Budgetary Measures

The Minister for Finance (Minister) announced a total budget package of €14bn consisting of a core expenditure package of just under €5.3bn, a tax package of just over €1.1bn, a package of once off cost-of-living measures of €2.7bn and a non-core expenditure of €4.75bn, including an additional €250m for the public capital programme. The Minister forecasted tax revenue to reach €88.3bn this year, a notable downward revision for 2023 compared to earlier expectations mostly due to the fall in corporation tax receipts in the summer.

Corporation Tax

The Minister noted a sharp fall in corporation tax receipts this year. It is expected that ‘windfall’ corporation tax receipts now stand at around €10-€12bn. The Minister warned against over reliance on these ‘windfall receipts’ pointing out that removal of such receipts would lead to an underlying general Government deficit of €2bn in 2023. To avoid building up permanent fiscal commitments on the basis of transitory corporation tax revenues, the budgetary package is being complemented by €4.75bn in non-recurring measures.

The Minister also announced that long-awaited legislation implementing the 15% minimum effective tax rate for large companies as provided under the OECD Pillar Two agreement will be published in the Finance Bill.

International

The Minister confirmed that a participation exemption for foreign sourced dividends will be legislated for in Finance Bill 2024. The Minister stated that detailed development work on this will take place over the coming months. He gave a commitment to engage with stakeholders in relation to Ireland’s current regime for interest deductibility in the period ahead.

The Research and Development (R&D) Tax Credit will be increased from 25% to 30%. The Minister explained that this increase will:

• maintain the net value of the credit for businesses which will be subject to the 15% minimum effective tax rate; and
• provide an increased credit for smaller companies who do not fall within the Pillar Two regime.

In addition, the first-year payment threshold, which allows for claims up to the threshold amount to be paid in full in year one rather than over three years, will be increased from €25,000 to €50,000.

Domestic

Changes to the Capital Gains Tax Retirement Relief were also announced by the Minister. The age limits will increase so that a higher level of relief will be available for disposals to children and to others from the age of 55 to age 70. From 1 January 2025, there will also be a new limit of €10m on the relief available for disposals to a child up until the age of 70.

The Minister announced that EU State aid approval has been obtained to commence the outstanding 2022 amendments to the Key Employee Engagement Programme (KEEP). As such, KEEP will be extended to the end of 2025 and the limit for the total market value of issued but unexercised qualifying share options under the scheme will be extended from €3m to €6m.  The amendments will be commenced by Ministerial Order shortly.

Property

The vacant homes tax, an annual tax which applies to residential properties that are occupied for less than thirty days in a twelve-month period, will be increased to five times a property’s existing base local property tax liability. This change will take effect from 1 November 2023.

The Minister announced that the first return date for the Residential Zoned Land Tax (RZLT), a 3% tax rate on the market value of land which is zoned as suitable for residential development not currently developed for housing, has been extended by one year. This is to allow for further review of local authority maps to take place and to afford taxpayers further opportunities to engage with the process.

In light of rising interest rates and mortgage costs, a one-year tax break for homeowners with an outstanding mortgage balance of between €80,000 and €500,000 as of 31 December 2022 on their primary dwelling house will be introduced. The relief will apply to 20% of the increase in interest payable on their mortgage in 2023 versus 2022 subject to a €1,250 cap.

Capital Gains Tax Angel Investor Relief

The Minister announced a new relief to encourage angel investment in innovative start-up small and medium enterprises (SME). The relief will be available to an individual who invests in an innovative SME for a period of at least 3 years. The investment must be in the form of fully-paid newly issued shares costing at least €10,000 and constituting between 5% and 49% of the ordinary issued share capital of the company. Qualifying investors may avail of an effective reduced rate of capital gains tax of 16%, or 18% if through a partnership, on a gain up to twice the value of their initial investment. Further detail on the relief will be provided in the Finance Bill.

