Corporation Tax

Business Tax Advice. Corporation Tax. Research & Development (R&D), Capital Gains Tax (CGT)

The Minister for Finance Jack Chambers published his first Budget today  announcing a number of changes to our corporate tax regime.  A raft of tax measures and policies will be introduced to support Irish start-ups, small and medium-sized enterprises (SMEs) and multinational businesses.  Budget 2025 provided for a total budget package of €10.5b  Our focus in this article is purely on Business Taxes under Capital Gains Tax, Corporation Tax, VAT and Employer/Employee Taxes.

SUMMARY OF BUSINESS TAX MEASURES:

1. There will be an increase in the VAT registration thresholds

2. There will be an extension of the temporary 9% VAT rate in relation to supplies of gas and electricity for an additional six months.

3. There will be an increase in the farmer’s flat rate addition from 1^st January 2025.

4. A new 9% VAT rate on heat pumps has been introduced.

5. Employer/Employee Tax Changes – Amendments to Benefit-in-Kind (BIK) on cars

6. Employer/Employee Tax Changes – There will be an increase in the annual employee Small Benefit Exemption from €1,000 to €1,500. A business will also be able to give five non-cash benefits to their employees in a single year.

7. CGT Changes – Amendments to Retirement Relief.

8. CGT Changes – Amendment to Relief for Angel Investors.

9. Corporation Tax Changes

10. Participation Exemption – Exemption for companies in receipt of Foreign Dividends

VALUE ADDED TAX (VAT)

• With effect from 1^st January 2025, the VAT registration thresholds will be increased from €40,000 to €42,500 for services.

• The VAT registration thresholds will be increased from €80,000 to €85,000 for goods with effect from 1^st January 2025.

• The unregistered farmers flat rate scheme will be increased from 4.8% to 5.1%.

• There will be an extension of the reduced 9% VAT rate on electricity and gas up to 30^th April 2025.

• From 1^st January 2025, the 9% VAT rate will also apply to heat pump installations. This will have the effect of reducing the cost of replacing inefficient boilers.

EMPLOYER / EMPLOYEE TAXES

SMALL BENEFIT EXEMPTION

• There will be an increase in the annual limit of the small benefit exemption from €1,000 to €1,500.

• It has also been amended to allow five non-cash benefits, up from two, to be granted by an employer in a single year. The cumulative total of the first five benefits in a calendar year cannot exceed €1,500.

• From 1^st January 2024 an employer is required to return details of all qualifying incentives provided to employees where the small benefit exemption applies.

• This benefit can be given to any employee of the company, including directors and shareholders, providing they are on the payroll.

BENFIT-IN-KIND

• Budget 2025 introduced a BIK exemption for home car chargers provided by employers. It provides for an exemption from Benefit-in-Kind where it is the employer who incurs the cost of providing a facility for electric charging of vehicles at the home of an employee or director.

• The proposed tapering of Benefit-in-Kind Relief for electric vehicles has been deferred. The universal relief of €10,000 which applied to the Original Market Value of a vehicle in Category A – D is being extended to 31^st December 2025.  The amendment to the lower limit of the highest mileage band has also been extended until 31^st December 2025.   Therefore, the highest mileage band is entered into at 48,001km.

CAPITAL GAINS TAX

Retirement Relief

Retirement Relief (CGT) supports the cost effective / tax efficient transfer of businesses and farms from one generation to the next.

Finance Act 2023 introduced a number of amendments to the Retirement Relief regime which included:

1. an increase in the upper age limit from 66 years old to 70 years old.

2. A cap of €10 million of proceeds / market value where the individual disposing of the assets to a child is aged from 55 to 69 years.

3. The current limit of €3million will continue to apply but only from age seventy.

These changes were to come into effect on 1^st January 2025.

Budget 2025 will retain the increased upper age limit. It also introduced a clawback period of twelve years on the Relief.

This means that any tax arising due to the cap of €10 million will be abated provided the assets are retained for twelve years.

In other words, the €10 million cap, due to be introduced on 1^st January 2025, will only apply in circumstances where the child disposes of the assets within twelve years.

Angel Investor Relief

Angel Investor Relief, introduced in Budget 2024, was aimed at encouraging business angel investment in innovative start-ups.

Finance Act 2023 introduced a reduction on this rate for angel investors, bringing it down from 33% to 16% or 18%.

