Dear subscriber,

Welcome to OSK's February B2B.

The Finance Bill 2012 was published on 8 February 2012.

The measures introduced reflect government stated policy to incentivise investment in Irish property, and to develop Ireland as a ‘smart economy’ and a base for multinational corporations.

We have provided a summary of the main provisions of the Bill.

Your feedback is welcome - please contact us with your queries or comments.

Warm Regards,

The OSK Team

Capital Gains Tax

The rate of CGT is increased from 25% to 30%, with effect from 7 December 2011.

For more information on Retirement Relief and CGT holiday please click here.

Stamp Duty

The rate of Stamp Duty on non-residential property is reduced to 2%. It is hoped by the government that this reduction, in conjunction with the CGT holiday discussed above will encourage investment in Irish property.

An automatic fine of €3,000 is introduced for late filing of any Stamp Duty return. This level of penalty appears quite harsh for cases where the actual Stamp Duty liability is minimal or nil.

Gift and Inheritance Taxes

The rate of Capital Acquisitions Tax (“CAT”) has increased from 25% to 30%, with effect from 7 December 2011. Whilst this is a significant increase the Irish rate of tax on gifts and inheritances remains one of the lowest in Europe. In our view the prospect of the rate being increased further to 40% in future Budgets cannot be ruled out.

The tax-free threshold for gifts/inheritances received by a person from his or her parents is reduced to €250,000. The 2012 reduction continues the trend of cuts in this tax-free threshold, which stood at almost €550,000 in 2009.

Finally, the CAT pay and file deadline is moved from 30 September to 31 October, i.e. the CAT return for gifts/inheritances in the 12 month period to 31 August must be made by 31 October in the following year.

Personal Tax

As announced in the Budget, the rate of DIRT is increased to 30% from 1 January 2012. The full ‘marginal’ effective rate of tax on deposit interest income will be 34% including PRSI.

A new 30% rate of mortgage interest relief applies in respect of certain loans taken out to acquire residential property during the boom years of 2004 to 2008.

Pensions

The deemed distribution amount from an Approved Retirement Fund (“ARF”) or a vested PRSA is increased from 5% to 6%.

Employer PRSI relief for employee pension contributions has been abolished, with effect from 1 January 2012.

Finally, the Income Tax rate applying on transfers (on death) of pension assets to a child aged over 21 is increased to 30%, to bring the tax treatment here into line with the taxation of transfers (on death) of pension assets to children aged under 21 (whereby Capital Acquisitions Tax at 30% applies).

Research & Development Credit

The Finance Bill introduces a number of measures which will be attractive to Irish small and medium sized enterprises carrying on R&D activities.

Click here here for full details.

Property - capital allowances shelters

A 5% surcharge (administered under USC provisions) will apply to income sheltered by property capital allowance reliefs (Section 23 relief etc). This applies from 2012. For most taxpayers claiming these reliefs this will result in a €4,000 increase in annual tax liabilities.

The termination dates for utilisation of accelerated capital allowances (hotels, private hospitals, nursing homes, etc) are confirmed as the later of 2014 or the expiry of the tax-life of the underlying property.

Corporation Tax Start-Up Exemption

The 3 year exemption from Corporation Tax for start-up trading companies is extended to companies commencing to trade up to 31 December 2014. This exemption is worth up to €40,000 per year for new qualifying companies.