18 Oct 2019 | 02.35 pm
Finance Bill 2019: Analysis From KPMG
KPMG's Tom Woods summarises what's contained in Finance Bill 2019
18 Oct 2019 | 02.35 pm
Tom Woods, Head of Tax and Legal Services at KPMG, says there will be disappointment that Finance Bill 2019 does not include measures to improve the competitiveness of Ireland’s tax regime for international mobile talent or domestic entrepreneurs
Finance Bill 2019 confirms the finance minister’s announcement that, given the economic uncertainty, there would be no personal tax cuts. It includes the various tax reliefs announced in the Budget, including
• Amendment to the R&D tax credit regime to make it more accessible and valuable (30% credit) to smaller companies
• Amendment to the Employment and Investment Incentive (EII) to increase the qualifying investment to €250k, or possibly €500k in the case of long-term investments, and allow the full tax relief in the year of investment
• Amendment to the Key Employee Engagement Programme (KEEP) to make it available to employees with fact patterns more commonly found in practice
• An increase in the home carer tax credit of €100
• An increase in the earned income tax credit of €150.
The Bill also confirms the tax-raising measures announced in the Budget, including:
• An increase in carbon tax of €6/tonne
• An increase in the stamp duty rate on non-residential property to 7.5%
• An increase in the dividend withholding tax rate to 25% from 1 Jan 2020
• Certain IREF & REIT-related measures to raise additional tax.
It was encouraging to see the minister take further steps to support a more environmentally friendly and sustainable economy. Measures in the Bill include:
• Extending the 0% rate of BIK on electric vehicles to the end of 2022
• Extending VRT reliefs for conventional and plug-in hybrids to the end of 2020.
The Bill also implements the anti-hybrid rules provided for in the EU Anti-Tax Avoidance Directive (ATAD). With the exception of the interest limitation rules which are due to be introduced in Finance Act 2020, almost all of the ATAD has now been adopted into our domestic law.
The Bill also implements another EU/Directive, DAC6, which introduces a mandatory disclosure regime for certain cross-border transactions. Reporting of transactions will begin from 1 July 2020 but will capture transactions entered into on or after 25 June 2018.
Ireland’s legislation governing transfer pricing was also updated in the Bill to include enhanced documentation requirements and to extend the scope to cover certain non-trading and capital transactions.
The government conducted a public consultation on a number of the matters covered in the Bill, including the new transfer pricing and anti-hybrid measures. These consultations are very welcome as they generally mean that the legislation which is introduced is more considered and avoids unintended consequences of the new laws.
There will be some disappointment that the Bill does not include measures to improve the competitiveness of Ireland’s tax regime for international mobile talent or domestic entrepreneurs. We have a heavy reliance on the multinational sector for corporation tax receipts (77% of total). It is important that we support the multinational sector and the high earners they employ as best we can.
In this regard, ensuring that Ireland can attract very senior executives (with a more attractive SARP regime) to lead the multinational organisations and help support their growth is key to addressing some of the exposure we have to this base. It is also important that we diversify and develop the domestic business sector.
While some measures in the Bill do this, we see an improved Entrepreneur’s Relief as being very important, and it is hoped that future Finance Bills will contain such measures.
The Bill contains provisions to enact the minor income tax changes announced by the minister in his Budget speech but there are no material additional measures.