Finance Act | 2010 | Summary
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The Finance Act 2010 was signed into law on 3 April 2010.
Levies
3. Income levy. Makes four changes :
(a) Rewrites the charging section,
(b) treats tax agreements as equivalent to treaties for the purposes of the income levy,
(c) extends cross-border relief to the income levy, and
(d) relieves EU Nitrate Directive payments from the scope of the levy.
Income Tax
4. Preferential loans. If a loan provided by an employer at a preferential rate no longer qualifies for home loan interest relief (s 244), the employee is taxed on the interest benefit.
5. Loans of art objects; long-term care policies. The annual benefit of the loan of an art object, from an employer to an employee is treated as a benefit in kind.
Premiums on long term care policies do not qualify for relief.
Both changes are effective 1 January 2010.
6 . Health expenses. Ensures, from 1 January 2010, that:
(a) hospitals no longer need to be approved by Minister,
(b) relief is available in respect of private contributions made toward the upkeep of an individual under the Fair Deal Scheme,
(c) cosmetic surgery is not generally allowed, and
(d) the Minister can prescribe that treatments contrary to public policy do not qualify for tax relief.
7 . Home loan interest. Loans taken out on or after 1 January 2013 will not qualify for relief. Loans taken out between 1 January 2004 and 31 December 2011 continue to obtain relief, but relief is abolished from 1 January 2018. During 2012 to 2017 inclusive, the interest ceiling for married couples and widowed individuals is €6,000, and for single persons it is €3,000, and the maximum rate at which relief will be given is 15% for first-time buyers and 10% for non-first time buyers.
8 . Proprietary directors: credit for tax deducted. The credit for PAYE tax remitted cannot exceed PAYE actually deducted from the director’s emoluments.
9 . Remittance basis. Ceases in respect of individuals who are not ordinarily resident in the Republic of Ireland (ROI). Effective 1 January 2010.
10 . Relief for non-domiciliaries taking up employment in Ireland. The relief (currently applicable only to non-EEA nationals) is extended to EU/EEA nationals who come to live and work in Ireland for at least one year. Effective 1 January 2010.
11 . Foreign earnings. Changes meaning of “presence” in the ROI for one day to ensure it means presence at any time during the day – as is already the case for the general residence test.
12 . Local authority service charges. Abolished for 2011 and later tax years.
13 . Rent-a-room relief. Anti-avoidance. The relief does not apply where the claimant is an employee of the person making the payment.
14 . Farm stock relief for young trained farmers. A Bachelor of Agricultural Science – Agri-Environmental Science (UCD) enables an individual to qualify for 100% farm stock relief.
15 . Rental losses. Case V capital allowances must be deducted in priority to Case V losses carried forward from a previous tax year.
16 . Pensions. Where the value of a fund exceeds the limit, the notional distribution is calculated at 3% for 2010 and later tax years.
Leaving funds in a Personal Retirement Savings Account (PRSA) at the point of retirement rather than transferring such funds to an Approved Retirement Fund (ARF) is a benefit cystallisation event (BCE).
Administrators of Small Self-Administered Pension Schemes must, from 1 January 2011, file scheme accounts electronically.
17 . Restricted shares. The trust in which such shares are held must be resident in the Republic of Ireland or an EEA State.
18 . Awards of shares. Employers must file returns providing details of awards of shares to directors and employees.
19 . Profit sharing schemes. Anti-avoidance. A scheme will not be approved if there are arrangements in place for loans to be made to eligible employees. Shares in service companies do not qualify. Effective 4 February 2010.
20 . Health insurance premiums. Provides an age-related tax credit, as follows:
| 2009 | 2010 | |
| € | € | |
| Aged 50 – 60 on contract date or renewal date | 200 | 200 |
| Aged 60 – 70 on contract date or renewal date | 500 | 525 |
| Aged 70 – 80 on contract date or renewal date | 950 | 975 |
| Aged 80 or over on contract date or renewal date | 1,175 | 1,250 |
21 . Losses on approved buildings. From 1 January 2010, passive investors will no longer be entitled to shelter income with losses. Provided there is a written contract in place before 4 February 2010, work underway on that date will qualify for relief in 2010 and 2011.
22 . Professional Services Withholding Tax. Adds six new bodies to the list of accountable persons who must deduct such tax. Effective 1 May 2010.
23 . High earners. From 1 January 2010, if your income exceeds €125,000, the maximum reliefs and exemptions you can claim is the higher of:
(a) €80,000, and
(b) 20% of your total income.
