Investment Jackie Masterson Liam Kenny Overview of Presentation - - PowerPoint PPT Presentation

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
• 1st January 2009 – 31st December 2014
• “New” = incorporated on / after

14th 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

(previously carried on as sole trader) €50,000

• 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

(€23,750 - €5,000)

€18,750

• Referable to Income from Qualifying Trade

€18,750 x €100,000/€170,000 - €20,000) =

€12,499

• 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

Employee Remuneration

• Option now to reward "key" employees involved in the

R&D process

• Key Employee:
• Not director or director of a connected company
• Not holding material interest or connected to person who has

material interest

• 75% duties of employment are R&D
• Credit can't reduce the employee's effective rate of tax to

below 23% - employee claim required

• The aggregate surrendered to employees must not

exceed the company's CT liability for the period (prior to any R&D tax credits)

Base Year

• Positive changes for SMEs
• 1st €100k of qualifying spend – ignore base year
• Tax credit will continue to apply to incremental R&D

expenditure in excess of €100k

• Therefore additional €25,000 per annum of tax credit

(effectively cash) available to reinvest

Outsourcing

• Positive changes for SMEs who may not have capacity to

undertake all R&D activities in-house

• Previously sub-contracted spend restricted to 10% of total

spend (or 5% of total spend where sub-contracted to third level institutions)

• Limit now increased to greater of:
• 5%(universities)/10%(others) of total R&D spend; or
• €100,000
• Company must notify third party provider it cannot claim

R&D tax credit also

Research & Development (R&D)

Other Recent Developments:

• Substantial amount of Revenue Audits being conducted:
• self review approach adopted by Revenue
• Significant focus on contemporaneous back-up documents
• Claim for R&D Tax Credits must be made within 1 year of

the end of the accounting period in which expenditure is incurred

• Claim for year ended 31 December 2011 must be made by

31 December 2012 – only 3 months left!

Group Loss Relief

• Two companies are members of a group if one is a 75%

subsidiary of the other or both are 75% subsidiaries of a third company

• Group relief is available to Irish companies, in respect of

certain losses incurred by their non-Irish subsidiary companies

• Losses to be surrendered between group companies:
• Trading Losses;
• Certain excess capital allowances;
• Management expenses; and
• Charges on income

Group Loss Relief

• Current year losses only
• No capital losses surrendered
• Losses only grouped against profits of a corresponding

accounting period

• Restriction on group loss relief if Corporation Tax

Returns filed late:

• 25% restriction delay is less than 2 months
• 50% restriction delay is greater than 2 months

Group Losses - Recent Development

• The previous corporation tax group relief provision

required all members of a loss group to be resident in:

• Ireland;
• the EU; or
• an EEA member state (with which Ireland had a tax treaty)
• Group relief provisions have been extended such that a

group will now include a company tax-resident in a double tax treaty country or listed on a recognised stock exchange, i.e. ownership may be traced through such group companies

• Ireland has DTA‟s with 66 jurisdictions

Group Losses - Recent Development

• Principal class of shares must be substantially and

regularly traded on a recognised stock exchange

• Amendment only applies to companies with accounting

periods ending on or after 1 January 2012

• Apportionment rules are applicable for accounting periods

which straddle this date

Questions

Thank You