Budget 2025 provides Capital Gains Tax Relief for a third party individual who takes a significant minority shareholding (i.e. between 5% and 49% of the ordinary issued share capital of the company) for a period of at least three years,  in a certified innovative start-up small and medium enterprise (SME) company which is less than seven years old.   The investment by the individual must be in the form of fully paid-up newly issued shares costing at least €20,000 or €10,000 if acquiring between 5% and 49% of the ordinary issued share capital of the company.

Qualifying investors will be able to avail of an effective reduced rate of CGT of 16%, or 18% if through a partnership, on a gain up to twice the value of their initial investment.

There was previously a lifetime limit of €3 million on gains to which the reduced rate of CGT will apply.  Budget 2025 has increased this limit to lifetime gains of up to €10 million.

 Therefore, the amount on which the reduced CGT rates of 16% or 18% will apply is the lowest of the following:

1. The actual chargeable gain.
2. Twice the amount of the investment.
3. €10 million less the total of all/any other chargeable gains that may qualify under this Relief.

CORPORATION TAX 

The following will be extended for a further two years until 31^st December 2025:

1. Employment Investment Incentive (EII),
2. Start-Up Relief for Entrepreneurs (SURE) and
3. the Start-Up Capital Incentive (SCI)

In addition, the EII limit on the amount that an investor can claim relief on will be doubled i.e. increasing from €500,000 to €1,000,000.

It is proposed to increase the SURE relief available to a maximum of €140,000 per year or a total of €980,000 over seven years.

Research and Development (R&D) Tax Credit

As you’re aware, the existing Research and Development (R&D) Tax Credit provides a 30% tax credit for all qualifying R&D expenditure.

The first year payment threshold will now increase from €50,000 to €75,000.

Companies with claims of between €75,000 and €150,000 will benefit from a €25,000 increase in the first instalment of their claim.

Companies with claims of in excess of €150,000 will continue to receive a first instalment amount based on 50% of the Research & Development Tax Credit claim.

Two new Audio-visual incentives

1. Tax Credit for Unscripted Productions

A new tax credit will be introduced for the unscripted film production sector.

The relief will take the form of a 20% Corporation Tax Credit for certain production expenditure up to a maximum limit of €15 million per project.

The commencement will be subject to State Aid approval from the European Commission.

A cultural test will be introduced.

2. Scéal Uplift

The second incentive is an 8% uplift referred to as the “Scéal Uplift”.

This involves an uplift of 8% to the existing film credit in respect of certain feature film productions.

It will be applied to the existing film credit and will result in a tax credit rate of 40% for projects with a maximum qualifying expenditure of up to €20 million.

This incentive is for small to medium budget productions under the Section 481 film tax credit.

As with the Tax Credit for Unscripted Productions, the Scéal Uplift is subject to State Aid approval.

FOREIGN DIVIDENDS

A new Participation exemption for foreign sourced dividends from subsidiaries in EU/EEA and tax treaty jurisdictions will be introduced with effect from 1st January 2025.  The aim is to simplify existing Double Taxation Relief provisions.

Currently, Ireland operates a worldwide corporate tax regime.  This means that all the profits (both domestic and foreign) earned by an Irish resident company are subject to Irish tax with Relief for any foreign taxes deducted under, a ‘tax and credit’ regime.

Under the new rules, a company will have the option of either (a) claiming the participation exemption or (b) continuing to use existing tax-and-credit relief.

To do this, an election will have to be made in the company’s annual corporation tax return. It will apply to all qualifying dividends in that particular period.

For non-qualifying jurisdictions, the existing method of claiming double taxation relief should continue.

The new participation exemption for foreign source dividends will come into effect from 1^st January 2025.

For full information on Budget 2025, please click https://www.gov.ie/en/publication/e8315-budget-2025/

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Budget 2023 – Corporate Tax, Personal Taxes Global Mobility, Employment Taxes, SARP, FED, KEEP

Today, Minister for Finance, Paschal Donohoe T.D., and Minister for Public Expenditure and Reform, Michael McGrath T.D. presented Budget 2023.  We have summarised the key measures included in this “cost of living” Budget including Ireland’s headline Corporate Tax rate remaining unchanged at 12½%.  A number of welcome personal tax and global mobility employment tax measures to benefit Irish employees and international assignees include an extension to the Special Assignee Relief Programme (SARP),  to the Key Employee Engagement Programme (KEEP) and the Foreign Earnings Deduction (FED).   The key Corporate Tax measures include amendments to the R&D tax credit, the extension of the KDB as well as the extension of the film tax credit, subject to a commencement order.