Income Tax, Corporation Tax and Capital Gains Tax
24 . Charities and donations to approved bodies. Charities based in EEA/EFTA countries can apply for tax exemption. A two year waiting period applies before a charity can access the donations relief scheme (s 848A).
25. “Windfall” profits or gains from land disposals. Under the National Assets Management Agency Act 2009, such gains were subjected to an 80% tax rate. That rate will not apply to disposals of small sites (below 0.4047 hectare, and with a market value below €250,000). Effective 30 October 2010.
Increases in the value of land, as a result of planning decisions which materially contravene a development plan for a particular area, are also taxed. Effective 4 February 2010.
26 . Crèches. The capital allowances scheme ceases from 30 September 2010, with extensions as follows: If the work required planning permission, the termination date is 31 March 2011, provided 30% of the construction costs have been incurred by 30 September 2010.
27 . Mid-Shannon tourism incentives. Extends application period to 31 May 2012. Subject to approval by EU.
28 . Payment of tax by donation of heritage property. Property may be donated to the Commissioner for Public Works.
29 . Relevant contracts withholding tax (RCWT). Principal contractors may pay and file less frequently. Revenue may make regulations requiring principals to provide additional information on the return, and enabling them to issue two-year C2 certificates. Revenue may also, without being requested to do so, amend the limit on a relevant payments card (C47).
30 . Exempt gains of unauthorised unit trust. The trustees must file, on or before 28 February in the following tax year, an electronic statement providing each unit holder’s name, address and other information Revenue may reasonably require. A €3,000 penalty applies if the statement is not made, or is incorrect. Effective for 2010 and later tax years.
31 . Unit trusts and offshore funds. Exempts non-resident unit holders from exit tax, where the investment undertaking has:
(a) put measures to ensure the unit holders are non-Irish resident, and
(b) been approved by Revenue where they are satisfied with such measures.
A relevant undertaking for collective investment in transferable securities (UCITS) formed under the law of another EU State is not liable to Irish tax solely on the basis that it has a management company that is authorised under Irish law.
32 . Profits from agencies etc. Section 1035, which charges a non-resident in respect of the profits of an agent in the State, does not apply in the case of a UCITS formed under the law of another EU State which has a management company authorised under Irish law.
33 . Dividend withholding tax (DWT) To claim exemption from DWT, a non-resident company will provide a declaration to the paying company or intermediary. That declaration will last six years. Dividend statements may be provided to shareholders electronically. Effective 3 April 2010.
34 . Purchase of own shares by quoted company. To qualify for the CGT treatment, a share buy back by a quoted company must not be part of a tax avoidance scheme. The paying company must notify Revenue of share buybacks within 12 months of the end of the accounting period in which the buyback took place. Effective 4 February 2010.
35 . Government and public securities. Interest on savings certificates issued by governments of EU countries is exempt from tax. All non-resident individuals (not just non-ordinarily resident individuals) will qualify for the exemptions in ss 43, 47, 48 and 49. Effective 4 February 2010.
36 . Finance leases. A lessee who bears the burden of wear and tear on an asset is entitled to the capital allowances on that asset (s 299). The amounts treated as income by the lessor, and as expense by the lessee, must match. Only one party to a lease can claim the allowances. Effective 3 April 2010.
37 . Deposit interest retention tax (DIRT). A PRSA provider is exempt from DIRT; financial institutions must obtain the tax number of depositors; DIRT is to be paid by financial institutions within 21 days of 31 March, 30 June and 30 September; financial institutions must automatically issue a statement of DIRT deducted from interest (not just on request). Effective from date of Ministerial Order.
38 . Film relief. Investors may carry forward 100% (not 125%) of unused relief – corrects an error. The figure should have been reduced to 100% when the relief increased from 80% to 100%.
39 . Islamic finance. The return on specified finance transactions is treated as interest for tax purposes. The new legislation sets out rules for credit transactions, deposit transactions and investment transactions.
40 . Interest payments to non-residents. An Irish company or investment undertaking need not deduct income tax from such interest, provided the payee is resident in a treaty country and the interest is liable to tax in that country. Effective 3 April 2010.
41 . Credit for foreign tax. Where an Irish taxpayer in receipt of foreign income gets a payment from the foreign government in respect of tax paid by another person (the paying company’s corporation tax - for example, an imputed tax credit) he is subject to Irish tax on the gross amount of the payment (inclusive of the tax paid by the other person). Effective 4 February 2010.
