Income tax rates

There were no changes made to tax rates for 2023. The standard income tax rate will remain at 20% and the higher rate at 40%.

The Standard Rate Cut Off Points (SRCOPs) for 2022 have been increased as follows:

Certain income tax credits will increase as follows:

The sea-going naval personnel tax credit of €1,500 has been extended for 2023.

Universal Social Charge (USC)

A rise in the minimum wage from €10.50 to €11.30 per hour was announced in the Budget to take effect from 1 January 2023.

The USC rates and bands from 1 January 2023 will be:

• €0 – €12,012 @ 0.5% – no change
• €12,013 – €22,920 @ 2%
• €22,921 – €70,044 @ 4.5%
• €70,045+ @ 8%
• Self-employed income over €100,000: 3% surcharge

Incomes of less than €13,000 remain exempt from USC.

Small Benefit Exemption

The Small Benefit exemption has been increased from €500 to €1,000, with employers permitted to give employees two vouchers per year rather than just one which was the case up to the Budget announcement. This provision applies to 2022 and future years.

Rental Tax Credit

The Bill gives effect to the Budget Day announcement whereby a new €500 new rent tax credit will be introduced from 2023 onwards for those renting in the private sector and who are not in receipt of other State housing supports. Other notable points in respect of the new credit include:

• Only one credit may be claimed per person per year (the value of the credit will be doubled in the case of jointly-assessed married couples and civil partners);
• Certain formalities and conditions will need to be complied with in order to claim the credit:
  • The tenant will be obliged to provide details of the property and landlord
  • The tenant will be obliged to provide a receipt for rent paid if required by Revenue
  • The tenancy must be registered with the RTB, where appropriate.
  • The claimant may be required to provide the LPT reference number for the property;
• The credit will also apply in the case of certain non-RTB registered tenures, including certain licence type arrangements where the landlord consents to the licence arrangement;
• The credit will be available to parents who pay rent on behalf of their student children who are in third-level education. Where a student is under 23 on 1 January of the year of their first point of entry into an approved course, the parent(s) will be able to claim the tax credit for the duration of that course. This will only apply in the case of RTB registered tenancies;
• The credit may be claimed “in year” in the years 2023 to 2025. In 2023, the credit will be available on a retrospective basis in respect of rent paid in 2022.

Vacant Homes Tax

A new vacant home tax will be introduced in 2023 and will apply to residential properties which are occupied for less than 30 days in a 12-month period. The tax will be capped at 3 times the existing LPT rates applicable to that property.

The Bill provides for a number of specific exemptions from the tax, including where the property is actively marketed for sale, death of the chargeable person in respect of the vacant property where that was the sole or main residence of that person, and where the sale or occupation of the property is prohibited by court order.

Special Assignee Relief Programme (SARP) and Foreign Earnings Deduction (FED)

The Bill gives effect to the Budget Day announcement that SARP relief will be extended until 31st December 2025. However, the qualifying minimum income limit will increase for new entrants from €75,000 to €100,000.

The FED was also due to cease at the end of 2022 and has been extended until the end of 2025.

Help-to-Buy Scheme

In line with the Budget Day announcement, the Bill confirms that the Help to Buy scheme is being extended at current rates until the end of 2024. It was due to expire in December 2022.

Return by Employers on Reportable Benefits

The Bill provides for the automatic reporting to Revenue by employers in respect of the following benefits that are made to employees without the deduction of payroll taxes:

• The remote working daily allowance of €3.20,
• The payment of travel and subsistence expenses, and
• The small benefit exemption.

The measure will be subject to a Ministerial Commencement Order.

BIK on Employer Contributions to PRSAs

The current position in relation to employer contributions to PRSAs is that this contribution is treated as a Benefit-in-Kind (BIK) for the purposes of employee income tax. This effectively restricted employer PRSA contributions to a level that is usually significantly less than could be contributed BIK free to an Executive Pension Plan or its Master Trust equivalent, for the same employee.

The Bill proposes to alter the current position by abolishing the BIK charge for employer related PRSA contributions. If passed into law, the employer contributions will no longer be treated for tax relief purposes as an employee contribution.

This change, if implemented, would take effect from 1 January 2023. Any employer contribution to a PRSA paid before the end of 2022 will remain a BIK charge for the employee.

Foreign Pension Lump Sums

The Bill provides that an Irish tax resident may receive a tax-free lump sum of up to €200,000 from a foreign pension, in line with that available for Irish pension holders from 1 January 2023. Amounts in excess of this tax-free limit are subject to tax in two stages. The portion between €200,000 and €500,000 is taxed at the standard rate of 20 per cent while any portion above that is taxed at the individual’s marginal rate of tax and USC.

