Budget 2010
October 2008
April 2009
December 2009
Budget Strategy
- Objective - Rebuild Nations Self Confidence- Restore International Reputation
- How- Bold – Decisive – Innovative Steps
- Conclusion - Worst is Over- Return to Growth in 6 – 9 Months
€4 Billion Question ?
Social Welfare19%Day to Day
Expenditure 25%
Capital Investement
24%
Other Taxes 7%
Public Sector Pay25%
Public SectorPaySocialWelfareDay to DayExpenditure CapitalInvestement Other Taxes
Signalled Changes
• Taxation of child benefit X
• Introduction of carbon tax • Introduction of property tax
2010
• Review taxation exempt income / reliefs • CAT/CGT Business Reliefs X
• Pension Contributions / Lump Sums ?
• Reduce VAT/Excise • Car Scrappage
Personal Tax
Income Tax Rates
• No Changes
• Reminder – Income Tax – PRSI– Health Levy– Income Levy
Simplify and Reform Tax System
- Reform and Fairness
- Social Contribution
- Low Rate
- Broad Base
- Income Tax
- Progressive Rates
- 2011
Employee
>€75k €75k-€175k €175k+
Income Tax 41 41 41
PRSI 4 - -
Health Levy 4 5 5
Income Levy 2 4 6
51% 50% 52%
IT, PRSI, Health Levy & Income Levy
Self-Employed
>€75k €75k-€175k €175k+
IT 41 41 41
PRSI 3 3 3
Health Levy 4 5 5
Income Levy 2 4 6
50% 53% 55%
IT, PRSI, Health Levy & Income Levy
International Comparisons: Overall marginal tax rates for
employees on €80,000
0%
10%
20%
30%
40%
50%
60%
Total
Why No Tax Increase?
- Reached Limit of Taxation
- Heaviest Burden on Higher Earners - Income Levy : Gross - High Earners Cap
High Earners Cap
- Introduced 2007
- Restricted Specified Reliefs
- Aim - Effective Rate 20%
How It Worked 2009
- 20% Effective Rate- Restricted Relief to Higher of:
- €250,000OR
- 50% of Income
2010- Now 30% Effective Rate
- Entry Point €125,000- Full Restriction if Income > €400,000
- Finance Bill Clarification
2009 2010
€’000 €;000
Income 600 600
Specified Reliefs 400 400
Allowed 300 150
Restricted 100 250
Taxable 300 450
Tax @ 41% 123 185
Effective Rate 2009 20% 30%
High Earners Cap - Example
Tax Exiles
New Irish Domicile Levy
- Non Resident Domiciled Individuals
- Worldwide Income > €1m
- Irish Located Capital > €5m
- Annual Levy €200,000
- Details in Finance Bill
Mortgage Interest Relief
• Budget 2009– Relief to cease for loans over 7 years
• Interest Relief now until 2017– Home Owners in Negative Equity – New Loans before 1/7/2011 – Loans from 1/7/2011 to 31/12/2012
(Restricted)
Residential Rental Property
• Reminder – current position
• Tax deduction for interest reduced to 75%
Investments/Savings
• Existing 25%/28% Tax
• New National Savings Product – National Solidarity Bond– 5/7 Years – 2010– Details to be announced
Pension
- Overhaul Imminent- No Immediate Change - Frame Work Policy to Review- Likely Outcome
- Max Tax Tree Lump Sum €200k- Excess Taxable?- SSIA Type Scheme- No Tax Relief
Child Benefits
• Children’s Allowance – 10% cut to allowance– Future Taxation / Means Test ?
• Incentive in 2009– Preschool – Free Year– Effective 1/1/10
Business Taxation
Ireland Inc
Business Taxation• Corporation Tax
– 12.5% tax rate unchanged– International Brand
• Employers– Employers PRSI unchanged (8.5 – 10 ¾ %)– Employer Job Incentive Scheme– Details to be announced
New Company Set Up
• Introduced 2009
• Profits < €320k per annum
• 3 Year Period
• Extended set up’s in 2010.
