On the 12th of October 2021, Ireland’s Minister for Finance, Mr Paschal Donohoe, delivered the budget statement for 2022, with a total budgetary package of €4.7 billion – including measures to promote entrepreneurship as well as supporting growth and job creation, was announced during the statement.
The Minister noted that this year’s budget will look to meet the goals of investing in Ireland’s future, and meeting the needs of today while putting the public finances on a sustainable path. The budget was delivered against a fast-changing economic backdrop both at home and abroad impacted by the Covid pandemic.
Some of the key points from this year’s statement include:
Updates to International Tax Policy
- Corporation Tax Code On 8 October 2021 an agreement was reached between 136 countries including Ireland on a revised agreement for a two-pillar approach to international tax reform (“the OECD Agreement”). Pillar One proposes a re-allocation of a proportion of tax to market jurisdictions, while Pillar Two seeks to apply a global minimum effective tax rate of 15%. Ireland’s Minister for Finance stated that the OECD Agreement will provide critical certainty for Government and industry and will provide long-term stability and certainty to business in the context of investment decisions.
- EU Anti-Tax Avoidance Directive (ATAD) Interest limitation rule The completion of ATAD Transposition includes a new Interest limitation rule which will come into effect from 1 January 2022. This change is required for Ireland to fully transpose ATAD and at a high level seeks to restrict tax-deductible interest expenses to 30% of EBITDA in a given period
- Anti-Reverse-Hybrid Rules New rules to take effect from 1 January 2022 and will bring certain tax transparent entities within the scope of Irish tax where the entity is 50% or more owned/controlled by entities resident in a jurisdiction that regard it as tax opaque and, as a result of this hybridity, double non-taxation occurs.
- Exit Tax In line with the EU Anti-Tax Avoidance Directive, Ireland amended its exit tax rules in 2018. Exit tax remains unchanged at 12.5%.
Updates to Corporate Tax
Corporation Tax (“CT”) rates Ireland will apply the new minimum effective rate of 15% as agreed in the OECD Agreement. Ireland’s existing 12.5% corporate tax rate will continue to apply for businesses with revenues less than EUR 750 million (approximately USD 865 million), which are outside of the scope of the OECD deal. The Minister noted that Ireland will remain an attractive location for investment and continue to play to our strengths, centred on a highly educated and dynamic workforce that has consistently delivered innovation and profitability over many decades to businesses that have made Ireland their home.
- Revised Entrepreneur Relief This new scheme will give a CGT rate of 10% on gains from the disposal of qualifying business assets. An individual who held at least 5% of the shares in a qualifying company, or group of companies, for a continuous period of any three years qualifies
- Corporation tax relief Certain start-up companies carrying on a new business may qualify for relief from corporation tax on business profits in their first three years of trading. The relief was due to end on 31 December 2021, but the Minister for Finance has announced an extension of the relief to 31 December 2026.
- Research and Development Incentives and Capital Allowances The Minister provided details of Ireland’s first Digital Gaming Tax Credit (“DGTC”) which was previously referred to by the minister in his Budget 2021 speech last year. In order to support employment growth in the Digital Gaming sector in Ireland, a refundable DGTC of 32% will be available to companies for expenditure incurred on the design, production, and testing of a game.
- Key Employee Engagement Programme (KEEP) In 2017, the minister announced the introduction of the Key Employee Engagement Programme (KEEP), an employee share option incentive scheme targeted at Small and Medium Businesses to attract and retain key employees in a competitive international labour market, by providing for advantageous tax treatment on share options. The scheme came into effect in January 2018 and currently applies for qualifying options granted before 31 December 2023.
- Knowledge Development Box (“KDB”) The corporation tax rate for income qualifying for relief under the KDB will remain unchanged at 6.25%. The KDB encourages companies to develop intellectual properties, patents, and copyrighted software in Ireland.
Updates to Employment Tax
- Personal Tax rates and bands
The updated personal tax rates and bands are displayed in the table below
|Single/Widowed without depending children||€36,800|
|Married/Civil Partners (one earner)||€45,800|
|Married/Civil Partners (two earners)||€73,800|
- Universal Social Charge The ceiling of the second USC rate band will be increased from €20,687 to €21,295 as follows:
– Incomes of €13,000 or less are exempt.
– €0 to €12,012 @ 0.5%
– €12,013 to €21,295 @ 2%
– €21,296 to €70,044 @ 4.5%
- Employer’s PRSI The weekly threshold for the employer’s PRSI will be increased from €398 to €410 to 8.8%. The balance is at 11.05%.
- Self-employed The PAYE credit will in credit to €1,700 National living wage
- Minimum wage With effect from 1 January 2022 the minimum wage is increasing from €10.20 per hour to €10.50 per hour.
Any Other Tax Updates
- Deposit Interest Retention Tax The rate of DIRT will remain at 33%.
- Capital Acquisition Tax There has been no change to the rate of CAT, which remains at 33%.
- VAT The standard rate of VAT will remain at 23%. The reduced VAT rate applicable to the tourism and hospitality sectors will remain at 9% until 31 August 2022. It will then increase to 13.5% with effect from 1st September 2022 to 31st December 2022.
How can Animo Help?
With specialist consultants based in the capital of Ireland, we are able to provide you and/or your business with expert local industry knowledge. If you have any queries on how the above may affect you and/or your business in the new tax year, get in touch with us today and we will be happy to share support and guidance on best practices. Contact us today by calling +353 (0) 1663 9646, emailing at firstname.lastname@example.org, or by filling in a contact form below.