A feature of every Budget, compliance and anti-avoidance are always hot topics. Surprisingly, this year the compliance focus is on the dividend withholding tax regime. ‘Anti-avoidance’ involves correcting an unintended additional relief afforded by the tax legislation for capital expenditure on scientific research.

Dividend Withholding Tax Regime

Under the heading of ‘compliance’ we heard about changes to the dividend withholding tax (DWT) regime. The focus is on tax compliance and addressing a potential gap identified by Revenue between the DWT remitted by companies and the final income tax and USC liability of the individual recipient. This means that there will be a two-step change process to the current DWT regime.

First is a DWT rate increase from 20% to 25%. The higher 25% rate is closer aligned to the combined average rates of income tax (20%) and USC (4.5%). The final tax liability of Irish tax residents will not be impacted. The focus then must be on non-Irish tax residents who are not exempt from DWT under Irish tax law.

And, secondly, in 2021 information Revenue collects under the real-time PAYE system will be used to allocate a personalised DWT rate to each taxpayer. No more details are available at this stage. We expect consultation with Revenue via the TALC process and other suitable forums on how this proposed new system will work.