Tax Developments Promoting Growth of Indigenous Business and - - PowerPoint PPT Presentation

Tax Developments Promoting Growth of Indigenous Business and Attracting Foreign Direct Investment

Peter Vale – Tax Partner & Sasha Kerins – Tax Director

Slide Overview of Presentation Overview of Presentation heading

• Tax Developments Promoting Growth for

Indigenous Business

• Corporation Tax Exemption for Start-up Companies
• Understanding Tax for New & Back to Work Hires
• EII Scheme
• VAT – the Essential Update
• Tax Developments Attracting Foreign Direct

Investment

• FED in 2012
• R&D Tax Credits
• Recent Developments with Group Losses

Tax Developments Promoting Growth for Indigenous Business

Corporation Tax - Start- up Exemption

• S.486C – 3 year exemption – claimed in CT1
• Relief extended to new companies set-up in

2011

• Trade not previously carried on & not liable to

close company surcharge

• Full exemption if CT < €40,000, marginal relief

€40,000- €60,000

• Linked to employer's PRSI

Corporation Tax Start-up Exemption Example

• Employers PRSI paid - €5,000 (A)
• Case I trading income - €80,000
• Total taxable profits - €80,000
• Tax @ 12.5% = €10,000
• CT referable to income from qualifying trade -

€10,000 (B)

• Max relief – lower of A and B – thus max relief

€5,000

• Revised tax payable - €5,000

Tax for New and Back to Work Hires

Employer Incentives - Revenue Job Assist Scheme

• Revenue Job Assist allows employers take a double

wage deduction if they employ a person who has been unemployed for 12 months or more

• Can last for a 3 year period!
• No limit on the number of employees provided that they

take „„qualifying jobs‟‟ – 30 hrs pw, capable of lasting > 12 mths

Tax for New and Back to Work Hires

Employer PRSI Incentive Scheme

• Employers not liability to pay Employer‟s PRSI for 18

months from date of approval for the scheme

• Scheme is available to any employer who creates a new

and additional job in 2012

• Limited to a maximum of 5% of your existing employees
• r five employees

Tax for New and Back to Work Hires

Employee Benefits – Revenue Job Assist Scheme

• An additional allowance is granted to an individual who

has returned to work following unemployment

• Tax relief is due at the individual‟s marginal rate of tax
• In order for this allowance to be granted the

employment must be a “qualifying employment” (30 hours a week/capable of lasting more than 1 year)

Employment & Incentive Investment Scheme (EIIS)

• Employment and Investment Incentive Scheme ("EIIS")

– replaced BES

• Introduced Budget 2011 – EU approved 25/11/11
• Maximum Company Funding €10M
• Annual limit €2.5M. For individual €150k
• Most SME trades qualify (some exemptions)
• Tax Relief 30%, specified relief. Further 11% (not

H.E.R.), if employment targets met

• Holding period 3 years
• Investor cannot be connected with the company

VAT Essential Update

• VAT @ 23% std rate – 1 Jan 2013
• Finance Act 2012 defined bread for purposes of

0% v 13.5% - e-brief 23/2012

• VAT @ 9% for admission to open farms and

heritage buildings

• Mandatory e-filing for all VAT cases since 1

June 2012

VAT Essential Update

• Construction services connected parties not within RCT

net – reverse charge provisions effective 1 May 2012

• Amend invoicing procedure and ensure self account

for VAT on these services

• Welcome change for admin & cashflows
• Rise in e-Audits- use of IDEA
• identifying incorrect rates with greater ease

Tax Developments Attracting Foreign Direct Investment

FED 2012 Overview

• Relief will be calculated on the ratio of qualifying days

spent in a BRICS country (Brazil, Russia, India, China

• r South Africa) to total days in the tax year
• This ratio will be applied to income earned from the

employment in a tax year, including share based benefits but excluding termination payments, company cars, BIK's and preferential loans

FED 2012 Overview

• The maximum deduction available is limited to €35,000

and conditions include:

• 60 days minimum per annum to be spent in the

BRICS country

• all trips must be for at least 4 consecutive days to be

counted towards the 60 threshold

• will apply for the tax years 2012, 2013 and 2014; and
• the deduction only reduces income for income tax

purposes only (not USC or PRSI)

FED 2012 Overview

• The new provision is inserted in to Schedule 25B (i.e. a

specified relief) for the purpose of the High Earners Restriction

• Relief may not have widespread use due to restricted

number of countries it applies and the cap on the level of FED available

Research and Development Overview

• Qualifying R&D expenditure
• Costs associated with:
• basic research
• applied research
• experimental development
• Activities must be carried out by company's own

employees plus expenditure must be incurred in EEA

• Includes both revenue and capital expenditure
• Aim is to achieve scientific & technological advancement

and resolve scientific & technological uncertainty

Research and Development Overview

• Relief for revenue expenditure (salaries, overheads,

direct and indirect), plant/machinery and qualifying buildings

• Incremental spend above base year - fixed as 2003
• Outsourcing limit 5% and 10% of qualifying expenditure
• Ability to reclaim 25% of R&D as:
• current year CT offset/group relief
• prior year CT offset
• cash rebate - over max 3 years
• carried forward to offset future CT

Research and Development Overview

• Overall 37.5% tax relief – 300% deduction @

12.5%

• Accounting treatment:
• EBIT enhancement
• R&D in nominal ledger
• Internal back-up:
• timesheets
• RTI grants
• memos detailing activities

Research and Development Overview

• €100K R&D exp - benefit on a volume basis
• Excess €100K - incremental basis over base year
• Outsourcing limits - greater of 5%/10% or €100K
• Reward key employees:
• portion of R&D credit
• key employees involved in development of R&D
• key employees - 75% of time spent of developing R&D
• can be director/5% shareholder

Research and Development Overview

R&D tax credit - a valid claim

• 13 key criteria provided
• Detail each R&D project separately
• Submit claim as part of Corporation Tax Return

for relevant year

• Claim must be lodged within 12 months of

accounting year-end

Research and Development Overview

• Company incurs R&D spend in 2003 of

€100,000

• In year ended 31/12/2011 company incurs R&D

spend of €600,000

• Incremental spend €500,000
• Company has paid €50,000 in CT in preceding

accounting period

• Company will not have a CT liability for the next

3 accounting periods

Recent Changes re Corporation Tax Group Losses

• Effective for accounting period ending on or after

1 Jan 2012 – time apportion losses

• Grouping CT Losses -can now also include

companies:

• Resident in a treaty country and
• Quoted on a recognised stock exchange
• E.g. now can group losses between 2 Ire cos held

directly by a US parent

• Does not include CGT groups

Thank You