Consultations & Initiatives

It was announced that Revenue will conduct a range of targeted compliance managed activities in 2024. It is expected that increased taxpayer compliance in the areas of eCommerce, payroll and expenses reporting and the cash/shadow economy will lead to additional receipts for the Exchequer.

A Revenue initiative was announced whereby Revenue will establish a dedicated Tax Administration Liaison Committee (TALC) subgroup to identify opportunities to simplify and modernise the administration of business supports.

Additionally, the Minister announced that Revenue will launch a public consultation on how digital advances can be used to modernise Ireland’s VAT Invoicing and Reporting System.

The Minister also announced a public consultation on share-based remuneration. This consultation reflects the importance of share-based remuneration to reward and retain employees and progress the globalisation of the workforce.

The Minister confirmed that a review of the Funds sector is currently underway. As part of this review, Revenue is considering the life assurance exit tax and the taxation of funds, including exchange traded funds. The findings of the review are due to be reported on in summer 2024.

The Minister announced a personal income tax package to the value of €1.3bn.

Standard Rate Band

The 20% standard rate band has been increased by €2,000 for all earners. The following rate bands will apply for 2024:

Tax Credits

The Personal Tax Credit, Employee Tax Credit and the Earned Income Credit have all been increased by €100 from €1,775 to €1,875.

The Home Carer Tax Credit has also been increased by €100 from €1,700 to €1,800, while the Incapacitated Child Tax Credit increased by €200 to €3,500

Rent Tax Credit

A rent tax credit was introduced in last year’s budget for taxpayers who rent their principal primary residence and are not in receipt of any State housing support. The credit will be increased from €500 per year to €750 for 2024.

Parents who pay rent on behalf of their student children who are staying in digs or a “rent a room” property, can now claim the rent tax credit as well. The ability to claim for these parents will be backdated for 2022 and 2023.

Universal Social Charge (USC)

The first USC reduction in 5 years was announced. The ceiling for the 2% rate of USC will be increased to €25,760. This increase which will come into effect from 1 January 2024 is proposed to increase the take home pay of a full time worker on the minimum wage.

The reduced rate of USC for all medical card holders earning less than €60,000 is maintained for a further 2 years until 31 December 2025.

Temporary Tax Relief for landlords

A temporary tax relief will be introduced to benefit landlords of residential properties. The tax relief will be subject to certain conditions, with further detail to be provided in the forthcoming Finance Bill. The relief will be available on rental income from residential properties which are rented for the full four-year period of 2024 – 2027 and only for tenancies which are registered with the Residential Tenancies Board or where the residential property is rented to a public authority.

Tax relief at 20% will be available on rental income of; €3,000 in 2024, €4,000 in 2025 and €5,000 in 2026 and 2027. If a property is removed from the rental market during this four-year period, any tax relief claimed will be clawed back.

Mortgage Interest Relief

A temporary tax break will be provided for taxpayers with a mortgage on their principal private residence where the balance outstanding on that mortgage at 31 December 2022 was between €80,000 and €500,000. Taxpayers must have complied with all local property tax obligations in respect of their principal private residence to avail of the relief.

Taxpayers will be entitled to tax relief at 20% of the increase in interest payable on their mortgage in 2023 compared against to 2022. The maximum relief available to taxpayers will be €1,250.

The relief will be claimable by taxpayers from early 2024 by filing a tax return and will be implemented as a tax credit to be offset against the taxpayer’s 2023 income tax liability. Further details will be set out in the Finance Bill.

Employment Investment Incentive scheme (EII)

Effective from 1 January 2024, the investment period will be standardised to four years for all investments and the amount an investor can claim will be doubled to €500,000.

The Key Employee Engagement Programme (KEEP)

The Minister announced he has secured EU State aid approval to commence the outstanding 2022 amendments to the KEEP. Amendments include the extension of the scheme to the end of 2025 and a doubling from €3m to €6m of the limit for the total market value of issued but unexercised qualifying share options. These amendments are to be commenced shortly by Ministerial Order.

