CORPORATE TAX

The Minister of Finance confirmed Ireland’s continued commitment to maintaining the 12.5% corporation tax rate to attract and retain foreign direct investment.

International tax update

As initiated in Budget 2017, a Review of the Irish Corporate Tax Code (‘the Review’) was carried out by Mr Seamus Coffey and published on 12 September 2017. This review included a number of recommendations to be considered by the government following the completion of a consultation phase prior to the introduction of the recommended changes.

As part of the Budget papers, the Government issued an Update on Ireland’s International Tax Strategy which benchmarks Ireland’s progress on meeting international tax standards and instigated the consultation process recommended in the Review.

Capital Allowances on Intellectual Property (IP)

One of the key recommendations within the Review was a restriction on the capital allowances available for capital expenditure on IP to 80% of the relevant income arising from that IP. The Minister has now implemented this recommendation from 11 October 2017.

It is important to note that this restriction applies only in respect of new expenditure incurred on or after 11 October 2017. Relief arising from intangible assets acquired prior to this date will not be restricted.

Notably full relief will still be granted for the cost of acquiring the IP albeit over a longer time period. The above restriction results in an effective 2.5% tax rate on income arising from such IP, restoring the position previously in place prior to 2014.

Accelerated capital allowances for energy efficient equipment

This measure originally introduced in Finance Act 2008 to incentivise companies to purchase energy efficient equipment has been extended until the end of 2020. This measure allows companies to claim 100% capital allowances for the cost of qualifying energy efficient equipment in the year the asset is acquired and brought into use.

 PROPERTY

Budget 2018 concentrated on initiatives to address the issues in the housing market and consequently taxation measures that targeted the property market were prevalent. The primary aim appears to be the release of both existing residential property and development residential property into the market.

Stamp duty

Non-residential  property rate

Since 14 October 2008 the stamp duty rate applicable to transfers of non-residential property reduced on a sliding scale from 9% to 2% with the aim of buoying the then very stagnant property market. Having achieved its objective the rate is now increasing from its current 2% to 6% for transfers of non-residential property on or after 11 October 2017.

Stamp duty refund scheme

Commercial land purchased for the development of housing will be eligible for a stamp duty refund. The refund will be subject to certain conditions, including a requirement that the ‘relevant development’ is commenced within 30 months of the land acquisition.

The 1% rate applicable to transfers of farm land between related persons has been maintained.

Young trained farmers

The exemption from stamp duty on transfers of agricultural land to a young trained farmer has also been maintained.

 Capital Gains Tax (CGT)

Seven year exemption

An exemption from Capital Gains Tax (CGT) was introduced in Finance Act 2012 which provided an exemption from CGT on the disposal of residential and commercial property purchased between 7 December 2011 and 31 December 2014, and held for seven years.

In order to free up stockpiled land banks of undeveloped property, the holding period has been reduced from seven years to four years with immediate effect.

 Pre-letting expenses

In order to encourage owners of vacant residential property to develop their property and bring it into the rental market, a measure has been introduced for the tax deduction of pre-letting expenses where that property remains in the rental market for a period of at least four years.

Vacant site levy

Since 1 January 2017 local authorities have been tasked with the establishment and maintenance of a register of vacant sites zoned for residential or regeneration purposes, which measure in excess of 0.05 hectares. An identified vacant site can be entered on the register when the authority is of the opinion that it has been vacant for a minimum of 12 months preceding its entry on the register.

From 1 January 2018 properties entered on the register are subject to an annual 3% levy on the market value of the site, which is payable in arrears at the beginning of 2019.

The vacant site levy has now more than doubled for second and subsequent years, rising from the current 3% rate that applies in the first year to 7% each year thereafter.

This measure will mean that any owner of a vacant site on the register who does not develop their property in 2018 will pay the 3% levy in 2019. If they continue to retain their vacant land then they become liable to the increased rate of 7% in 2020 meaning an effective total levy of 10% over a two year period.

Capital Acquisitions Tax (CAT)

Solar farms

For the purpose of CAT and CGT, the leasing of agricultural land for solar infrastructure is classified as agricultural land and thereby eligible to qualify for relief under both agricultural relief and retirement relief. A condition has been imposed restricting the amount of the farmland that can be used for solar infrastructure to 50% of the total farm acreage.