GLOBAL MOBILITY & EMPLOYMENT

In Budget 2023, Minister Donohoe announced an extension to a number of existing personal tax reliefs including:

• Special Assignee Relief Programme (SARP) is to be extended to the end of 2025.  The minimum income threshold for an employee to qualify for SARP is being increased from €75,000 to €100,000 for new entrants.  Existing claimants will not be affected by this change.  In other words, this higher qualifying threshold will not apply to current claimants availing of the relief.  For associated articles, please click SARP – 2023 Update – Accounts Advice Centre

• Key Employee Engagement Programme (KEEP) is to be extended to the end of 2025.  The lifetime company limit for KEEP shares will be raised from €3 million to €6 million.  KEEP is also being modified to provide for the buy-back of KEEP shares by the company from the relevant employee.

• Foreign Earnings Deduction (FED) which is a personal tax relief for employees who are tax resident in Ireland and who travel out of the State to temporarily carry out employment duties in certain qualifying countries was extended for a further three years to the end of 2025. FED provides relief from income tax on up to €35,000 of income.

• Another significant development was the doubling of the Small Business Exemption from €500 to €1,000 effective from 2022. Employers will also be permitted to grant an employee two vouchers/non-cash awards in a single year, provided the cumulative value of the two vouchers does not exceed €1,000.

PERSONAL TAX

Key measures included in Budget 2023:

• A significant increase in the Standard Rate Cut-Off Point to €40,000 for single individuals and €49,000 for married couples with one earner. This means that a single person can now earn an additional €3,200 before paying tax at the 40% Income Tax rate.

• An increase of €75 in the Personal Tax Credit, Employee Tax Credit and the Earned Income Tax Credit (all currently set at €1,700). For the tax year 2023 onwards the new tax credits be each be €1,775

• An increase of €100 in the Home Carer tax credit. From 2023 it will be increased to €1,700.

• A reintroduction of the rent tax credit of up to €500 for renters in the private sector for 2023 to 2025. It will be possible to claim this tax credit on a retrospective basis in relation to rent paid in 2022.  One credit per person can be claimed per year.

• The Sea-going Naval Personnel Tax Credit has been extended to the end of 2023.

• An increase in the ceiling of the 2% USC rate from €21,295 to €22,920.

• The exemption from the top rate of USC for medical card holders, and those aged over seventy years earning under €60,000 will continue beyond 2022. In other words, the reduced rate of 2% USC will be extended until the end of 2023.

• There is no increase to Employer’s PRSI rates.

ENTERPRISE – Corporate Tax

The main corporate tax measures include amendments to the Research & Development tax credit and extensions to the Knowledge Development Box and film tax credit regimes:

• The Temporary Business Energy Support Scheme (TBESS) was introduced to support trading businesses. The scheme will be open to businesses carrying on a Case I trade that are tax compliant and have experienced a significant increase in their natural gas and electricity costs. Businesses carrying on trading activities will be eligible for a refund of 40% on the increase in electricity and gas prices, subject to a monthly cap of €10,000 per trade.  Detailed information on the scheme has not yet been published, however, it is believed the scheme will operate by comparing the average unit price for the relevant period in 2022 with the average unit price for the corresponding period in 2021. If the increase in average unit price is more than 50% then the business will be eligible for the scheme. Businesses will be required to register for the scheme and to make claims within the required time limits.  This scheme is subject to State Aid approval from the EU.

• Amendments will be made to the R&D tax credit regime with respect to how repayments are made under the scheme which will ensure the regime is regarded as a “qualifying refundable credit” for the purposes of the Pillar Two Model Rules. Currently the R&D tax credit is firstly offset against current and prior year corporate tax liabilities followed by repayment over three instalments. The current system 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. In other words, the changes will enable taxpayer companies to call for the payment of their R&D tax credits in cash or for these to be offset against its tax liabilities in this three-year fixed period. The 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.  Transitional measures will be introduced for one year for those that already engaged in R&D activities and claiming the credit

• An extension to the Knowledge Development Box regime for a further four years to 31^st December 2026. Currently the KDB provides for a 6.25% effective rate of corporation tax on profits generated from exploiting certain assets, including patents and software developed through R&D activities carried out in Ireland. In preparation for the changes under the OECD Pillar Two agreement, the effective rate under the KDB regime is to be increased from 6.25% to 10%.  The policy document released by the Department of Finance states that the commencement of this rate will be determined by reference to international progress on the implementation of the Pillar Two Agreement but it is expected in 2023.