Vacant Homes Tax

A new vacant homes tax (VHT) was introduced in last year’s budget, applying to residential properties which are occupied for less than 30 days in a 12 month period and at a rate of three times the property’s base local property tax liability.

VHT will be increased to five times a property’s existing base local property tax liability. This change will take effect from the beginning of the next chargeable period which commences on 1 November 2023.

VRT

VRT relief for battery electric vehicles has been extended for a further two years to the end of 2025. This relief applies to battery electric vehicles with a value of up to €50,000.

Capital Acquisitions Tax (CAT)

Although the CAT rates and thresholds remain unchanged, the Group B threshold will be expanded to include the relationship that foster children have with their foster parents.

Capital Gains Tax Angel Investor Relief

A new relief was announced to encourage angel investment for innovative start-ups. The relief will allow angel investors to benefit from a reduced CGT rate when they dispose of a qualifying investment.

The individual will need to invest in an innovative start-up small and medium enterprise (SME) for a period of at least 3 years. The investment must be in the form of fully paid-up newly issued shares costing at least €10,000 and constituting between 5% and 49% of the ordinary issued share capital of the company.

Qualifying investors will be able to avail of an effective reduced CGT rate of 16% (or 18% if through a partnership) on a gain of up to twice the value of their initial investment. A lifetime limit of €3m on gains to which the reduced rate of CGT will apply.

Information Campaign

The Minister announced the launch of an extensive public information campaign with Revenue to raise awareness of the range of tax credits and reliefs available to PAYE Taxpayers. This is to ensure that people can avail of their full entitlements and receive any refunds due.

Increase in PRSI Contribution Rates

The government has committed to increasing PRSI contribution rates on an incremental basis over the next few years. It was announced that from 1 October 2024 all PRSI contribution rates will increase by 0.1%. The aim of these planned increases is to secure pension entitlements for this and for future generations.

OECD – Pillar Two

The Minister confirmed that next week’s Finance Bill will contain the legislation to implement the long-awaited 15% minimum effective tax rate for large multinational companies from 1 January 2024.

Consultations and Initiatives

The Minister recently announced the introduction of a participation exemption for foreign-sourced dividends in 2025. A consultation is ongoing and further work on the design of the new regime is intended over the coming months.

The Minister also noted the complexity of the current interest deductibility regime and committed to engaging with the relevant stakeholders in respect of the regime.

Employment Initiatives

In last year’s Budget, it was announced that the Key Employee Engagement Programme (KEEP) was extended to 31 December 2025 to facilitate the buyback of KEEP shares by an issuing company and to increase the company limit from €3m to €6m. The Minister announced that State Aid approval has been secured to commence the outstanding 2022 amendments. The amendments are due to be commenced by Ministerial order shortly.

Employment Investment Incentive scheme

From 1 January 2024, the minimum investment period for the Employment Investment Incentive (EEI) scheme will be standardised to four years for all investments. The amount an investor can claim relief on will be doubled to €500,000.

The Finance Bill will contain further detail on additional changes to the scheme to reflect amendments to the EU General Block Exemption Regulation. The Minister announced that the Department of Finance will conduct an additional review of EII in early 2024 to identify whether the scheme can be simplified further.

Research and Development Tax Credit

The Research & Development (R&D) tax credit will be increased from 25% to 30% for expenditure incurred in 2024. Claims for 2024 expenditure may be filed in 2025. In addition, the first-year payment threshold will be increased from €25,000 to €50,000.

CGT Relief

A Cost Benefit Analysis of Revised Entrepreneur Relief was published with the Budget papers which supports the continuation of the scheme. However, the report cautions against modifying or relaxing the eligibility criteria or scope of the relief without careful consideration of the potential impact on the exchequer. The analysis notes that the cost of the relief in 2021 was €143m.

