Corporation tax

Oct 09, 2018

Again this year, the Minister reaffirmed Ireland’s commitment to retaining the 12.5 percent corporation tax rate amidst the changing international tax environment. In recent days an unexpected once-off surge of €1 billion in corporate tax revenues is predicted to hit the exchequer before the end of the tax year. Recognising the volatility that such receipts could cause, the Minister is perhaps wisely putting some of this into the Rainy Day Fund. Today’s measures introduce with immediate effect a new exit tax on unrealised gains of assets located in Ireland as well as a new system of accelerated capital allowances for gas-propelled vehicles. As expected, CFC legislation will be written into Finance Bill 2018.

Exit Tax

This measure is being introduced under the EU’s Anti-Tax Avoidance Directive (ATAD) rules where a new exit tax regime of 12.5 percent on any unrealised capital gains arising when companies migrate or move assets offshore. This will come into effect from midnight tonight, Budget night.

Ireland currently has rules that provide for an exit tax, where that exit event triggers a deemed disposal of assets at market value for capital gains tax (CGT) purposes, resulting in a potential 33 percent CGT charge. Under ATAD, the existing rules are expected be tightened significantly, making it much more difficult to escape an Irish tax charge on migration of tax residence.

This measure could make it more difficult to move valuable assets, such as intellectual property, out of Ireland, but the lower 12.5 percent rate could also encourage existing groups to stay, which could be seen as a positive move. All EU countries will be obliged to introduce similar rules by 1 January 2020 at the latest.

Controlled Foreign Company (CFC) Rules

As outlined last month in Ireland’s Corporation Tax Roadmap, Finance Bill 2018 will introduce CFC rules with effect from 1 January 2019. The CFC rules are an anti-abuse measure, designed to prevent the diversion of profits to offshore entities in low- or no-tax jurisdictions and are required by ATAD.

Three year start up relief extended to 2021

Recognising the value of SMEs to the economy particularly in terms of job creation, the Three Year Start-Up relief for companies that was due to expire at the end of 2018 has been extended to the end of 2021.  The relief provides corporation tax relief for profit making start-up companies in the first three years of operation.

Film corporation tax credit extended to 2024

The film corporation tax credit will be extended until December 2024. The scheme provides relief in the form of a corporation tax credit related to the cost of production of certain films. The credit is granted at a rate of 32 percent of qualifying expenditure, capped at €70 million.  A new regional uplift of an additional 5 percent that will taper out over 4 years is to be introduced in 2019, subject to State aid approval.

Accelerated capital allowances for employer provided fitness and childcare facilities

This is an incentive to encourage employers to provide fitness and/or childcare facilities for their employees. This measure, first announced as part of Finance Act 2017 measure will come into effect from 1 January 2019.

Accelerated capital allowances for Gas-Propelled Vehicles and Refuelling Equipment

In an environmentally friendly move to encourage less use of diesel vehicles, accelerated capital allowances will be available when gas-propelled vehicles and refuelling equipment are purchased. This relief will be particularly aimed at the purchase of large vehicles such as HGVs and busses.