Irish Budget 2023

Key messages from the Irish Minister for Finance, Paschal Donohoe, and the Irish Minister for Public Expenditure and Reform, Michael McGrath on 27 September 2022:

On international tax reform

  • "Ireland has committed to the two-pillar agreement and has engaged intensively at OECD and EU level…co-ordinated multi-lateral action is the best approach to ensuring the international tax system keeps pace with changes in how business today is conducted internationally."

On corporate tax receipts

  • "I intend to start replenishing the National Reserve Fund with some of these excess receipts to build up our economic resilience…"

On cost of living

  • "Government has a responsibility to strike a delicate balance between helping with the cost of living pressures but, on the other hand, not making them worse by adding fuel to the inflationary fire."

The Irish Minister for Finance, Paschal Donohoe, and the Irish Minister for Public Expenditure and Reform, Michael McGrath made their respective speeches to the Irish Parliament on Tuesday 27 September 2022. The Budget has been shaped in the context of significant global economic uncertainty, a major cost of living crisis precipitated by factors also impacting global and domestic business, climate change and extensive international tax reform. The focus of this Budget is primarily relieving cost of living pressures whilst maintaining current tax reliefs for corporates and proposing policy reviews in certain areas of taxation.

Further detail in respect of the measures announced, apart from those introduced with immediate effect by way of Financial Resolution later tonight, will be contained in the Finance Bill 2022 which will be published on 20 October 2022. This should be signed into law by 25 December 2022.

At this stage, the key points of interest for the international business community include:

Budget highlights:

Stamp duty – extension of the Residential Development Stamp Duty Refund Scheme until the end of 2025.

The Residential Development Stamp Duty Refund Scheme is a scheme whereby a portion of the stamp duty paid on the acquisition of non-residential land is refunded where that land is subsequently developed for residential purposes. The date at which projects wishing to avail of this scheme must commence construction is being extended from 31 December 2022 to 31 December 2025.

Special Assignee Relief Programme – extension of the Special Assignee Relief Programme until the end of 2025.

The Special Assignee Relief Programme provides income tax relief for certain individuals who are assigned to work in Ireland from abroad. The relief will be extended to 31 December 2025 with an increase in the minimum income limit for new entrants of €100,000 (from €75,000).

Research and Development Tax Credit – amendments to the payable element of the Research & Development Tax Credit to align it with new international definitions.

The current system of offset against corporation tax liabilities and payment in three payable instalments is being changed to a new fixed three-year payment system. A company will have an option to call for payment of their eligible R&D tax credit or to request for it to be offset against other tax liabilities, and existing caps on the payable element of the credit are being removed. The first €25,000 of a claim will now be payable in the first year, to provide a cash-flow benefit for small R&D projects and encourage more activities in this space. Transitional measures will be put in place for one year to smooth the transition to the new payment system.

Knowledge Development Box – extending to accounting periods commencing before 1 January 2027 with a new effective rate.

A company qualifying for Knowledge Development Box relief (i.e. qualifying R&D activities for computer programmes, patent protected inventions and small company patentable IP) may be entitled to a deduction equal to 50% of its qualifying profits (such that qualifying profits are taxed at an effective rate of 6.25%). This relief is to be extended to accounting periods commencing before 1 January 2027 with a new effective rate of 10%. The change to the rate will come into effect when commenced by the Minister, to be determined following further international progress on the OECD Pillars. This is expected to occur at some point during 2023.

Film Relief – extension of film relief until the end of 2028.

Section 481 Taxes Consolidation Act 1997 provides relief in the form of a corporation tax credit related to the cost of production of certain audio-visual productions. This relief will be extended from its current end date of 31 December 2024 to 31 December 2028.

VAT – extension of the 9% VAT rate for the tourism and hospitality sector until 28 February 2023, extension of the 9% VAT rate for gas and electricity until 28 February 2023, and introduction of the 0% VAT rate on newspapers / periodicals (including digital editions), defibrillators and other medical products from 1 January 2023.

Future Policy – whilst there are no specific changes proposed in the following areas in this Budget the Government has committed to undertaking policy reviews with respect to (1) introduction of a territorial corporation tax regime and (2) the taxation of investment vehicles.

For further information please contact a member of the Tax team.

Date published: 27 September 2022