A new capital gains tax relief will be introduced for angel investors. When individuals, who invest in an innovative start-up SME for a period of at least three years, dispose of their investment, they may avail of an effective reduced rate of CGT of 16% (or 18% if through a partnership) on a gain up to twice the value of their initial investment. There is a minimum investment amount of €10,000 and the investment must be of fully paid-up shares representing between 5% and 49% of the ordinary share capital of the company. To qualify for the scheme, Enterprise Ireland will have to certify that the SME can demonstrate financial viability and compliance with the requirements of the EU General Block Exemption Regulation. There will be a lifetime limit of €3m on gains to which the reduced rate of CGT may apply.

From 1 January 2025, the upper age limit for the higher level of Retirement Relief will be extended from 65 years to 70 years. After this age, the reduced relief, which was previously available for individuals aged 66 and over, will apply. There will also be a new limit of €10m, for disposals to a child on the relief, up to the age of 70, from 1 January 2025.

Agri-Sector

The Consanguinity stamp duty relief has been extended for five years until 31 December 2028. The relief reduces the rate of stamp duty from 7.5% to 1% where the conditions of the relief are satisfied.

The accelerated capital allowances scheme for farm safety equipment will be extended to 31 December 2026.

VAT

From 1 January 2024, the current VAT registration thresholds will be increased to €40,000 for services and €80,000 for goods. The current thresholds are €37,500 for goods and €75,000 for services. Where a business’ turnover exceeds the relevant threshold, they are obliged to VAT register. The thresholds are calculated by reference to any continuous 12-month period.

Audiobooks and eBooks will be zero-rated from 1 January 2024.

The VAT rate on the supply and installation of solar panels for schools will be reduced to zero with effect from 1 January 2024.

The funds available under the Charity VAT Compensation Scheme will be increased from €5m to €10m.

Simplification of Business Taxes

A new Tax Administration Liaison Committee (TALC) will be established by Revenue to simplify and modernise the administration of business supports. The recommendations of the group are scheduled to be delivered in 2024.

Revenue will be launching a Public Consultation on using digital advances to modernise Ireland’s VAT Invoicing and Reporting System.

The Department of Finance will also be launching a Public Consultation on share-based remuneration.

Section 481 Film Relief

The cap on the maximum qualifying expenditure for the Section 481 Film Tax Credit will be extended from €70m to €125m, subject to State Aid approval.

Excise Duties

There will be a €0.75 increase on a pack of 20 cigarettes with pro-rata increases planned on other tobacco products.

A domestic tax on e-cigarettes and vaping products is intended to be introduced in next year’s budget.

Compliance Regime

Revenue will conduct a range of targeted projects including in the areas of e-commerce, payroll and expenses reporting and the cash/shadow economy. These projects are expected to increase taxpayer compliance and, in turn, yield €120 million to the Exchequer.

Accelerated Capital Allowances

The accelerated capital allowances scheme for Energy Efficient Equipment has been extended for two years up to 31 December 2025.

BIK Measures for Motor Vehicles

The temporary universal relief of €10,000 which is applied to the Original Market Value of a vehicle has been extended for a further year to 31 December 2024.

In respect of electric vehicles, the current Original Market Value deduction of €35,000 is being extended until 2025. The deduction will be reduced to €20,000 in 2026 and €10,000 in 2027.

Increase in PRSI Contribution Rates

The government has committed to increasing PRSI contribution rates on an incremental basis over the next few years. It was announced that from 1 October 2024, all PRSI contribution rates will increase by 0.1%. These planned increases aim to secure pension entitlements for this and for future generations.

Rental Tax Credit

A rent tax credit was introduced in 2022 for taxpayers who rent their principal private residence and are not in receipt of any State housing support. The credit will be increased from €500 per year to €750 for 2024.

Parents who pay rent on behalf of their student children who are staying in digs or a “rent a room” property, can now claim the rent tax credit as well. The ability to claim for these parents will be backdated for 2022 and 2023.

