Budget 2022 includes measures which continue to support the economy after the fallout from COVID-19 while new measures are being introduced to address climate change.
EisnerAmper Ireland summarises key measures included in Budget 2022 across the following four areas:
- Employment & Personal Tax Measures;
- Corporate & Enterprise Measures;
- Indirect Taxes Measures; and
- Other Measures.
1. Employment & Personal Tax Measures
Income Tax, USC and PRSI
- The standard rate band for Income Tax is being increased by €1,500 in 2022 from €35,300 to €36,800 for a single person and from €44,300 to €45,800 for married couples / civil partners with one earner.
- The Personal Tax Credit, Employee Tax Credit and Earned Income Tax Credit have all been increased by €50 from €1,650 to €1,700.
- The Sea-going Naval Personnel Tax Credit which was introduced in 2020 has been extended until 31 December 2022.
- The reduced rate of USC for medical card holders and people aged 70 and above whose income is €60,000 or less has been extended for another year until 31 December 2022.
- Due to an increase in the National Minimum Wage from €10.20 to €10.50 per hour on 1 January 2022, the threshold for the 2% rate of USC has increased from €20,687 to €21,295. This is to prevent full-time workers on minimum wage from paying USC at the top rates.
- The weekly threshold for the higher rate of Employer’s PRSI has been increased from €398 to €410.
- The BIK exemption for battery electric vehicles will be extended to 2025 with a tapering effect on the vehicle value. This measure will take effect from 2023. For BIK purposes, the original market value of an electric vehicle will be reduced to €35,000 for 2023; €20,000 for 2024; and €10,000 for 2025.
Working from Home Deduction
- Taxpayers who work remotely will be allowed to claim an Income Tax deduction of 30% of the cost of heat, electricity and broadband incurred on days spent working from home.
- Households who sell residual electricity that they generate back to the grid will be allowed a €200 tax disregard on their personal income.
Employment Wage Subsidy Scheme (“EWSS”)
- The EWSS will be extended until 30 April 2022 in a graduated form.
- There will be no change to EWSS for the months of October and November 2021.
- Businesses availing of the EWSS on the 31st of December 2021 can continue to be supported until the 30th of April 2022:
- from December 2021 to February 2022, the original two-rate structure of €151.50 and €203 will apply;
- for March and April 2022, a flat rate subsidy of €100 will be put in place.
- The reduced rate of Employers’ PRSI will not apply for March – April 2022.
- The scheme will close to new employers from 1 January 2022.
Taxation of International Flight Crew
- An amendment will be introduced in the Finance Bill to exclude non-resident flight crew from Irish Income Tax where certain conditions are satisfied. The details will be provided in Finance Bill 2021.
Pre-letting Rental Expenses
- The Finance Act 2017 introduced a provision which allowed a tax deduction against rental income for pre-letting expenses (expenditure that was incurred during the 12 months prior to being let after a vacant period). This provision was due to expire on 31 December 2021. Budget 2022 now extends the tax deductibility for pre-letting rental expenses to 31 December 2024.
2. Corporate & Enterprise Measures
New Corporation Tax credit for the digital gaming sector.
- Relief will be available as a refundable Corporation Tax credit at a rate of 32% on eligible expenditure (relating to the design and production of digital games) of up to a maximum limit of €25 million per project with a per project minimum spend requirement of €100,000.
Corporation Tax relief for certain start-up companies
- The relief will be amended to allow companies claim relief within their first five years of trading, an increase from the current three-year claim window.
Employment Investment Incentive (“EII”)
- The EII scheme is being extended to the end of 2024. Other provisions are being introduced with the aim to make the EII scheme more accessible – to open up the scheme to a wider range of funds and to make it easier for investors to redeem their capital without being subject to a penalty.
Headline Corporation Tax rate
- The Minister reiterated that agreement has been reached that the Irish headline Corporation Tax rate will increase to 15% (from 12.5%). However, the increased Corporation Tax rate will apply only to businesses with annual revenues exceeding €750m.
3. Indirect Taxes Measures
- The Minister has confirmed the reduced VAT rate of 9% for the hospitality sector will expire at end of August 2022 as previously suggested.
- The Minister also announced a change to the Farmers Flat Rate Scheme. There will be a decrease in the farmers’ flat rate addition from the current 5.6% to 5.5% in respect of 2022. The flat-rate scheme compensates un-registered farmers on an overall basis for VAT incurred on their farming inputs.
Vehicle Registration Tax (VRT)
- Budget 2022 introduced increases in the rates of VRT. From January 2022, the Minister said that a revised VRT table is being introduced. The 20 band table will remain with an increase in rates with a 1% increase for vehicles that fall between bands 9-12, a 2% increase for bands 13-15 and a 4% increase for bands 16-20.
- The Minister has confirmed that the Carbon Tax will increase by €7.50 from €33.50 to €41 per tonne of carbon dioxide emitted as flagged in the Finance Act 2020. The Finance Act 2020 provided for annual increments in the Carbon Tax of that amount every year out to 2030. This increase will be effective as of Budget night for auto fuels and 1 May 2022 for all other fuels.
Transfers of land to young trained farmers
- An extension to the Young Trained Farmer Stamp Duty relief was announced by the Minister. This measure means that full relief from Stamp Duty on the conveyance of farmland remains available to eligible young trained farmers to the end of 2022. In the context of this relief, the young trained farmer must be below the age of 35. This relief represents a 7.5% Stamp Duty saving.
4. Other Measures
Warehousing of Tax Liabilities
- Previously, company owners who had a material interest in their company were restricted from availing of the warehousing of debt provisions for employment income from that company. The provisions relating to warehousing of debt were introduced on account of COVID-19 and were effectively a deferral of certain tax liabilities.
- Budget 2022 now allows for such self-assessed income tax-payers who have that material interest in the company to warehouse Income Tax liabilities relating to the employment income from that company.
Help to Buy Scheme
- This scheme was due to cease on 31 December 2021. Budget 2022 now extends that relief to 31 December 2022 and provides that the enhanced relief will be available.
Accelerated Capital Allowances
- The Accelerated Capital Allowance scheme for Energy Efficient Equipment is being amended to exclude equipment directly operated by fossil fuels from qualifying for the scheme.
- The Accelerated Capital Allowance scheme for Gas Vehicles and Refuelling Equipment allows an accelerated deduction when businesses invest in vehicles powered by natural gas /biogas and related refuelling equipment. The scheme is being extended to the end of 2024 and is being amended to include hydrogen powered vehicles and refuelling equipment.
Anti-Tax Avoidance Measures
- Budget 2022 introduced a new rule in relation to interest limitation. This will limit deductible interest expenses to 30% of EBITDA for companies falling within the scope of the measure. Disallowed interest may be carried forward and may be deducted in future years if the company has sufficient interest capacity.
- Also introduced are new anti-reverse-hybrid rules. These rules may bring certain tax transparent entities (such as partnerships) within the scope of Irish tax where the entity is 50% or more owned/controlled by entities resident in a jurisdiction where a non-aligned tax treatment would cause a double non-taxation to occur.
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