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Following the cessation of the temporary 9 percent VAT rate applying the goods and services in the tourism and hospitality sector on 31 August 2023, Revenue has updated several VAT Tax and Duty Manuals to reflect the application of the 13.5 percent rate of VAT from 1 September 2023: VAT Treatment of Food and Drink Supplied by Wholesalers and Retailers VAT Treatment of Restaurant and Catering Services VAT Treatment of Guest and Holiday Accommodation VAT treatment of Admission fees for entry to Historic Houses and Gardens VAT treatment of Admission to Amusement parks and Fair grounds VAT treatment of Services connected with immovable property Supply of Printed Matter

Revenue has published a new Tax and Duty Manual which provides guidance on the new Vacant Homes Tax (VHT) introduced in Finance Act 2022. VHT is an annual tax that applies to residential properties in use as a dwelling for less than 30 days in a 12-month chargeable period. The first chargeable period applies from 1 November 2022 to 31 October 2023 and the electronic return is due on or before 7 November 2023. The manual outlines in detail when VHT applies, when properties are outside the scope of the tax, the obligations on chargeable persons, Revenue powers and certain exemptions that can be claimed. VHT is charged at three times the base Local Property Tax (LPT) rate (the rate excluding any local adjustment factor). It is charged in addition to LPT.

Tunisia deposited its instrument of ratification for the Multilateral Convention to Implement Tax Treaty Related Measures (“MLI”) to Prevent Base Erosion and Profit Shifting. The MLI now covers around 1,850 tax treaties.

The OECD has published a paper comparing the tax treatment of labour and capital income. The authors have compared the effective tax rates (“ETRs”) for taxpayers earning different levels and types of incomes which demonstrates that dividend income and capital gains are generally subject to lower ETRs than wage income. In their view, this has implications for both efficiency and equity.

The Minister for Finance, Michael McGrath TD, has welcomed growth in Modified Domestic Demand (MDD) in the second quarter of the year Despite the growth, the Minister noted that there were ‘several headwinds’ including constraints in infrastructure and slower growth among trading partners, and that it would be against this backdrop that Budget 2024 would be framed. The Minister for Finance, Michael McGrath TD, has welcomed growth in Modified Domestic Demand (MDD) in the second quarter of the year. Despite the growth, the Minister noted that there were ‘several headwinds’ including constraints in infrastructure and slower growth among trading partners, and that it would be against this backdrop that Budget 2024 would be framed. The figures as reported by the CSO in its publication of the Quarterly National Accounts showed that while MDD expanded by one percent relative to the previous quarter, consumer spending increased by 0.9 percent while GDP increased by 0.5 percent over the quarter. However, GDP was down 0.7 percent on an annual basis, reflecting the volatility of production in the multinational sectors and falling demand for certain pharma exports. Commenting on the figures, Minister for Finance, Michael McGrath T.D., said: “Firstly, while GDP was up on a quarterly basis in the second quarter, I am conscious that it fell by -0.7 per cent relative to the same period last year. This reflects a fall in Covid-related pharmaceutical exports triggered by the passing of the pandemic, as well [an] easing exports associated with so-called ‘contract manufacturing’. As has been well documented, multinational production in Ireland is extremely volatile and, given the outsized role the multinational sector plays in our economy, GDP is clearly not a useful measure of domestic living standards. In terms of the domestic economy, I am encouraged to see that Modified Domestic Demand (MDD) – my preferred metric of domestic economic activity – grew at a solid pace in the second quarter of the year. These data are consistent with trends in the labour market, where figures published last week show employment at its highest level ever at end-June. Importantly, consumer spending was a key driver of growth in the second quarter, increasing by 0.9 per cent over the quarter. This reflects a number of factors including the easing in inflationary pressures over recent months, the strength of our labour market and the role that Government support has played in supporting households. With three-quarters of our working age population in employment – a record high – this should support continued expansion of consumer spending in the coming quarters. While today’s data confirm continued growth in the domestic economy, I am conscious of several headwinds. Our economy is clearly operating at full-employment and capacity constraints, in both our housing and labour markets, are increasingly binding. Externally, growth is slowing in some of our main trading partners, and this could have knock-on implications for Irish exports. It is against this backdrop that Budget 2024 is being framed. We will, once again, need to strike the right balance: ensuring that budgetary policy is calibrated in a manner which avoids adding to the price pressures in our economy while, at the same time, supporting households and delivering the infrastructure and public services that our society needs.”

