Tax Developments Promoting Growth of Indigenous Business and Attracting Foreign Direct Investment Jackie Masterson Liam Kenny
Overview of Presentation • Tax Developments Promoting Growth for Indigenous Business • Tax Developments Attracting Foreign Direct Investment
Tax Developments Promoting Growth for Indigenous Business Jackie Masterson
Agenda • Corporation Tax Exemption • New & Back to Work Hires • EIIS • VAT update
Tax Exemption for Start-Ups
Corporation Tax Exemption • Relief from corporation tax for 3 years • New company carrying on new trade • Total profits: • ≤ € 320,000; CT may reduce to Nil • > €320,000 ≤ € 480,000 CT rate <12.5% • 2011 onwards relief linked to PRSI contributions
Corporation Tax Exemption • Qualifying Trade: • Commenced by new company • 1 st January 2009 – 31 st December 2014 • “New” = incorporated on / after 14 th October 2008
Corporation Tax Exemption • Excludes: • Trades previously carried on in Ireland by another person • “Excepted” Trades – s.21A • Professional Services Companies – s.441 • Certain trades specified in EU Regs • Anti-avoidance -associated companies
Corporation Tax Exemption • The Relief • Total corporation tax ≤ € 40,000 • Relief lesser of: • CT referable to qualifying trade • Specified contributions • Specified contributions per employee – lesser of: • PRSI paid • € 5,000 • NB PRSI ceiling change retrospective (1 Jan 2011) • Marginal relief CT > € 40,000 < € 60,000
Example-Tax Exemption for Start- Ups • Case I income – Shop A (new) € 100,000 • Case I income – Shop B € 50,000 (previously carried on as sole trader) • Case V rents € 20,000 • Total Income € 170,000 • Tax Payable • € 150,000 @ 12.5% € 18,750 • € 20,000 @ 25% € 5,000 € 23,750
Example • Total Corporation Tax < € 40,000 • Relevant Corporation Tax € 18,750 ( € 23,750 - € 5,000) • Referable to Income from Qualifying Trade € 12,499 € 18,750 x € 100,000/ € 170,000 - € 20,000) = • Relief Available = € 12,499 • Specified Contributions > € 15,000 • Net Corporation Tax Payable = € 11,250
New & Back to Work
New & Back to Work Hires 1. Employer Job (PRSI) Incentive Scheme • Introduced 2010; extended to 2012 • Employer PRSI Exemption for up to 18 months • Scheme Criteria • Include as contribution for s.486C
New & Back to Work Hires 2. Revenue Job Assist / Long Term Unemployed • Unemployment > 12 months • In receipt of certain benefits • Employer and employee incentive Employer • Double deduction to employer • Emoluments/PRSI for 36 months • Worth € 2,500 p.a to company / € 8,000 p.a to sole trade (at min. wage)
New & Back to Work Hires • Employee • Personal allowance for individual • Additional tapering allowance for 3 years • Individual plus each qualifying child • 20% rate payer worth € 1,524 over 3 years
New & Back to Work Hires 3. Back to work enterprise allowance (BTWEA) • Aimed at certain unemployed, lone parents, social welfare recipients • Pursue self employment • Retain social welfare payments up to 2 years • Benefit not taxed • Form BTW2
New & Back to Work Hires 4. Back to work short term enterprise allowance • Become unemployed / immediate support • Pursue self employment • Retain job seekers benefit • Allowance = jobseekers benefit • Max period of 1 year • Benefit is taxed • Business Plan must be approved • Form STEA1
New & Back to Work Hires 5. Job Bridge • Internship of 6-9 months • Individual sign on for at least 3 months • € 50 per week additional to participants
New & Back to Work Hires 6. Succeed in Ireland • Finders fee • Online referral network • € 1,500 - € 3,000 per sustainable job • www.connectireland.com
EIIS
EIIS • Replaces BES • Replaces seed capital relief • New legislation • Some provisions retained • Key differences
EIIS – Key Changes • Qualifying Trade • Broader range than BES • Some exclusions remain e.g. • Dealing in shares • Dealing in land • Forestry • Hotels • Nursing Homes • Professional service companies • Easier for green energy companies
EIIS • Cap on total EIIS investment • € 10m (previously € 2m) • € 2.5m per annum (previously € 1.5m) • Holding Period • 3 years (from 5 years)
EIIS • Income Tax Relief • Maximum investment € 150,000 per annum • 30% relief (from 41%) • 11% additional – after 3 year period • Employment levels/R&D • HIE – 30% only