42 . Transfer pricing. These rules ensure that arm’s length prices apply to transactions between associated persons, thus ensuring the full profit is taxed in the country receiving the income. The rules do not apply to small and medium sized enterprises (less than 250 employees, with turnover below €50m or assets below €43m). Effective 1 January 2011 as respects transactions agreed on or after 1 July 2010.
Corporation tax
43 . Intangible assets. The period in which an intangible asset must be used in a trade to avoid a clawback is reduced to 10 (previously 15) years.
Software bought by a company for commercial exploitation is to be treated as an intangible asset.
Pre-commencement expenditure on an intangible asset will qualify. Relief is given where an impairment of an intangible asset results in a downward revaluation.
The management or exploitation of specified intangible assets is treated as a separate trade for capital allowance purposes. All changes are effective from 4 February 2010.
44 . Energy efficient equipment. Extends 100% capital allowances to three new categories – refrigeration and cooling systems, electro-mechanical systems, and catering and hospitality equipment. Effective from date of Ministerial Order.
45 . Start-up companies. The relief which allows a new company with a corporation tax charge of up to €40,000 to reduce that charge to nil is extended to 2010. The relief is subject to EU de minimis aid regulations.
46 . Foreign royalties. A trading company in receipt of royalties from a non-treaty country is entitled to unilateral relief for the foreign tax paid. Effective 1 January 2010.
47 . Unused foreign tax on branch profits. May be carried forward and credited against corporation tax in subsequent accounting periods.
48 . Foreign branch excess losses. May be set against profits of the branch arising after 1 January 2011.
49 . Dividends from Irish resident subsidiary. These are taxed at 12.5% if the dividends derive from profits earned while the subsidiary was non-resident.
50 . Foreign dividends. The 12.5% rate is extended to include dividends received by a plc from trading profits of a subsidiary in a non-treaty country. Foreign dividends received by a portfolio investor company (one having a holding of less than 5%) are exempt if the dividend forms part of the company’s trading income.
51 . Mergers; capital allowances. The transfer of trade assets in the course of a merger will not give rise to a balancing charge.
52 . Short-term leases of plant and machinery. The lessor may elect to be taxed on the accounting profits from the lease. The new rules apply to leases in excess of a threshold amount. If the lessor is a group member, the threshold is calculated on a group basis.
53 . Foreign currency: capital allowances and trading losses. Where a company’s lesing activity is not sufficient to constitute a trade, it may compute capital allowances and losses in its functional currency.
54 . Research and development (R & D) – tax credit. If a company carries on R & D at different centres in separate locations, it must keep separate records for each location. The expenditure of a centre that ceases to be used for the company’s trade, must be excluded from the threshold amount. The clawback is charged under Schedule D Case IV. The clawback also applies if within 10 years of the centre ceasing to be used for R & D, no group company remains within the charge to corporation tax.
A claim in respect of pre-trading R & D expenditure must be made within 12 months of the end the accounting period beginning on the date the company started to trade.
The R & D changes are effective from 1 January 2010.
55 . Royalty payments. These may be made free of withholding tax, provided the recipient:
(a) is resident in an EU State or a treaty country,
(b) is liable to tax in respect of the payment in that territory.
Capital gains tax (CGT)
56 . Compulsory purchase orders (CPOs). Time of disposal is when the compensation is received. The proceeds are liable to CGT if the person making the disposal dies before receiving the consideration. Effective 4 February 2010.
57 . Non-resident company – attribution of gains to participators. These rules do not apply to:
(a) a non-trading company which is in a group with a trading company, and
(b) gains on intangible assets.
Effective 4 February 2010.
58 . Retirement relief. A payment received in respect of a share buyback is taken into account for the purposes of the €750,000 lifetime limit. Effective 4 February 2010.
59 . Allowable losses - restrictions. Anti-avoidance. Disallows losses where no real economic loss has been suffered. Effective 4 February 2010.
60 . Government and other securities. Anti-avoidance. Profits and losses on gilt futures contracts are based on the value of the underlying gilt. This prevents generation of artificial losses. Effective 4 February 2010.
61 . Disposals to State, public bodies, charities. Clarifies that disposals to government-funded national cultural institutions, for example, the Chester Beatty Library, are exempt. Effective 4 February 2010.
62 . Due date for payment. Technical amendment, effective 4 February 2010.
