With little money available and the Brexit cloud continuing to swirl, Finance Minister Paschal Donohoe has announced a modest budget aiming to protect the economy. There were some positive announcements for business as well as some missed opportunities.
The introduction of the new rules on transfer pricing from January 1, 2020, was widely consulted on in advance of the budget.
The new rules will bring Ireland’s regime in line with current OECD guidelines. The application of these rules to SMEs is subject to Ministerial Order.
This means that for now, SME companies will not have to apply the new rules which is quite good news for that sector.
It is positive that the research and development (R&D) tax credit has been enhanced to make it more beneficial for small and micro-enterprises.
It is also really positive that there has been an increase in the third-level outsourcing limit.
The increase in carbon taxes was well-flagged and the announcement that the taxes would be ring-fenced for future climate action measures is welcome.
Aligning with the Climate Action Plan is also welcome and it is a positive for business to have certainty on carbon tax so that they can plan appropriately.
With a very real skills challenge facing Ireland, the enhancement of the Key Employment Engagement Programme is welcome as a measure to retain valued personnel. The changes to the Employment and Investment Scheme, allowing tax relief for investments up to €250,000 per year and providing for all of the tax relief in year one, are particularly welcome.
The reform of these reliefs is extremely important to encourage investment in and employment in indigenous businesses.
An area of disappointment is with regard to the Special Assignee Relief Programme, while extended to 2022, it has not been amended in an effort to make it more accessible for international assignees.
A real missed opportunity is that the entrepreneur relief on capital gains tax of 10% has not been extended.
This continues to significantly lag the UK relief which has a £10m (€11.2m) limit.
There was little progress for the self-employed who still pay higher taxes than their employees.
The increase in the earned income credit for self-employed individuals was welcome, but the failure to equalise it with the employee allowance and to address USC rates, have to be seen as missed opportunities, to be frank about it.
Overall, it was a modest, though positive, budget for businesses and, in particular, the SME sector.
- Nicola Quinn is tax partner at PwC Cork