Business

Global Minimum Corporation Tax

The Minister referred to Ireland's recent decision to join the OECD International Tax Agreement (Agreement) as being "historic".  He noted the fact that both he and his predecessors had in previous budgets highlighted the importance of the 12.5% corporation tax rate to the Irish economy. However, the Minister acknowledged that in his view our national interest is now best served by joining the Agreement as it maintains our tax competitiveness and strengthens our position in the world while providing long-term certainty for businesses and investors.

The Minister confirmed that when the new corporation tax rate comes into effect, Ireland will apply the new minimum effective rate of 15% which will still be less than many of our key competitors.

Ireland has joined the Agreement, meaning that Ireland has agreed to a corporation tax rate of 15%. The government confirmed that Ireland will continue to offer the 12.5% corporation tax rate for multinationals and domestic businesses with less than €750m in revenue, meaning that there will be no change for 160,000 businesses employing 1.8 million people in Ireland. It is expected that the new minimum corporation tax rate will be implemented in 2023.

Digital Gaming Sector Credit

This new credit was announced last year aimed at the digital gaming sector to support qualifying activity from 2022.   The relief available will be at a rate of 32 per cent on eligible expenditure up to a limit of €25 million per project.  Further details will be announced in the Finance Bill 2021.  As the credit will require state aid approval, it will be subject to a commencement order.

EU Anti-tax Avoidance Directive (ATAD)

The Minister confirmed that Ireland's transposition of the ATAD will be completed in Finance Bill 2021 with the introduction of the new Interest Limitation Rule (ILR) and the new Anti-Reverse Hybrid rules. 

The ILR will place a limit on deductible interest expenses of 30% of EBITDA for companies within the scope of the rule. Full details of the ILR will be contained in the Finance Bill (expected to be published on 21 October 2021).

The Anti-Reverse Hybrid rules will bring certain Irish tax transparent entities (such as partnerships) within the scope of Irish tax where the entity is controlled by entities resident in a jurisdiction that treat it as tax opaque and, as a result of this hybridity, double non-taxation occurs. Full details to be provided in the Finance Bill. 

Innovation Equity Fund

In Budget 2021, the Minister announced that the Ireland Strategic Investment Fund (ISIF) would establish an innovation equity fund to invest in domestic high-innovation enterprises.

The government intends to commit a further €30m investment to this fund through Enterprise Ireland, which will be matched by €30m from the European Investment Fund (subject to Board approval).

The innovation equity fund is expected to be launched in early 2022 and will increase the availability of early-stage funding for Irish SMEs and will promote regional development and climate change initiatives, and support female entrepreneurship.

Extension of the Bank Levy

Since its introduction in 2013, the bank levy has been extended on several occasions and currently applies to the end of 2021. 

The Minister announced the extension of the bank levy for a further year. It was confirmed that as Ulster Bank and KBC are leaving the Irish market in 2022, they are being excluded from the charge. The remaining banks will pay the same amount in 2022 as they did in 2021, equating to approximately €87m in total.

The Minister noted that that the levy and its future will be assessed in 2022.

Employment Wage Subsidy Scheme (EWSS)

The EWSS will remain in place in a modified form until the end of April 2022.  

The extension will broadly operate as follows: 

  • No change to EWSS for the months of October and November 2021
  • Businesses availing of the relief at 31 December 2021 will continue to be supported until the end of April 2022
  • Across December, January and February, a two-tiered structure of €151.50 and €203 will apply.
  • For the final two months of the scheme, March and April 2022, a flat rate subsidy of €100 will be put in place.  The reduced rate of employers PRSI will be removed for these two months.
  • The scheme will no longer be available for new employers from 1 January 2022.

Start-Up Relief

The existing start-up relief has been extended for certain start-up companies to the end of 2026.  The relief will be available for up to 5 years of trading from the existing 3 year period.  This should assist companies in utilising the relief in full. 

Accelerated Capital Allowances 

The scheme for energy efficient equipment was previously extended in Budget 2021.  However, equipment directly operated by fossil fuels will no longer qualify. 

The accelerated capital allowance scheme will be extended by a further three years for gas vehicles and refuelling equipment.  As higher carbon savings are obtained from the use of renewable hydrogen, the scheme is also extended to include such powered vehicles and refuelling equipment.

VAT

The temporary reduction in VAT rates to 9% for tourism and hospitality-related services and goods will remain until 30 August 2022.

Employment Investment Scheme

It is envisaged that this scheme could be significant in driving investment in early stage companies and high potential start-ups. In order to assist this scheme reach its full potential, some positive changes will be made to the scheme which include the extension of the scheme for a further three years to the end of 2024 and opening the scheme to a wider range of investment funds. 

In addition, and subject to certain conditions, rules around the “capital redemption window” will be relaxed. The 30 per cent minimum expenditure rule will be removed. 


For further information on Budget 2022, please contact Brian Duffy or your usual William Fry Tax contact.