• The extension of the Film Corporation Tax Credit until December 2028. Film relief is granted at a rate of 32% of qualifying expenditure which is capped at €70 million.

PROPERTY

Help-to-Buy Scheme

The scheme will continue at current rates for another two years and will expire on 31^st December 2024

Vacant Homes Tax (“VHT”)

A VHT will apply to residential properties which are occupied for less than 30 days in a 12 month period.

Exemptions will apply where the property is vacant for “genuine reasons.”

The applicable tax rate is three times the existing local property tax (“LPT”) rate

Residential Development Stamp Duty Refund Scheme

The stamp duty refund scheme will continue until the end of 2025.

The stamp duty residential land rebate scheme allows for a refund of eleven-fifteenths of the stamp duty paid on land that is subsequently developed for residential purposes. was due to expire on 31 December 2022. It has been extended to the end of 2025.

Pre-letting Expenses on Certain Vacant Residential Properties

The limit for landlords claiming allowable pre-letting expenses is to be increased from €5,000 to €10,000.

The vacancy period is to be reduced from 12 months to 6 months.

Levy on Concrete Blocks, Pouring Concrete and other Concrete Products

A 10% levy was announced in response to the significant funding required in respect of the defective blocks redress scheme. A 10% levy will be applied to concrete blocks, pouring concrete, and certain other concrete products

This levy applies from 3rd April 2023.

VAT

9% VAT rate for hospitality and tourism sector

The 9% VAT rate currently in place to support the tourism and hospitality sectors will continue until 28^th February 2023.

9% VAT rate on electricity and gas supplies

The temporary reduction in the VAT rate applicable to gas and electricity supplies (from 13.5% to 9%) will be extended to 28^th February 2023.

Farmers’ Flat-Rate Addition

The flat-rate addition is being reduced from 5.5% to 5% in accordance with criteria set out in the EU VAT Directive.

This change will apply from 1^st January 2023.

Zero-rated supplies

From 1^st January 2023 VAT on newspapers, including digital editions will be reduced from 9% to 0%.

For further information, please click: https://www.gov.ie/en/publication/4de03-your-guide-to-budget-2023/

and

https://www.revenue.ie/en/corporate/press-office/budget-information/previous-years/2023/budget-summary-2023.pdf

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so.. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Cryptocurrency. Capital Gains Tax (CGT). Personal Tax. Remittance Basis

On 27th April 2022 Revenue updated its guidance material to provide clarity on the tax treatment of transactions involving crypto-assets, particularly in relation to Capital Gains Tax (CGT) and the remittance basis of Tax.  This latest publication also provides worked examples.

The terms “cryptocurrency” and “cryptocurrencies” are not defined.

The Irish Central Bank places cryptocurrencies, digital currencies, and virtual currencies into the same category of digital money. It is important to bear in mind, however, that although defined in this manner, these “currencies” are unregulated and decentralised which means that no central bank either guarantees them or controls their supply.

Throughout Revenue’s updated document the term “crypto-asset” is used, which includes cryptocurrencies, crypto-assets, virtual currencies, digital money or any variations of these terms.  Revenue state that the information contained in their most updated guidance is for tax purposes only.

Under Section TCA97 Ch4 s71–5, an individual who is resident in Ireland but not Irish domiciled is liable to Irish income tax in full on his/her/their income arising in Ireland, and on “non-Irish income” only to the extent that it is remitted to Ireland.

This is known as the remittance basis of taxation.

It’s important to keep in mind that the remittance basis of taxation does not apply to income from an office or employment where that income relates to the performance of the duties of that office or employment which are carried out in Ireland.

Section 29 TCA 1997 is the charging section for Capital Gains Tax.

s29(2) TCA 1997 states that a person who is Irish resident or ordinarily resident and is Irish domiciled is chargeable to Irish CGT on gains on all disposals (on his/her/their worldwide assets) arising in the year of assessment regardless of whether the gains are remitted to Ireland or not.

s29(4) TCA 1997 states that an individual who is Irish resident, or ordinarily resident,  but not Irish domiciled is chargeable on gains arising on disposals of Irish assets in the year of assessment as well as on remittances to Ireland in the year of assessment in respect of gains on the disposals of foreign assets.  In other words, an Irish resident/ordinarily resident but non domiciled individual is liable to Irish CGT on remittances in respect of gains arising on the disposal of assets situated outside the state.