Stamp duty Refund on certain residential property transactions

Currently Stamp Duty legislation provides for a refund of stamp duty paid on a site purchase, to reduce the stamp duty from 7.5% to an effective rate of 2%, where the site is developed for residential purposes. Under existing rules, construction must commence on or before 31 December 2022 and a 30- month time limit is allowed for completion. The Bill extends the commencement date to 31 December 2025. The 30-day time limit for completion remains in place. Construction must also commence within 30 months of the land transfer.

Electricity and Gas

The Bill extends the 9% rate on the supply of electricity and gas until 28 February 2023.

Flat rate farmers

The flat rate addition payable to unregistered farmers is reduced from 5.5% to 5%.

Milk and milk products

Food products that are categorised as “milk and preparations and extracts derived from milk” are removed from zero rate VAT and will fall within the standard rate of VAT from the passing of the Finance Act.

Medical Professionals

The Bill clarifies that registered medical professionals and registered members of designated health and social care professions are the groups of persons who may supply exempt medical care services.

Deduction for VAT on securities issued to raise capital

The Bill provides that VAT incurred on dealing new stocks, new shares, new debentures or new securities for raising capital will be deductible under general provisions.

Registration

The Bill provides that traders who register for VAT for domestic transactions only and subsequently engage in intra-Community transactions, are required to notify Revenue within 30 days of engaging in such activity.

R&D Tax Credit

The Bill contains changes to the payment provisions (not the quantum of credit that is claimable) to tie in with international developments. In certain cases, the changes may accelerate the benefit of the claims made as the Bill provides for the repayment of the credit in full in three instalments within 48 months from when a valid claim is made.

The Bill also provides for the allowance of pre- trading expenditure incurred on qualifying R&D activities in a R&D claim over a three-year period from the year the company commences to trade.

Non-commenced provisions relating to micro and small sized companies have been repealed, due to State Aid reasons.

Knowledge Development Box (KDB)

The KDB regime has been extended for a further four years, to include accounting periods commencing before 1 January 2027.

The Bill also provides (subject to a Ministerial Commencement Order) for a new effective rate of 10%for profits within scope of the KDB (currently 6.25%). The reason for this is to counteract the impact of changes in the OECD/G20 Inclusive Framework Two-Pillar Solution, specifically the Subject to Tax Rule (“STTR”).

Birth Registration

The definition of “child” for CAT purposes is amended to include an affected person, being an individual affected by an incorrect birth registration, and insert the terms “social father”, “social mother” and “social parent”. These terms should be read in conjunction with the Succession Act 1965 to determine the relationship that an affected person bears to such individuals and their relatives.

The Bill amends the computation of CAT on gifts and inheritances to provide the facility for an affected person to make an election as to the applicable relationship for CAT purposes where that person takes a taxable benefit from his or her birth parents or from his/ her social parents. Once made, that election will apply to all future gifts and inheritances received from the same disponer.

As announced on Budget Day, TBESS is being introduced to mitigate higher energy costs. A business may qualify for relief where it is trading and has experienced a significant increase in its energy costs. The scheme operates by comparing energy unit prices in a reference period in 2021 to that same period in 2022 and 2023. Where there is an increase of over 50% in energy costs for the reference period, the business will be eligible for relief of 40% of the increase experienced. Following much lobbying after the Budget Day announcement, the Bill extends the scheme to include Case II professional businesses such as doctors, accountants and solicitors. The scheme will operate in respect of energy costs relating to the period 1 September 2022 to 31 December 2022, being extended to 28 February 2023 pending revision of the TCF.

Businesses must register to participate in the scheme, and it will be subject to a monthly cap of €10,000 per trade or profession. This may be increased to €30,000 in certain circumstances where qualifying businesses operate across more than one location and have multiple meter point reference numbers.

There is an overall maximum payment limit for support given under the EU State Aid Temporary Crisis Framework (“TCF”) of €500,000 per undertaking carrying on one or more qualifying business (lower limits apply to businesses engaged in farming (€62,000) and fishing (€75,000) activities).

The scheme will be administered by the Revenue Commissioners and a claim must be made within 4 months of the end of the relevant claim period. Payments cannot be made under the scheme until State aid approval has been received.

The Bill will be debated in the Houses of the Oireachtas, and most likely certain amendments will be made during that process.

While the Bill contains some very welcome measures such as TBESS, in my view, there were some missed opportunities, however.

More targeted measures to support climate change would have been very welcome. Also, there were very limited amendments to Capital Gains Tax and Capital Acquisitions Tax. It is hoped that measures addressing these matters will be announced in future Budgets.