Irish Budget 2015

Irish Budget 2015 - Key Points

General

On Tuesday 14th October, Minister Michael Noonan announced Ireland's 2015 Budget and future fiscal and economic policies.

Although Mr. Noonan admitted the recovery had not fully reached all parts of the country, he advised the country has now had seven consecutive quarters of annual employment expansion and an increase of 70,000 people at work, since early 2012, which is expected to increase to 128,000 by the end of 2015.  Unemployment has now fallen for 27 months in a row.

Mr. Noonan stated that two of the major ratings agencies have recently upgraded Ireland's long term debt back into the A grades. GDP for 2015 has been revised upwards to 3.9% and he is now targeting a deficit of 2.7%.  Considering it was felt an adjustment of €2 billion was necessary just one year ago, this is quite an achievement since this budget has effectively brought to an end the austerity measures that have been part and parcel of the previous seven budgets.

Personal Tax

As was widely expected and as part of a three year plan to ease the tax and Universal Social Charge (USC) burden on income earners, Minister Noonan announced a cut in the top rate of income tax from 41% to 40% with an increase of €1,000 to the lower 20% threshold to €33,800.

There were changes to the USC. The entry point threshold was increased from €10,036 to €12,012. Reduced rates of 1.5% €0 - €12,012 & 3.5% between €12,013 - €17,576.  7% €17,577 - €70,044.  A new fourth rate of 8% was introduced between €70,045 - €100,000 (PAYE in excess €100k) and 11% over €100,000.  There were no changes to the PRSI rates which remain at 4%.

As a result of the tax cuts, lower and middle income families will have more money arriving into their pockets.  This may well be negated by the new water charges coming into effect in 2015, albeit Mr. Noonan did announce water charge tax relief at the standard rate would now come into effect.  However for those earning over €70,000 the marginal rate of 52% has to be seen as disappointing.

With regards to Pensions, Minister Noonan confirmed the end of the 0.6% levy (end 2014) and that the additional 0.15% levy will cease end of 2015. One of the main advantages of utilising a pension scheme is the ability to defer such income until retirement age and to shelter any gains on investment of the income from tax.  Utilising the Deposit Interest Retention Tax (DIRT) rate of 41% applicable to income on interest, this continues to make pensions an attractive way for individuals to mitigate their tax.

Business

Mr. Noonan stated that Ireland's corporation tax strategy has three key elements:- "Rate, Regime and Reputation".  Importantly, Mr. Noonan robustly defended Ireland's 12.5% corporate tax rate stating it was never up for discussion and was settled policy that will not change.

He announced a three year extension to the Foreign Earnings Deduction (FED) scheme for Irish employees spending significant time travelling abroad, extending this to a number of other countries.  There is a one year extension to the three year tax remission for start-up companies and the "base year" for calculating R&D tax credits has now been abolished.  Improvements have also been made to the Intellectual Property (IP) regime which will remove some restrictions, making it easier to obtain relief for IP acquisition/development.

There was a key change to the corporate residence rules which is hoped will eliminate some of the recent unfair criticism surrounding the "Double-Irish" tax structure and will ensure Ireland's tax system is seen as being open, transparent and therefore remains competitive.  From 1 January 2015 all new Irish companies will become Irish tax resident (subject to double tax agreement rules).  There will be a six year phasing out of existing non-resident companies pursuant to "grandfathering" provisions, providing multinationals time to consider how BEPS will impact tax law internationally.

In other areas, a series of tax measures have been introduced for the agricultural industry to promote better access to land for young farmers and long-term leasing arrangements. This includes a 50% increase in income tax exemption levels on long term leases to an upper limit of €40,000.  To help tackle the growing volatility in farmer incomes, Mr. Noonan announced the period for "income averaging" would also be extended from three to five years.

For further information or to book a free consultation to discuss how we may be able to assist you, please call us on 021 422 2220 or contact Lee Fox directly on 087 627 4210.

Lee Fox
Lee Fox
Position: Ireland Country Head

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