From professional experience, the location of the crypto asset is often difficult to prove.

According to Revenue’s most recent publication:

“… where a crypto-asset exists ‘on the cloud’, it will not actually be situated anywhere and therefore, cannot be
viewed as ‘situated outside the State’.”

If the crypto-asset isn’t located anywhere and isn’t, therefore, considered to be a “disposal of an asset outside the state” then the remittance basis of taxation does not apply and the gain arising will be liable to Irish Capital Gains Tax based on the residency rules of the individual.

As you can see, it is very much the responsibility of the taxpayer to be able to prove the location where the gain arose on the disposal of the crypto-assets.

Revenue have outlined their record keeping provisions in relation to all taxes as follows: https://www.revenue.ie/en/starting-a-business/starting-a-business/keeping-records.aspx

In situations where the records are stored in a wallet or vault on any device including a personal computer, mobile phone, tablet or similar device, please be aware that these records must be made available to Revenue, if requested.

As with all taxes, full and complete records must be retained for six years in accordance with legislation. It is important to keep in mind that these provisions apply to all taxpayers, including PAYE only taxpayers.

For further information, please follow the link: https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-02/02-01-03.pdf

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so.. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Personal Tax Advisors Dublin. Qualified Accountants and Tax Consultants for individuals.

Today, 14th April 2022. the Irish Revenue published guidance (Revenue eBrief No. 090/22) on the tax treatments of Ukrainians, who continue to be employed by their Ukrainian employer while they perform the duties of their employment, remotely, in Ireland.  The Guidance material outlines a number of tax concessions which will apply for the 2022 tax year under PAYE (Employment Income) and Corporation Tax.

PAYE

As you’re aware, income earned from a non-Irish employment, where the performance of those duties is carried out in Ireland, is liable to Irish payroll taxes irrespective of the employee’s or employer’s tax residence status. However, by concession, the Irish Revenue are prepared to treat Irish-based employees of Ukrainian employers as not being liable to Irish Income Tax and USC in respect of Ukrainian employment income that is attributable to the performance of duties in Ireland.

Ukrainian Employers will not be required to register as employers in Ireland and operate Irish payroll taxes in respect of such income.

Please be aware that this concession only relates to employment income which is (a) paid to an Irish-based employee (b) by their Ukrainian employer.

In order for the above concessions to apply, two conditions must be met:

1. The employee would have performed his/her/their employment duties in Ukraine but for the war there and
2. the employee remains subject to Ukrainian income tax on his/her/their employment income for the year.

Corporation Tax

The Irish Revenue will disregard for Corporation Tax purposes any employee, director, service provider or agent who has come to Ireland because of the war in Ukraine and whose presence here has unavoidably been extended as a result of the war in Ukraine.

Again, such concessionary treatment only applies in circumstances where the relevant person would have been present in Ukraine but for the war there.

For any individual or relevant entity availing of the concessional tax treatment, it is essential that he/she/they retain any documents or other evidence, including records with the individual’s arrival date in Ireland, which clearly shows that the individual’s presence in Ireland and the reason the duties of employment are carried out in the state is due to the war in Ukraine.  These records must be retained by the relevant individual or entity as Revenue may request such evidence.

For further information, please follow link: https://www.revenue.ie/en/tax-professionals/ebrief/2022/no-0902022.aspx

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so.. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Non resident landlords. Corporation Tax (CT). Income Tax. Rental Income. Capital Allowances

Section 18 of the Finance Bill 2021 brings non Irish resident companies, in receipt of Irish rental income, within the charge to Corporation Tax (CT). Previously these companies were liable to Income Tax on their Irish rental profits.

Prior to the Finance Act 2021 amendment, non Irish resident companies, where no Irish branch existed, were liable to income tax at 20% on their rental income while Irish tax resident companies were, instead, liable to corporation tax at 25% on their rental income.

In circumstances where non-resident companies dispose of assets which had previously generated Irish rental income, any chargeable gains are now within the charge to corporation tax at 33% as opposed to capital gains tax, which is also at 33%. In other words, this amendment does not give rise to any additional tax as the effective rate of tax is 33% but the Corporate Tax rules now apply as opposed to the Capital Gains Tax rules.