EIIS – Provisions Retained • Investor connection with the company • Qualifying company – size: • Micro/small – located anywhere • Medium: • Assisted area or • Start up stage – located anywhere • Qualifying company • Control • Subsidiaries
Seed Capital
Seed Capital • Encourage employees to set up own business • Maximum subscription € 600,000 • Maximum relief in any year € 100,000 • Refund of tax in previous 6 years • Individual – requirements: • Employment with company • Share capital – new and other companies • Income sources – Schedule E
Seed Capital – Key Changes • Removal of limitation on qualifying trades • Permitted limit of non schedule E income • € 50,000 (previously € 25,000)
VAT Update
VAT Update • Alternative to bi-monthly returns? • Turnover dropping de-register? • Cash receipts basis • Continuous supplies – RFPs • Bad debts • VAT 13B • Conference accommodation /CO2 vehicles
VAT Update • Place of supply of services • Temporary 9% VAT rate • Revised Pharmacists Scheme – Ebrief 41/12 • Receiverships • Electronic Invoicing • Mandatory E-Filing
Tax Developments Attracting Foreign Direct Investment Liam Kenny
Topics to be Covered • Foreign Earnings Deduction (FED) • Special Assignee Relief Programme (SARP) • R&D Tax Credits – FA 2012 Essentials • Group Losses – Recent Developments
Foreign Earnings Deduction (FED) • FED – reintroduced by FA 2012 to support companies' efforts to expand into BRICS countries • BRICS countries (Brazil, Russia, India, China, South Africa) • Operate for three years with effect from 1 January 2012 • Available where individuals work 60+ days in a 12 month period in any of the BRICS countries • The individual's taxable income is reduced accordingly
Foreign Earnings Deduction (FED) • Deduction of taxable salary, not USC • Deduction = No. Qualifying Days x Qualifying Income 365 • Qualifying days = 1 of at least 4 consecutive days • Capped @ € 35,000 deduction • Max income tax saving € 35k @ 41% = € 14,350
Foreign Earnings Deduction (FED) - Example • Mary is Irish resident • She is working on a project in Brazil throughout 2012, spending at least 3 weeks at a time working in Brazil, therefore 90 qualifying days in total • Annual remuneration package: salary of € 150,000, taxable share award of € 20,000 and share option gain of € 10,000 • FED available: - Qualifying income € 180,000 * 90/365 days = € 44,380 - Deduction capped at € 35,000 - Reduction of taxable salary of € 35,000 and repayment of income tax of € 14,350 (not USC)
Foreign Earnings Deduction (FED) • FED is regarded as a „specified relief' • Not applicable to Benefit-in-Kinds (BIKs) • Employee/director must make claim for FED in personal income tax return to obtain relief each year • FED cannot be claimed where the following reliefs apply: - Special Assignee Relief Programme (SARP) - New Employee R&D Tax Credit Relief
Special Assignee Relief Program (SARP) • Objective - attract key talent to Ireland • Persons arriving in Ireland in 2012, 2013 and 2014 • Employers incorporated and tax resident in treaty country ("relevant employer") • N/a branches & unincorporated entities • Employed by relevant employer for 12 months prior to arrival in Ireland • Employee must perform substantially all duties in Ireland for 12 consecutive months
Special Assignee Relief Program (SARP) • Employee - not ROI tax resident in 5 tax yrs pre-arrival • Max 30 overseas working days • Min base salary of € 75,000 • Tax free deduction from remuneration (A-B) x 30% A = total remuneration (cap € 500k) B = € 75k • Max annual relief ( € 500k - € 75K) x 30% x 41%= € 52,275 • Claim max of 5 years only • N/A to USC or PRSI
Special Assignee Relief Program (SARP) If claiming SARP • Cannot claim : • Remittance basis • R&D key employee relief • Cross border worker relief • FED • Can claim : • Travel costs – return trip • School fees max € 5k
Research & Development (R&D) Positive changes enacted by Finance Act 2012 to R&D tax credit regime: 1. Employee Remuneration 2. Base Year Relaxation 3. Outsourcing Rules Relaxed
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