Personal Income Tax
Income Tax
Credits and rate bands changes from 1 January 2024
The income tax standard rate bands will increase as follows:
- Single, widowed or surviving civil partner from €40,000 to €42,000;
- Single, widowed or surviving civil partners, qualifying for the Single Person Child Carer Credit from €44,000 to €46,000;
- Married couples or civil partners (one income) from €49,000 to €51,000;
- Married couples or civil partners (two incomes) from €49,000 to €51,000 (with a maximum increase of €33,000).
- The personal tax credit, employee tax credit and earned income tax credit will all increase from €1,775 to €1,875.
- The home carer tax credit will increase from €1,700 to €1,800,
- The single person child carer credit will increase from €1,650 to €1,750.
- The incapacitated child tax credit will increase by €200 from €3,300 to €3,500.
USC
To ensure that the salary of a full-time worker on the minimum wage will remain outside the new 4 percent rate of USC when the minimum wage increases from €11.30 to €12.70 from 1 January 2024, the ceiling of the 2 percent USC rate band will increase by €2,840 from €22,920 to €25,760. The 4.5 percent rate will reduce to 4 percent.
As a result, the USC rates and bands from 1 January 2024 will be:
- €0 – €12,012 – 0.5% – no change;
- €12,013 – €25,760 – 2%;
- €25,761 – €70,044 – 4%
- €70,045+ – 8%; and
Self-employed income over €100,000 – 3% surcharge.
Incomes of less than €13,000 are exempt from USC.
The Minister also announced the extension of the reduced rate of USC for medical card holders to December 2025.
Benefit-in-Kind on Motor Vehicles
The temporary relief of €10,000 on the Original Market Value of vehicles (and vans) in Categories A to D has been extended to 31 December 2024. The amendment lowering the limit of the highest mileage has also been extended to 31 December 2024.
Sea-going Naval Personnel Tax Credit
This tax credit is being extended to 31 December 2024. 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.
Measures to Support Enterprise/SMEs
Foreign Earnings Deduction (FED)
- Enhancements to the Research and Development (R&D) which include an increase in the credit available from 25% to 30% in respect of claims which will be filed in 2025 and increase in the first-year payment threshold from €25,000 to €50,000.
- Legislation will be published in the Finance Bill next week to implement the 15% minimum effective tax rate to in-scope taxpayers as provided for under the OECD Pillar 2 agreement.
- Work is ongoing to develop a territoriality / participation exemption for foreign sourced dividends with the intention that this will be legislated for in Finance Bill 2024 after due consideration of recent consultation processes.
- A revised bank levy will be introduced with the intention of raising €200m in 2024.
- Maximum qualifying expenditure for Film Relief under Section 481 will be increased from €70m to €125m, subject to State aid approval.
- Establishment of two specific funds – the Future Ireland Fund, which will be designed to support future social and public expenditure, and an Infrastructure, Climate and Nature Fund to support sustained levels of investments in infrastructure to support climate and nature related projects. The Future Ireland Fund will initially be funded with windfall corporate tax receipts, whilst both will receive seed funding further to the dissolution of the National Reserve Fund.
- Intention to establish a dedicated group focused on simplifying and modernising the administration of business supports.
- Engagement with stakeholders over the next year in relation to complexities regarding the current interest deductibility regime. In addition, there will be consideration of the current taxation framework applicable to the funds sector (including life assurance exit tax), following the recent consultation process.
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
Various farming related tax reliefs to be extended and/or increased including:
- enhanced stock relief for farm partnerships,
- stamp duty relief on transfer of farms from parents to children,
- accelerated capital allowances for farm safety equipment
and
- increase in combined lifetime threshold across a number of measures including stock relief for young trained farmers, relief for succession farm partnerships and young trained farmers stamp duty relief.
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 Help to Buy Scheme which had been due to come to an end on 31 December 2024, has been extended to the end of 2025. The scheme will also be amended to ensure that applicants of the Local Authority Purchase Scheme will also be able to avail of the Help to Buy Scheme.
