The Minister for Finance Michael Noonan this week published the Finance Bill 2012 which gives effect to taxation measures announced in last December’s Budget.
The Bill, which will go through the Oireachtas in the coming weeks, gives effect to a number of measures, including the following:
• The Bill provides for an increase to 30 per cent in mortgage interest relief for first time buyers who took out their first mortgage in the period 2004-2008. The Bill will also make provision for mortgage interest relief to be available at 25 per cent for first-time buyers who purchase in 2012 and at 15 per cent for non-first-time buyers who purchase in 2012.
• The Bill makes provision also to increase the exemption threshold for the Universal Social Charge from €4,004 to €10,036. This measure will remove approximately 330,000 people from the liability to the Universal Social Charge.
• A Special Assignee Relief Programme (SARP ) is being introduced to reduce the cost to employers of assigning skilled individuals from abroad to take up positions in the Irish based operations of their employer. An exemption from income tax on 30 per cent of salary between €75,000 and €500,000 will be provided for employees who are assigned for a minimum of one year and a maximum of five years.
• A Foreign Earnings Deduction (FED ) is being introduced to assist companies seeking to expand into emerging markets in Brazil, Russia, India, China, and South Africa. The maximum amount of income that can be deducted under the scheme will be €35,000 per annum. The deduction will operate for three years (ending in the 2014 tax year ).
• The DIRT (Deposit Interest Retention Tax ) rate has been increased by three percentage points to 30 per cent and the rate for certain longer term savings products has also been increased by three percentage points to 33 per cent. The increased rate applies to interest paid or credited on or after January 1 2012.
• Retirement relief will be modified as announced in the Budget. An upper limit of €3m on retirement relief for business and farming assets disposed of within the family is introduced where the individual transferring the assets is aged over 66 years. This will incentivise earlier transfer of farms. The current unlimited amount applies for a transitional period of two years for individuals currently aged 66 or who reach that age before December 31 2013.
• A new incentive relief from Capital Gains Tax is being introduced for properties bought between Budget night and the end of 2013. Where such property is held for more than seven years the gains attributed to that seven year period in that period will be relieved of CGT.
• The Irish citizenship condition for the payment of the domicile levy will be abolished for tax years from 2012 onwards. This means it will not be possible for an individual to avoid the levy by renouncing Irish citizenship, if s/he meets the other criteria for paying the levy.
• The annual imputed distribution which applies to the value of assets in an approved retirement fund (ARF ) each year is being increased from five per cent to six per cent in respect of ARFs with asset values in excess of €2 million and the imputed distribution arrangements are being extended to “vested” PRSAs on the same basis. The transfer of ARF assets on the death of an ARF owner to a child of the owner aged over 21 is subject to a final liability tax the rate of which is being increased from 20 per cent to 30 per cent.
• The scheme which provides relief from corporation tax on the trading income and certain gains of new start-up companies in the first three years of trading is being extended to include start-up companies which commence a new trade in 2012, 2013, or 2014.
• Provision is made to allow for the increase in the rate of Carbon Tax from €15 to €20 with effect from December 6 2011 in respect of petrol and auto diesel and May 1 2012 in respect of the other mineral oils and natural gas.
