Top 10 Highlights from Budget 2015

In the weeks leading up to Budget 2015 there was much speculation around the easing of the tax burden for the low to middle income earners and thankfully Budget 2015 delivered on some of those expectations. In comparison with previous years, this year’s budget was a positive one.  The budget saw forecasts of real GDP growth increasing from 3.6% to 3.9% and forecasted deficits for 2014 to reduce from 4.8% to 3.7%, with an expected deficit of 2.7% for 2015.  

Such improvements in Ireland’s economic outlook are as a result of Ireland’s economy currently growing at the fastest rate among developed economies, with the rate of job creation in Ireland being one of the highest in Europe.  Another significant impact for Budget 2015 came in the latter half of 2013 when Ireland exited the bailout. We have reviewed Budget 2015 and have outlined below the Top 10 highlights which may be relevant to you and your business:  

1.  Personal Income Tax

• Standard Rate Band increased from €32,800 to €33,800
• Higher rate of Income Tax reduced from 41% to 40%.

2.  Pay Related Social Insurance (PRSI) and Universal Social Charge

• No Change to PRSI
• USC bands and rates amended as follows:

3.  Corporation Tax

• As in previous years Minister Noonan has again made it very clear that Ireland’s Corporation Tax rate of 12.5% will remain. In this year’s budget, Minister Noonan announced that:

“The 12.5% tax rate never has been and never will be up for discussion. The 12.5% tax rate is settled policy. It will not change.”

 4.  “Double Irish”

• Budget 2015 is abolishing the “Double Irish”. This is a legal tax avoidance strategy whereby multinational corporations reduce their corporate tax liabilities by shifting income between higher-tax jurisdictions to lower tax jurisdictions.
• This will be abolished for new companies from 1st January 2015, with a transitional period for existing companies to 2020.

 5.  VAT

• 9% VAT rate on tourism-related activities to be retained
• Unregistered farmer’s flat rate addition has been increased from 5% to 5.2%.
• For Cross-border EU telecommunications, broadcasting and electronically supplied services, from 1st January 2015, VAT will be charged to the member state of the consumer and not the supplier.

6.  Property

• Home Renovation Incentive scheme is now extended to residential rented properties.
• Rent-a-room relief is increased from €10,000 to €12,000 per annum from 1st January 2015.
• Tax relief at 20% in respect of water charges paid up to a maximum of €500 per household per annum.

7.  Corporation Tax Relief for Start Up Companies

• 3 year relief from corporation tax in respect of start up companies has been extended.

8.  Amendments to Special Assignee Relief Programme (SARP)

• SARP has been extended to 2017
• Conditions have been amended to ensure the application is more accessible to key management.

9.  Intellectual Property and the “Knowledge Development Box”

• Proposals for the development of a “Knowledge Development Box” whereby corporate tax rates on would be levied on assets such as patents which are managed and located in Ireland.

10.  Farming

A number of measures were introduced in support of the farming and agri-food sector.  Some of these measures include:

• Income Tax Exemption on long term leasing has increased by 50%
• €40,000 per annum exemption on leases of greater than 15 years
• Income averaging has been increased from 3 years to 5 years

Summary

While Budget 2015 was not the “give away” budget that many would have liked, it is a positive, but prudent, budget. Minister Noonan outlined in his speech that this budget is designed to support and broaden the economic recovery and to build consumer confidence, support, and jobs and to strengthen demand in the domestic economy. Following the Ministers speech, An Taoiseach, Enda Kenny spoke on how further income tax reductions could be expected over the next two budgets.  With the positive economic outlook for Ireland in the coming year, this may well be possible.