Mortgage Interest Relief
A one year mortgage interest relief has been announced for homeowners who have a mortgage balance of between €80,000 to €500,000 on their primary dwellings as of 1 December 2022. The relief will be available in respect of the increased interest paid on the mortgage in 2023 compared to 2022 at the standard rate of income tax of 20% income tax. The relief is capped at €1,250 per property.
Landlords with residential rental income
A new temporary tax relief is being introduced for landlords in relation to residential rental income. Subject to conditions being satisfied, rental income will be disregarded for income tax purposes at the standard rate (20%) as follows: €3,000 for tax year 2024, €4,000 for tax year 2025 and €5,000 for 2026 and 2027.
Rent Tax Credit
The rent tax credit has been increased from €500 to €750 per year for 2024. Parents who pay for their student children can now claim for rent paid in rent a room properties or digs accommodation. The latter change will apply retrospectively to the years 2022 and 2023.
Vacant Homes Tax (VHT)
The rate of the Vacant Homes Tax is being increased from three times the property’s existing base rate of Local Property Tax to five times the base rate, with effect from the next chargeable period commencing this November.
Residential Zoned Land Tax
The liability date for Residential Zoned Land Tax (RZLT) is being extended by one year to allow further time for engagement from those affected and consideration from local authorities of what land should be placed on the RZLT maps.
Capital Gains Tax
Carbon Tax
- A new targeted CGT relief for angel investors in innovative, start up SMEs has been announced. The relief will provide for a lower CGT rate of 16% (or 18% where held through a partnership) for disposals of qualifying investments for gains up to a value of two times the initial investment. There is a minimum investment period of at least 3 years and lifetime relief limit of €3 million.
- The upper age limit for claiming Retirement Relief will be extended from 65 to 70 from 1 January 2025. Reduced relief which was previously available on disposals from 66 onwards will apply from above this increased age threshold. From 1 January 2025, a limit of €10m on the relief available on transfer to a child is to be introduced.
- A cost-benefit analysis of Revised Entrepreneur Relief has been carried out and it is intended that opportunities to refocus the relief will be examined in order to improve the incentives offered for founders and entrepreneurs.
- The EII scheme is being enhanced by standardising the minimum holding period for all investments to four years and doubling the amount on which an investor may claim relief on from €250,000 to €500,000. Future simplification and enhancement to the scheme are also being considered, with a review of the scheme in early 2024 being announced.
VAT and Excise Measures
Application of a zero VAT rate for newspapers and news periodicals, including digital editions
- Temporary 9% VAT rate currently applicable to supplies of gas and electricity extended for an additional 12 months.
- Increase in VAT registration thresholds to €40k and €80k in relation to the respective supplies of services and goods from 1 January 2024.
- 0% VAT rate to apply to the supply and installation of solar panels in schools, in addition to the supply of audio books and eBooks from 1 January 2024.
- Funds available under the existing Charity VAT Compensation Scheme to be increased from €5m to €10m.
- Revenue Commissioners to launch a Public Consultation on how digital advances can be used to modernise Ireland’s VAT Invoicing and Reporting System.
- VRT relief for battery electric vehicles is being extended to the end of 2025.
- Excise duty on a packet of 20 cigarettes to be increased by 75 cents (including VAT) with a pro-rata increase on other tobacco products from midnight on 10 October. Announcement to introduce a tax on e-cigarettes and vaping products in next year’s Budget.
- Fuel excise increases which were due to come into effect on 31 October 2023 to be deferred until 2024. The rate per tonne of carbon dioxide emitted for petrol and diesel will go up from €48.50 to €56.00 from 11 October as per the trajectory set out in the Finance Act 2020.
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 Automatic External Defibrillators and period products
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
PRSI
From 1 October next year all PRSI contribution rates will increase by 0.1 percent.
Donations of heritage items
This tax relief is available to taxpayers who donate heritage items to Irish national collections. A credit equal to 80 percent of the market value of the item donated can be set against donors’ liabilities for income tax, corporation tax, capital gains tax or gift and inheritance tax.
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.