63 . Exempt bodies. Updates references to local authorities. Effective 4 February 2010.
Customs and excise
64.-111. Mineral oil tax carbon charge, natural gas carbon tax, solid fuel carbon tax, increases on alcohol products tax, tobacco products tax.
Value-added tax (VAT)
112-113. Interpretation. Amends definitions relation to margin schemes, and adds definition of “telephone card.”
114. Property transactions. Allows a joint option to tax where the sale of the property is forced, for example, in the case of liquidation.
115. Immovable goods: transitional measure.
116. Supply of services. Deletes definition of “telephone card.”
117. Accountable persons. Clarifies that the reverse charge rule applies where the service is received by a taxable person carrying in business in the State or by a person with an Irish VAT number.
From 1 July 2010, the State and public bodies are taxable if they provide services outside their regulatory functions, if they carry on an activity listed in the new Schedule 7, or where there is likely to be a distortion of competition. In practical terms, local authority-owned car parks and leisure type centres must now charge VAT.
118. Taxable amount. The time of supply for telephone cards is changed from the time of supply to the time the card is used – the time of redemption. Telephone cards are now treated in the same manner as any other voucher which can be redeemed for a specific value. Coupons, vouchers, telephone cards etc sold to another person in the course of business are liable at the time of supply (not at the time of exchange for goods or services).
119. Margin scheme goods. The sale of second-hand means of transport (s 12B), and agricultural machinery (s 12C), is brought under the general margin scheme (s 10A). The onward supply of goods acquired as margin scheme goods is taxable unless the goods are passenger motor vehicles or are goods used in an exempted activity. If a taxable dealer uses a motor vehicle for business purposes (for example, a demonstration model) he is caught for VAT on a self-supply at the time the vehicle is registered, but he may apply the margin scheme when the vehicle is later sold.
120. Special scheme for auctioneers. The onward supply of goods acquired through auction is taxable unless the goods are passenger motor vehicles or are goods used in an exempted activity.
121. Rates of tax. The standard rate is reduced to 21% (previously 21.5%). Effective 1 January 2010.
122. Special scheme for means of transport. Abolished from 1 July 2010, with transitional measures in place from 1 January 2010 to 30 June 2010. The supply of second-hand means of transport is now taxed under the margin scheme (s 10A).
123 . Special scheme for agricultural machinery. Abolished from 1 July 2010, with transitional measures in place from 1 January 2010 to 30 June 2010. The supply of second-hand agricultural machinery is now taxed under the margin scheme (s 10A).
124 . Retail export scheme. Extends the conditions that a supplier must meet in order for a traveller’s qualifying goods, and the services of a VAT refunding agent, to be zero-rated. If the supply of goods does not qualify for zero-rating, the services of the VAT refunding agent do not qualify either.
125 . Imported goods. Implements Council Directive 2009/69/EC regarding tax evasion linked to imports. The importer must provide certain information before the supply of imported goods to another EU State can be zero-rated.
126 . Records. A taxable dealer must keep records relating to the transitional measures for second-hand means of transport and agricultural machinery (see above).
127 . Invoices. Entitlement to deduct VAT relating to a qualifying conference is not restricted by the travel agents’ margin scheme.
128 . Penalties. A €4,000 penalty applies where a person fails to comply with a notice to provide records relating second-hand means of transport and agricultural machinery in the transitional period.
129 . Schedule 7. Implements Council Directive 2006/112/EC, by listing good and services that are chargeable to VAT when supplied by the State or public bodies.
130 . Schedules 1, 2 and 6. Rewrites and replaces these, in preparation for consolidation of the VAT legislation. The medical care exemption is brought into line with the EU Directive. Individually negotiated postal contracts are not exempt. Islamic financial products are exempt from VAT.
131 . Consequential amendments. Updates cross-references to the Schedules and repeals other schedules.
132 . Pre-consolidation changes. Lists various amendments required before consolidation can take place.
133 . Supply of greenhouse gas emission allowances. Taxable activity.
Stamp duties
134 . Interpretation.
135 . Property Registration Authority. Revenue may exchange information with the Authority.
136 . Conveyance in consideration of debt. Anti-avoidance. Debt paid by a person other than the transferee must be included in the consideration for stamp duty purposes.
137 . Certain investment certificates. Stamp duty is not chargeable on investment certificates (s 267O).
138 . Funds: reorganisation. The exemption for reconstructions and amalgamation also applies where a domestic fund issues units to a foreign fund. Transfers of assets within certain unit trusts are also exempt from stamp duty.