Revenue has published a new Tax and Duty Manual which provides guidance on the new Vacant Homes Tax (VHT) introduced in Finance Act 2022. VHT is an annual tax that applies to residential properties in use as a dwelling for less than 30 days in a 12-month chargeable period. The first chargeable period applies from 1 November 2022 to 31 October 2023 and the return is due on or before 7 November 2023. The manual outlines in detail when VHT applies, when properties are outside the scope of the tax, the obligations on chargeable persons, Revenue powers and certain exemptions that can be claimed. VHT is charged at three times the base Local Property Tax (LPT) rate (the rate excluding any local adjustment factor). It is charged in addition to LPT.

Revenue has issued notices to employers and agents via the ROS inbox facility  with further information on the new Enhanced Reporting Requirement introduced in Finance Act 2022.  Revenue intends to hold information sessions on the new reporting requirement in the coming weeks. The sessions will provide an overview of what will need to be reported to Revenue.  A link to Eventbrite will issue to employers and agents advising where they can register their interest in attending one of the information sessions, which are to run from late August to mid-November. We will keep you updated on the proposed sessions as more information becomes available. Further information on the reporting requirement can be found on the leaflet.

Revenue has published a Tax and Duty Manual which highlights further changes to the 2022 income tax return (2022 ROS Form 11).  The changes include a workaround, advocated by CCAB-I, to enable the filing of the 2022 Form 11 where rental income is paid to non-resident landlords and there is no collection agent, or the tenant has not withheld tax from rent paid.  Other changes include pre-population of certain PSWT information, a new sub-panel to claim the rent tax credit as well as updates to the tax credits panel to reflect increased values, warning messages and some changes to the EII, SURE and SCI sub-panels. The 2022 ROS Form 11 has been available since 1 January 2023 but is updated on an ongoing basis to include additional prepopulated information from third parties.  Readers are reminded that there is no ROS offline version of the 2022 Form 11 but it can be prepared offline using the Return Preparation Facility (RPF). Further information is available in eBrief No.177/23.  Revenue’s Tax and Duty Manual – A Guide to Self-Assessment- has also been updated at paragraph 4 to reflect the available online payment options.

In Irish news, Revenue has updated its website to include information on the new enhanced reporting requirements for employers and has provided a note regarding the tax treatment of GMS income of GPs in certain circumstances. In UK news, HMRC recently published its 2022/23 annual report, and has estimated error and fraud in R&D as it publishes its approach to R&D compliance. In International news, OECD research suggests a modest recovery in tax revenues in the Asia-Pacific region post-pandemic. TaxNews will be taking a seasonal break for the next few weeks, returning 4 September 2023.  Ireland Revenue updated its website to set out information on the new enhanced reporting requirements for employers to report details of non-taxable small benefits, travel and subsistence and remote working allowances paid to employees and directors from 1 January 2024. Revenue has provided us with a note in relation to the tax treatment of GMS (General Medical Services) income of GPs in circumstances where GMS payments have been mandated to a medical practice by a GP that is an employee of, or partner in, the practice. UK HMRC has published its annual report and accounts for the year ended 31 March 2023 together with the HMRC Charter annual report 2022/23. HMRC estimates error and fraud in R&D and publishes approach to R&D compliance. International OECD research observes modest recovery in Asia-Pacific tax revenues. Keep up to date with all the latest Irish, UK, and international tax developments through Chartered Accountants Ireland’s Tax Newsletter. Subscribe to the Tax News by updating your preferences in MyAccount. You can also read this week’s EU exit corner here.

The OECD has published comments received on two toolkits to support developing countries in addressing base erosion and profit shifting (BEPS) when pricing minerals.