International Tax Newsletter - Spring/Summer 2012 - Ireland
RESEARCH & DEVELOPMENT (R&D)
A 25% R&D credit applies to qualifying expenditure incurred on or after 1 January 2009. A company which carries on a trade in Ireland, undertakes R&D activities in Ireland or within the EEA and incurs the expenditure shall be entitled to the R&D tax credit. If the company does not have a corporation tax liability, then it is possible to receive a refund of the R&D tax credit, up to certain limits, over a 33-month timeframe.
Finance Act 2012 introduced a number of changes to the R&D tax credit scheme as follows:
- Volume basis: The R&D credit applies to incremental expenditure with reference to a fixed base period of 2003. This has been revised so that the first €100,000 of qualifying R&D expenditure will benefit from the 25% R&D tax credit on a volume basis. The tax credit will continue to apply to incremental R&D expenditure in excess of €100,000.
- Outsourcing limits: At present, there are limits on eligibility of sub-contracted R&D costs. These limits can disproportionately affect smaller companies. Hence, the outsourcing limit for sub-contracted R&D costs is increased to the greater of 5% or 10% as appropriate or €100,000.
- Use of the credit to reward R&D employees: Companies in receipt of the R&D credit will have the option to use a portion of the credit to reward key employees who have been involved in the R&D. The credit will be a tax-free payment in the hands of the employee.
CORPORATION TAX RELIEF FOR START-UP COMPANIES
New companies incorporated in Ireland or an EEA State after 14 October 2008 and commencing a new trade will be exempt from corporation tax on income and certain chargeable gains for the first three years. The relief is now limited to the amount of employer’s PRSI paid by a company in an accounting period subject to a maximum of €5,000 per employee and an overall limit of €40,000.
Marginal relief will apply where corporation tax payable by a new company for a period is between €40,000 and €60,000. This relief will not apply where an existing trade is acquired. It will also cease to apply where part of a newly established trade is passed to a connected party. Companies carrying on excepted trades and close service companies will not qualify for this exemption.
Relief is being extended to include start-up companies which commence a new trade in 2012, 2013 or 2014.
CAPITAL GAINS TAX (CGT)
The CGT rate has increased from 25% to 30% on disposals made after 6 December 2011.
A new incentive relief from CGT has been introduced for properties bought between December 2011 and the end of 2013, where the property is held for more than seven years. The relief will be granted by relieving any gain on the disposal of the land or buildings by the same proportion that the period of seven years bears to the period of ownership.
- With effect from 1 January 2012, the standard rate of VAT increased from 21% to 23%.
- Multiple Stamp Duty rates for non-residential property are abolished. A new single lower rate of 2% has been introduced which will apply to the entire consideration on instruments executed on or after 7 December 2011.
More information on these developments can be provided by Catherine McGovern, PKF Ireland, through the EisnerAmper contacts listed at the end of this Newsletter.
International Tax Newsletter - Spring/Summer 2012 Issue