There are no restrictions on the carry forward of rental losses and capital allowances in the change from the income tax regime to the corporation tax rules.

The payment date for certain affected companies’ preliminary corporation tax for 2022 has been adjusted. Those companies whose accounting period ends between 1st January 2022 and 30th June 2022 have until 23^rd June 2022 to pay preliminary corporation tax in a further measure to ease the transition from the Income Tax to the Corporation Tax regime.

From today, non-resident corporate landlords will now also be subject to the new interest limitation rules which have been introduced to comply with the EU’s Anti-Tax Avoidance Directives. These new rules link the taxpayer’s allowable net borrowing/financing/leverage costs directly to its level of earnings.  The ILR does this by limiting the maximum tax deduction for net borrowing costs to 30% of Tax EBITDA.  In other words, the ILR will cap deductions for net borrowing costs at 30% of a corporate taxpayer’s earnings before interest, tax, depreciation, and amortisation, as measured under tax principles.

For further information, please click: https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-45/45-01-04.pdf

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Digital Games Tax Credit. Corporation Tax. Personal Tax. Games Development Companies. Capital Gains Tax. Research and Development

On 12th October 2021 the Irish Government announced the introduction of a Digital Games Tax Credit, i.e. a refundable Corporation Tax Credit available to digital games development companies.

On 21^st October, Section 33 of the Finance Bill introduced section 481A TCA 1997 in relation to the new tax credit for the digital gaming sector which provides relief at a rate of 32% of the qualifying expenditure incurred in the development of digital games (i.e. the design, production and testing of a digital game) up to €25 million.

In other words, the credit of 32% will be on the lower of:

1. 80% of the qualifying expenditure per project or
2. €25 million per project

In order to qualify for the relief, the minimum expenditure per project is €100,000.

The digital gaming corporation tax credit will be available up to 31st December 2025.  

This credit is available to companies who are resident in Ireland, or who are EEA resident and operate in Ireland through a branch or an agency.

To qualify for this credit, the digital game must be issued with one of two types of Certificate from the Minister for Tourism, Culture, Arts, Gaeltacht, Sport and Media:

1. An interim certificate which is issued to companies who are in the process of developing their game or
2. A final certificate which is issued to companies who have completed the development of their game.

A digital games development company may not make a claim for the tax credit unless it has been issued with either an interim or a final certificate.  If a company has been issued with an interim certificate, it can claim the credit within twelve months of the end of the accounting period in which the qualifying expenditure is incurred.

Relief will not be available for digital games produced mainly for the purposes of advertising or gambling.

A digital game development company will be required to sign an undertaking in respect of “quality employment” which is similar to the requirements contained in section 481 TCA 1997 for tax relief for investment in films.

A claimant company will not be allowed to qualify for any additional tax relief under Section 481 Film Relief or the R&D tax credit.

As the credit will require EU state aid approval, it is to be introduced subject to a commencement order.

For further information, please click: https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-15/15-02-07-20240422142426.pdf

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so.. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

CRO. Company Secretarial. Annual Company Returns. Financial Statements

The Companies Registration Office (CRO) have announced that the 28th May filing deadline has once again been extended.  The Registrar of Companies has decided to extend the filing deadline for companies with an Annual Return Date falling on 30th September 2020 or later until Friday, 11th June 2021.

The extension of the deadline from 28th May 2021 was in recognition of difficulties being experienced when trying to file Annual Returns in the run-up to the filing deadline, which the CRO are currently working to resolve.

As you may remember, the CRO previously announced that the 26^th February 2021 filing deadline was to be extended until 28^th May 2021 for companies with an ARD on or after 30^th September 2020. This was due to the Level 5 restrictions as well as issues experienced by Accountants and other Compliance Professionals with the new CORE system.

For further information, please click the link: https://www.cro.ie/en-ie/About-CRO/Latest-News/filing-extension?

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Research and Development (R&D) Tax Credit – Corporation Tax

Ireland’s Research and Development (R&D) tax credit system is a valuable tax based incentive, providing major benefits to both multinational companies and SMEs operating in Ireland.  The R&D tax credit was first introduced in the Finance Act 2004 and has been subject to various amendments in the subsequent Finance Acts.  The credit operates by providing up to 25% of R&D expenditure incurred by a company on qualifying R&D activities (both revenue and capital) in a tax credit or in cash (subject to certain conditions being met). This 25% tax credit can be claimed in addition to the normal 12½% revenue deduction available for the R&D expenditure.  Therefore, the total tax benefit to a limited company is 37½% being the 12½% standard corporation tax rate plus the 25% R&D Tax credit.