Help to Buy Scheme

The help to buy scheme (HTB) helps first-time buyers of newly built homes to buy a new house or apartment. The HTB applies to properties costing €500,000 or less and was due to elapse at the end of 2024. The HTB scheme will be extended for a further year until the end of 2025.

The HTB will also be amended to allow purchasers availing of the Local Authority Affordable Purchase scheme to avail of HTB for the first time from 11 October 2023 onwards.

Mortgage Interest Tax Relief

A temporary tax break will be provided for taxpayers with a mortgage on their principal private residence where the balance outstanding on that mortgage at 31 December 2022 was between €80,000 and €500,000. Taxpayers must have complied with all local property tax obligations in respect of their principal private residence to avail of the relief.

Taxpayers will be entitled to tax relief at 20% of the increase in interest payable on their mortgage in 2023 compared to 2022. The maximum relief available to taxpayers will be €1,250.

The relief will be claimable by taxpayers from early 2024 by filing a tax return and will be implemented as a tax credit to be offset against the taxpayer’s 2023 income tax liability. Further details will be set out in the Finance Bill.

Vacant Homes Tax

A new vacant homes tax (VHT) was introduced in 2022, applying to residential properties which are occupied for less than 30 days in a 12-month period and at a rate of three times the property’s base local property tax liability.

VHT will be increased to five times a property’s existing base local property tax liability, this change will take effect from the beginning of the next chargeable period which commences on 1 November 2023.

Landlords Tax Relief

A temporary tax relief will be introduced to benefit landlords of residential properties. The tax relief will be subject to certain conditions, with further detail to be provided in the forthcoming Finance Bill. The relief will be available on rental income from residential properties which are rented for the full four-year period of 2024 – 2027 and only for tenancies which are registered with the Residential Tenancies Board or where the residential property is rented to a public authority (including a local authority).

Tax relief at 20% will be available on rental income of; €3,000 in 2024, €4,000 in 2025 and €5,000 in 2026 and 2027. If a property is removed from the rental market during these four years, any tax relief claimed will be clawed back.

Residential Zoned Land Tax

The residential zoned land tax (RZLT) was announced in Budget 2022 and will apply to land which is zoned as suitable for residential development but is not currently developed for housing. The RZLT will apply at a rate of 3% of the land’s market value.

Finalised maps of zoned lands were due to be published by local authorities in December 2023 with RZLT being payable in 2024 on zoned land included in these maps. The first tax liability date for RZLT will be extended by one year to allow for further review of local authority maps to take place in 2024 and to afford taxpayers further opportunities to engage with the process.

VAT on Installation Solar Panels

The rate of VAT applicable to the installation of solar panels on residential properties was reduced last year to 0% from 1 May 2023. This 0% rate of VAT will apply to the installation of solar panels on schools as well from 1 January 2024 onwards.

Land leasing income tax relief

The income tax relief available on rental income received from leasing farmland will be amended so that a lease must be for a definite term of at least 7 years to be a qualifying lease, increased from five years.

Defective Concrete Products Levy

It was announced that the levy will no longer apply to the pouring concrete used in the manufacture of precast concrete products and refunds will be available to those who paid the levy on such concrete between 1 September 2023 and 31 December 2023.

Bank Levy

The Minister confirmed that a revised bank levy will be introduced in 2024 to raise €200m. The Minister will undertake a further review of the levy next year.

Review of REIT, IREF and Section 110 Regimes

The Minister referenced the Funds Sector Review 2030 (Review) that was announced on 6 April 2023. The Review is in progress and will be made available to the Minister in the summer of 2024. The Minister noted that the Review will consider life assurance exit tax and the taxation of funds, including exchange traded funds. Once the Review is completed, the Minister will consider changes to the current taxation framework.

The Department of Finance will engage with targeted stakeholders in late 2023 and early 2024 using insights received from the public consultation that took place earlier this year.