139 . Life insurance premium levy. Excludes pensions and reinsurance business from the levy, and brings forward the due date for payment of the levy.
140 . Levy on health insurers. From 1 January 2010, the levy is €185 for each insured person aged 18 or over, and €55 for each person aged under 18.
141 . Young trained farmers. Extends relief to include the Degree in Agri-Environmental Science (UCD).
142. Interpretation.
143. Overpayment of tax. Extends the four-year time limit to overpayments of probate tax. Effective 3 April 2010.
144. Units in collective investment undertakings. A gift or inheritance of such units is exempt where both the disponer and the beneficiary are neither domiciled nor ordinarily resident in the State.
14 5. “ Your Country, Your Call”. Awards from this competition are exempt from CAT. Effective 17 February 2010.
146 . Agricultural relief. A clawback arises if the relieved property is disposed of within six years of the date of the gift or inheritance, and the proceeds are not reinvested in further agricultural property. From 4 February 2010, reinvestment in agricultural property acquired from one’s spouse does not qualify.
147 . Modernisation of CAT administration. Removes requirement for Revenue to certify the Inland Revenue Affidavit (IRA), and provides for e-filing if IRAs.
Removes secondary accountability and charging of CAT on property for the 12 years following the date of the gift or inheritance. This is a retrospective change.
Ensures that an Irish-resident agent is responsible for payment of CAT where the personal representatives and one or more beneficiaries are non-resident. That agent will have the right to withhold sufficient property from the estate to pay the tax.
Aligns the pay and file dates for CAT with the income tax pay and file dates: Where the valuation date falls between 1 January and 31 August, the pay and file date is 31 October in the same year. Where the valuation date falls between 1 September and 31 December, the pay and file date is 31 October in the following year. A surcharge, similar to the surcharge in operation for income tax, will apply. These changes come into effect from the date of an Order to be made by Revenue.
Where a beneficiary claims reliefs or exemptions (apart from the small gift exemption), the return must be filed electronically.
The threshold above which a clearance certificate is required from Revenue in relation to a jointly-held deposit account is increased to €50,000 (previously €31,750).
Miscellaneous
148 . Interpretation.
149 . Mandatory disclosure of certain transactions. Requires tax agents to provide Revenue with details of avoidance schemes.
150 . Domicile levy. This new levy is charged, for 2010 and later tax years, on Irish citizens who are Irish domiciled if the individual’s:
(a) world-wide income exceeds €1m,
(b) Irish located property is greater than €2m, and
(c) Irish income tax liability was lower than €200,000.
The individual may credit any Irish income tax paid against the levy.
The tax is due on or before 31 October in the tax year following the valuation date (31 December).
Other rules relate to the valuation of land and buildings, the making and amending of assessments, and the charging of interest on tax paid late.
151 . Residence treatment of donors of gifts to the State. Ceases as regards gifts made on or after 4 February 2010.
152 . Commissioner for Taxi Regulation. New rules require the Commissioner to provide information, on request, to Revenue.
153 . Third party information. Revenue may apply to the Appeal Commissioners for consent to issue a notice to obtain information from third parties in relation to a class of persons.
154 . National Asset Management Agency (NAMA). New rules require NAMA to provide information relating to property transactions, on request, to Revenue.
155 . Revenue offences. Allows a Revenue officer to serve documents relating to proceedings or relating to an appeal against a judgement relating to such proceedings.
156 . Tax clearance certificates. Extends the definition of “tax acts” to include customs and excise legislation.
157 . Double taxation. Allows for provisions relating to recovery of taxes to be included in tax treaties, and also allows for the ratification of the Joint Council of Europe/OECD Convention on Mutual Administration Assistance in Tax Matters.
158 . Double taxation relief. Adds Bahrain, Belarus, Bosnia and Herzegovina, Georgia, Moldova and Serbia to the list of tax treaty countries.
Adds Anguilla, Bermuda, Cayman Islands, Gibraltar, Guernsey, Jersey, Liechtenstein, and the Turks and Caicos Islands to the list of countries with which Ireland has information exchange agreements.
159 . Technical amendments.
160 . Provisional Collection of Taxes Act 1927.
161 . Judiciary. Provides for a voluntary gift scheme for members of the judiciary.
162 . Capital Services Redemption Account.
163 . Bretton Woods Agreement Act 1957 - amendment.
164 . Care and management.
165. Short title, construction, commencement.
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