How can the Credit be used?

Companies are entitled to a credit of 25% of the incremental R&D expenditure incurred for periods commencing on or after 1st January 2015.

The credit can be used to:

• Reduce the company’s corporation tax liability of the current period.  Where the credit exceeds the corporation tax liability for the current year, the excess can be carried forward indefinitely to offset against future corporation tax liabilities or
• Reduce the corporation tax liability of the previous year i.e. the company can make a claim for the excess to be carried back or offset against the preceding period’s corporation tax liability or
• If unused, the credit can be refunded by the tax authorities subject to certain restrictions.  The only restriction in obtaining a cash refund is that the R&D credit refund cannot exceed the PAYE/PRSI remitted by the company to Revenue in the last two years or the corporation tax liability for the prior ten years if higher.

The claim must be made within one year of the end of the accounting period in which the expenditure has been incurred.

Broadly,

It can alternatively be used as a key employee reward mechanism to remunerate R&D staff effectively, tax free subject to certain conditions.  The effective income tax rate for such key employees may be reduced to a minimum of 23%, provided certain conditions are met by the company and the individual.

For further information, please click:  https://www.revenue.ie/en/covid-19-information/index.aspx

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Research and Development (R&D) Tax Credit, Corporation Tax, Rental Income, Employment Taxes

Revenue published Tax and Duty Manual Part 29-02-03 – Research and Development (R&D) Tax Credit today.  These updated guidelines clarify Revenue’s treatment of rental expenditure incurred by a company.   It states that rental expenditure incurred by a company will be eligible to the extent to which is was incurred “wholly and exclusively” for the purposes of the Research and Development (R&D) activities.  This Revenue Guidance material also includes information on the treatment of subsidies received under (i) the Temporary Wage Subsidy Scheme (TWSS) and (ii) the Employment Wage Subsidy Scheme (EWSS).

• The eligibility of rental expenditure incurred by a company will relate to the extent to which it is incurred wholly and exclusively in the carrying on of the R&D activities.

According to previous guidance material on this matter issued on 1st July 2020 Revenue’s position was that “rent is expenditure on a building or structure and is excluded from being expenditure on research and development by section 766(1)(a) TCA 1997”.

Since then, Revenue’s position has been the source of continuous discussion and debate with many disagreeing with Revenue’s interpretation of the treatment of rent in relation to R&D claims.

Clarity had been sought from Revenue with regards to their position on rent in relation to both historic and new claims for Research and Development tax relief.

In this latest update, Revenue has clarified that rent will qualify in such circumstances where “the expenditure is incurred wholly and exclusively in the carrying on of the R&D activities.”

According to Paragraph 4.2 of the updated Revenue Guidance Manual:

“In many cases expenditure incurred on renting a space or facility, which is used by a company to carry on an R&D activity, may be expenditure that is incurred “for the purposes of”, or “in connection with”, the R&D activity but will not constitute expenditure incurred wholly and exclusively in the carrying on of the R&D activity. The eligibility of rental expenditure incurred by a company will relate to the extent to which it is incurred wholly and exclusively in the carrying on of the R&D activities. Where the nature of the rented space or facility is such that it is integral to the carrying on of the R&D activity itself then it is likely that the rent can be shown to be more than merely “for the purposes of” or “in connection with” the R&D activity.”

Therefore, it is possible for rental expenditure to be included as part of an R&D tax relief claim but only where that rented building is deemed to be integral to the carrying on of R&D activities.  According to Revenue’s guidance material, an example of a rental expense that may be considered qualifying expenditure might relate to the rental of a specialized laboratory used solely for the purposes of carrying out R&D activities. This is contrasted with the rental of office space necessary to house an R&D team, but which is not deemed to be integral to the actual R&D activity.  In this case, this rent would not be treated as eligible expenditure.

Revenue have confirmed that this position will only apply for accounting periods commencing on or after 1st July 2020. 

