Finance minister Michael Noonan has published Finance Bill 2015. The Bill gives effects to taxation measures announced in Budget 2016.
The USC reductions detailed in this Finance Bill will reduce the marginal rate of tax to 49.5% for all earners who earn up to €70,044. “This is an important milestone,” said Noonan. “Furthermore, the Bill provides for an exemption from an employee USC charge in respect of employer contributions to a PRSA, in line with the existing exemption for employer contributions to occupational pension schemes.”
There is provision in the Bill for the increase in the Home Carer’s Credit announced in the Budget statement and also for the Earned Income Credit, to the value of €550, available to those with earned income who do not have access to the PAYE credit.
In addition, the Finance Bill provides for an increase in the Small Benefits Relief: the limit goes up from €250 to €500. The initial expectation from tax experts was that the increase would not take effect until 2016. However press reports suggest that Noonan is arranging the change before this Christmas.
In addition to the Budget measures, the Bill also contains details of a number of further changes not yet announced, including many of a technical or administrative nature.
In Association with
The Finance Bill should complete its passage through the Oireachtas by December 31. As the Finance Bill is published in 2015, it is called ‘Finance Bill 2015’ even though it relates to Budget 2016.
The Appendix is also available, along with the text of the Bill, at www.finance.gov.ie.
Measures not announced on Budget Day
• The Bill provides for an exemption for employees from USC on employer contributions to a PRSA, to bring the USC treatment of such contributions in line with employer contributions to occupational pension schemes.
• Small Benefits: under the existing Benefit-in-Kind arrangements, an employer can provide an employee with a single non-cash benefit without applying PAYE, PRSI, etc. to that benefit. No more than one such benefit given to an employee in a tax year qualifies for such treatment. The maximum value for this benefit is being increased from €250 to €500. Where a benefit exceeds this maximum then the full value is taxable.
The voucher must not be exchangeable in part or in full for cash, and the voucher must not be part of any salary sacrifice arrangement between the employer and the employee.
According to PwC tax expert Mary O'Hara: "This relief builds on an existing Revenue concession whereby employers could provide an employee with a single tax-free non-cash benefit of up to €250 in a year.
"While the uplift from €250 to €500 will be welcomed by employees, employers and the retail community alike, it is worth noting that the proposed legislation restricts the operation of the previous concession to vouchers only, whereas previously it applied more broadly to non-cash items (e.g. hampers and other gifts).
"Employers who currently operate small benefits schemes not restricted to vouchers may need to revise their schemes accordingly. It remains to be seen whether the final enactment of the Bill will broaden the application of the exemption beyond vouchers only."
• Following a review by the Department of Communications Energy and Natural Resources, the Bill introduces a Petroleum Production Tax, the purpose of which is to ensure that discoveries made under future exploration licenses will result in an increased financial return to the State and at an earlier point in time. It will replace the Profit Resource Rent Tax which was introduced in Finance Act 2008. The Petroleum Production Tax will provide that:
o Once a field starts producing oil or gas, a minimum payment of 5% of annual gross revenues will be due annually
o The ultimate rate of tax and amount due will be determined on a variable basis depending on the profitability of an individual field and will be payable in addition to the existing 25% rate of corporation tax that applies to the profits from oil and gas exploration
o The operation of the Petroleum Production Tax will result in an increase in the maximum marginal tax take on a producing field (combining corporation tax and petroleum production tax) from 40% to 55%.
• The Bill provides that the Minister for Finance may make regulations providing for the payment of a grant in respect of fuel costs to members of the Disabled Drivers and Disabled Passengers Scheme. The fuel grant replaces the excise duty repayment on the fuel element of the Scheme which was ruled incompatible with the EU Energy Tax Directive by the Court of Justice of the European Union. The fuel grant is being introduced to ensure that no member of the Scheme shall lose out as a result of the decision of the Court. The Bill also provides for an offence and penalties for furnishing false or misleading information for the purpose of receiving the fuel grant.
• As indicated in the Spillover Analysis which was published on Budget Day, a particular focus of Ireland's tax treaty negotiation policy has been to engage with African countries that wish to extend their tax treaty networks. In this context, the Finance Bill will complete the final stage of the ratification process for a new Double Tax Agreement with Ethiopia. The Bill will also complete the ratification procedure for replacement Double Tax Agreements with Zambia and Pakistan. These two treaties have been renegotiated to reflect developments in international tax policy since they were signed in the 1970s. The Bill will also include the final step to ratify four other international agreements:
- a Protocol to our Double Tax Agreement with Germany and
- Tax Information Exchange Agreements with Argentina, the Bahamas and Saint Christopher (Kitts) & Nevis.
• Following on from the recent consultation on the tax treatment of expenses, it is proposed that vouched expenses, incurred by non-resident, non-executive directors travelling in the course of their duties, will be exempt from income tax. This recognises the special role in corporate governance played by such Directors whose expertise and experience is of considerable value to the organisations on whose boards they sit.
• While profits or gains from the occupation of woodlands are generally exempt from Income Tax, this relief is a specified relief for the purposes of the high earners’ restriction. One of the outstanding recommendations of the Agri-Taxation review was to examine this measure and the effect it is having on the forestry sector. Finance Bill 2015 removes forestry from the restriction, but only for active foresters. Passive investors in forestry companies will remain subject to the restriction.
• Standard Life plc: some thousands of Irish shareholders in Standard Life who opted earlier this year to have their return of value payments from that company treated as capital had their options delayed in the post and were defaulted into receiving an income payment. That income payment would be subject to tax under income tax rules which would likely result in a higher tax liability than if the payment was a capital payment subject to capital gains tax rules. A provision in the Bill will mean that Standard Life shareholders in that position will have their payment treated as capital and subject to tax under capital gains tax rules.