Smart Economy• Irish Economic Focus• Research & Development tax
credits– Qualifying R & D – 25% cash refund
• Intellectual Property• Awaiting Innovation Taskforce
Report
Support Motor Industry
• Car Scrappage Scheme– Car over 10 years old– €1,500 off VRT– Emissions band A or B
• Environmentally Friendly– Extension of VRT Relief to 2012
• VAT Margin Scheme
Supporting Retail Sector
• VAT Rate
– Reduced from 21½% to 21% from 1/1/10
• Excise Reduction on Alcohol
Supporting Agriculture
• Waste Management Capital Allowances – No Income Levy
• Forestry & Bio Energy
Supporting Other Industries
• Construction– Retrofit
• Tourism – Railway Scheme
• Other – Energy Efficient – Extends to Catering/Hospitality
Supporting Financial Services
• Incentives to develop International Funds Industry Hub
• Changes expected in Finance Bill
Incentives to Protect Employment
• Training Fund
• Food Industry
• Employment Job Incentive Scheme
Employment Subsidy Scheme
• Enterprise stabilisation fund– Assist Irish export companies in difficulty
• Second round now open– Eligibility extended Non Export– Minimum of 10 full time employees– Jobs at risk / Commit to retain jobs– Tight Deadline/ Immediate Application
Getting Credit Flowing
• Review Committee NAMA – External Review Process
• Review Banking Policies– Particular Focus on Retail, Car, Tourism &
Agriculture
New and Other Taxes
Carbon Tax
• €15 per Tonne on Fossil Fuels
• Effective Midnight 9/12/2009– Petrol 3.5% Increase
– Diesel 4.6% Increase
• Effective 1/5/2010– Home Heating …. 8.7%
• Commencement Order – Coal & Briquettes
Other Taxes
• Site Valuation Tax – Residential Property– Establishing Ownership Register– Valuation Database
• Water Charges – Based on Usage
Capital Gains Tax (CGT)& Capital Acquisitions Tax (“CAT”)• No changes currently
• Rate 25%
• Finance Bill?
Stamp Duty
• No changes currently
Anti Avoidance
• Clearly Signalled
• Tax Avoidance Schemes
• Strengthening Revenue Power
Conclusion
Tax Planning in the
Current Environment
Current Environment
• Existing Legislation
• Finance Bill / Finance Act
• Maximise available remaining tax reliefs– Secure tax savings– Improve cashflow
• Window of Opportunity
Cashflow Saving Tax Tips
• Preliminary Tax – If profits decreasing – base on current year
• Move to a cash receipts basis for VAT
• Review direct debits for PAYE / VAT
• Directors loan v Salary
• Use of a Redundancy Rebate
Losses
• Ability to Use Losses • Losses arising
– Land write downs / restricted– Capital allowances claims – obsolete assets– Stock / Bad Debt provisions– Inter group loans – write off / down
• Use – Carried back to prior year (company)– Offset against other Income (Personal)
Tax Based Funding/Reliefs• Pensions • Seed Capital Relief
– Start ups – Tax relief on investments up to €600k – Set against Income Tax bill in prior 6 years– Refund of income tax
• Business Expansion Scheme– Tax relief of €150,000 pa for individuals– Qualifying company can secure €2m– Lack of other tax incentives for individuals
Opportunities with Reduction in Asset Values
• Take assets out of company
• Re-organise company structure
• Transfer assets to children
Opportunities for Family Businesses / Companies
• Low valuations – opportunity to transfer
• CAT threshold for children €434k
• Significant tax reliefs remain at present
• Retirement Relief: extract €1.5m cash tax free (if husband & wife qualify)
• Commission on Taxation Report
Company Pension Schemes
• Significant pension fund contribution – Based on age, years of work and salary
• 25% tax free lump-sum
• Changes Signalled
Conclusion
Economy
• Worst is Over?
Tax
• Watch this Space