Revenue’s Manual has also been updated to include:

• Confirmation that the EWSS and TWSS are considered State support and therefore expenditure from such assistance will not qualify for relief.  In other words, such amounts will reduce the qualifying allowable expenditure or qualifying R&D tax relief expenditure.
• The COVID-19 practice for 2020, in relation to the use of a building in a ‘specified relevant period’ under section 766A TCA 1997.
• A further example of a subcontractor who would not be eligible to claim the R&D tax credit.

For further information, please follow the link: https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-29/29-02-03.pdf

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

Cryptocurrency. Crypto-assets. Personal Taxes. Capital Gains Tax. VAT. Corporation Tax. Payroll Taxes.

In Revenue’s most recent guidance material outlining how cryptocurrencies transactions should be treated for Irish tax purposes (under Income Tax, Capital Gains Tax, Corporation Tax, VAT and Payroll), they formed the view that no special tax rules are required.  For further information please click the link: https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-02/02-01-03.pdf

Cryptocurrencies are also known as virtual currencies and include the following:

• Bitcoin
• Ethereum
• Ripple
• Dash
• Litecoin

Ireland has its own cryptocurrency called “Irishcoin”.

One of the common questions arising is whether the profits or losses arising from cryptocurrency transactions are liable to Income Tax/Corporation Tax or if instead, they are subject to Capital Gains Tax.

In other words, it is important to keep in mind that there are different tax treatments for those trading in cryptocurrency and those investing in it.

If the cryptocurrency transactions are deemed to a trading activity then the profits are subject to Income Tax/Corporation Tax.  Capital Gains Tax, however, applies to gains arising from the disposal of cryptocurrency which is held as an investment.

Trading activity or investment?

This answer is determined by reference to what are known as the “Badges of Trade” as well as to related case law.

The ‘Badges of Trade’ are a set of indicators to decide if an activity is a trading or an investment activity and include the following:

1. The Subject Matter
2. Length of Ownership
3. Frequency of similar transaction
4. Supplementary work to enhance it or make it become more marketable
5. Circumstances for realisation

It is not essential that all the above “badges” be present for a trade to exist. When you examine all the badges present in the context of the activity carried out then it’s possible to ascertain if you are carrying out a trade in cryptocurrencies or investing in them.

Another way to look at this is to consider whether you are a passive or an active investor.

If you make a one-off purchase of a few coins that you retain in the hope the value increases then it would be fair to say you are a passive investor and any gain arising in the case of an individual, would be liable to Capital Gains Tax at 33% after offsetting any prior year and current year capital losses less the individual’s personal CGT exemption of €1,270.

If, however, there are multiple transactions taking place on a frequent basis, with a high level of organisation and a commercial motive (i.e. the aim of buying and selling the coins is to create/optimise profit) then it would be reasonable to consider yourself an active trader and any profits arising would be liable to Income Tax / Corporation Tax.  For example, profits derived from crypto mining activities carried on by an individual or a company, would be treated as trading profits and liable to Income Tax/Corporation Tax.

It is essential, therefore, that this should be correctly established by each taxpayer, given their own specific set of circumstances, from the very beginning, to avoid any costly errors further down the line.

As with all tax issues, it is vital to establish the residence and domicile of the investor.  Depending on the location of the cryptocurrency exchange, gains arising for non-resident individuals may be outside the scope of Irish tax.  Individuals who are Irish resident but non domiciled may be able to available of the remittance basis of tax.

What about VAT?

The Revenue Commissioners consider cryptocurrencies to be ‘negotiable instruments’ and therefore exempt from VAT.  This treatment applies to companies and individuals buying and selling cryptocurrencies.  Mining activities are also considered to be outside the scope of Irish VAT.

Financial services consisting of the exchange of cryptocurrencies for traditional currency are exempt from VAT where the company performing the exchange acts as the principal.

Value Added Tax, however, is due from suppliers of goods or services sold in exchange for cryptocurrencies. The taxable amount for VAT purposes should be calculated in Euro at the time of the supply.

What about Payroll Taxes?

Where an employee’s wages and salaries are paid in a cryptocurrency, the value of these emoluments for the purposes of calculating payroll liabilities is the Euro amount attaching to that cryptocurrency at the time those payments are made to the employee.

The amounts contained in returns made to Revenue must be shown in Euro.

Finally, as crypto currencies are traded on a number of exchanges, a reasonable effort should always be made to use an appropriate valuation for the transaction in question.

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so.. This information should not be acted upon without full and comprehensive, specialist professional tax advice.