) levy from 2 cent per litre to 0 cent per litre which will be provided for by the Minister for the Environment, Climate and Communications.
VAT and Excise Measures
Application of a zero VAT rate for newspapers and news periodicals, including digital editions
The VAT rate on newspapers and news periodicals will be reduced to zero from 9%. This measure will apply to digital editions of these publications. Newspapers and news related periodicals were previously brought to 9% in 2011 and the 9% rate was extended to digital editions in 2019. This change will be introduced from 1 January 2023
Application of a zero VAT rate for Automatic External Defibrillators and period products
A zero rate can now be applied to Automatic External Defibrillators and the small number of period products currently at 9%. The standard VAT rate of 23% currently applies to Automatic External Defibrillators. This change will be introduced from 1 January 2023.
Application of a zero VAT rate for all non-oral Hormone Replacement Therapy
The standard rate of VAT currently applies to all non-oral medicine. Due to a change in the VAT Directive a zero rate of VAT can be applied to non-oral medicine. A zero rate will now be applied to non-oral Hormone Replacement Therapy medicine. This change will be introduced from 1 January 2023.
Application of a zero VAT rate for all non-oral Nicotine Replacement Therapy
The standard rate of VAT currently applies to all non-oral medicine. Due to a change in the VAT Directive a zero rate of VAT can be applied to non-oral medicine. A zero rate will now be applied to non-oral Nicotine Replacement Therapy medicine. This change will be introduced from 1 January 2023.
Tobacco Products Tax
Increase in 50c on pack of 20 cigarettes with pro-rata increase on other tobacco products.
Special Exemption Order licence fee reduction
The excise fees for an application for a special exemption order are being reduced by 50% in support of the night time economy. The excise fee of €110 per application is reduced to €55.
Small Cider Producer Excise Relief Scheme
An alcohol excise relief scheme is being provided for small producers of cider and perry. A 50% excise relief will be available on up to 8,000 hectolitres of cider produced by microproducers with an annual production threshold of up to 10,000 hectolitres
Microbrewery relief production threshold
The qualifying production threshold for microbreweries is being increased to allow the industry more scope to expand. The current production ceiling of 50,000 hectolitres will increase to 75,000 hectolitres.
Additional Taxation Measures
New Defective Concrete Products Levy
Following from a Government decision November 2021 that a levy intended to contribute towards meeting the substantial cost of the Mica Redress Scheme should be imposed on the construction sector, targeted to raise €80 million per annum over the scheme’s lifetime, a new levy applying at the rate of 10% at the point of first supply in the State, will be applied to certain concrete products which fall within one of 18 harmonised EU Standards, which have been identified as meeting certain criteria. It will also apply to ready to pour (also known as readymix) concrete.
Extension of the Bank Levy
This levy, which was originally due to expire in 2021, was extended in last year’s Budget to end-2022, albeit applying to a reduced number of institutions, as, Ulster Bank Ireland DAC and KBC Bank Ireland plc were excluded from its scope due to the fact that they are exiting the market, is being extended to end-2023. The remaining banks, to whom the levy continued to apply, paid the same amount in 2022 as they did in 2021, i.e. €87 million. The findings of the ongoing Retail Banking Review (due to report in November 2022) are awaited as they are expected to inform considerations of this Levy’s future. It is expected that the amount of levy collected in 2023 will again be in the region of €87m.
Temporary Measures
Mineral Oil Tax Excise Reduction Extension
Excise rate reductions in the order of 5, 16 and 21 cents per litre VAT inclusive currently apply to MGO, diesel and petrol respectively. These rate reductions are due to expire on 12 October 2022. This measure provides for their extension until 28 February 2023.
Extension of 9% VAT rate for gas and electricity
The 9% VAT rate was previously introduced for gas and electricity on 1 May 2022 and is due to expire on 31 October 2022. This rate has now been extended to 28 February 2023 which will provide for a lower VAT rate from November to February.