Tax Developments Promoting Growth of Indigenous Business and - PowerPoint PPT Presentation

Tax Developments Promoting Growth of Indigenous Business and Attracting Foreign Direct Investment Peter Vale – Tax Partner & Sasha Kerins – Tax Director

Slide Overview of Presentation Overview of Presentation heading • Tax Developments Promoting Growth for Indigenous Business • Corporation Tax Exemption for Start-up Companies • Understanding Tax for New & Back to Work Hires • EII Scheme • VAT – the Essential Update • Tax Developments Attracting Foreign Direct Investment • FED in 2012 • R&D Tax Credits • Recent Developments with Group Losses

Tax Developments Promoting Growth for Indigenous Business

Corporation Tax - Start- up Exemption • S.486C – 3 year exemption – claimed in CT1 • Relief extended to new companies set-up in 2011 • Trade not previously carried on & not liable to close company surcharge • Full exemption if CT < € 40,000, marginal relief € 40,000- € 60,000 • Linked to employer's PRSI

Corporation Tax Start-up Exemption Example • Employers PRSI paid - € 5,000 (A) • Case I trading income - € 80,000 • Total taxable profits - € 80,000 • Tax @ 12.5% = € 10,000 • CT referable to income from qualifying trade - € 10,000 (B) • Max relief – lower of A and B – thus max relief € 5,000 • Revised tax payable - € 5,000

Tax for New and Back to Work Hires Employer Incentives - Revenue Job Assist Scheme • Revenue Job Assist allows employers take a double wage deduction if they employ a person who has been unemployed for 12 months or more • Can last for a 3 year period! • No limit on the number of employees provided that they take „„qualifying jobs‟‟ – 30 hrs pw, capable of lasting > 12 mths

Tax for New and Back to Work Hires Employer PRSI Incentive Scheme • Employers not liability to pay Employer‟s PRSI for 18 months from date of approval for the scheme • Scheme is available to any employer who creates a new and additional job in 2012 • Limited to a maximum of 5% of your existing employees or five employees

Tax for New and Back to Work Hires Employee Benefits – Revenue Job Assist Scheme • An additional allowance is granted to an individual who has returned to work following unemployment • Tax relief is due at the individual‟s marginal rate of tax • In order for this allowance to be granted the employment must be a “qualifying employment” (30 hours a week/capable of lasting more than 1 year)

Employment & Incentive Investment Scheme (EIIS) • Employment and Investment Incentive Scheme ("EIIS") – replaced BES • Introduced Budget 2011 – EU approved 25/11/11 • Maximum Company Funding € 10M • Annual limit € 2.5M. For individual € 150k • Most SME trades qualify (some exemptions) • Tax Relief 30%, specified relief. Further 11% (not H.E.R.), if employment targets met • Holding period 3 years • Investor cannot be connected with the company

VAT Essential Update • VAT @ 23% std rate – 1 Jan 2013 • Finance Act 2012 defined bread for purposes of 0% v 13.5% - e-brief 23/2012 • VAT @ 9% for admission to open farms and heritage buildings • Mandatory e-filing for all VAT cases since 1 June 2012

VAT Essential Update • Construction services connected parties not within RCT net – reverse charge provisions effective 1 May 2012 • Amend invoicing procedure and ensure self account for VAT on these services • Welcome change for admin & cashflows • Rise in e-Audits- use of IDEA • identifying incorrect rates with greater ease

Tax Developments Attracting Foreign Direct Investment

FED 2012 Overview • Relief will be calculated on the ratio of qualifying days spent in a BRICS country (Brazil, Russia, India, China or South Africa) to total days in the tax year • This ratio will be applied to income earned from the employment in a tax year, including share based benefits but excluding termination payments, company cars, BIK's and preferential loans

FED 2012 Overview • The maximum deduction available is limited to € 35,000 and conditions include: • 60 days minimum per annum to be spent in the BRICS country • all trips must be for at least 4 consecutive days to be counted towards the 60 threshold • will apply for the tax years 2012, 2013 and 2014; and • the deduction only reduces income for income tax purposes only (not USC or PRSI)

FED 2012 Overview • The new provision is inserted in to Schedule 25B (i.e. a specified relief) for the purpose of the High Earners Restriction • Relief may not have widespread use due to restricted number of countries it applies and the cap on the level of FED available

Research and Development Overview • Qualifying R&D expenditure • Costs associated with: • basic research • applied research • experimental development • Activities must be carried out by company's own employees plus expenditure must be incurred in EEA • Includes both revenue and capital expenditure • Aim is to achieve scientific & technological advancement and resolve scientific & technological uncertainty

Research and Development Overview • Relief for revenue expenditure (salaries, overheads, direct and indirect), plant/machinery and qualifying buildings • Incremental spend above base year - fixed as 2003 • Outsourcing limit 5% and 10% of qualifying expenditure • Ability to reclaim 25% of R&D as: • current year CT offset/group relief • prior year CT offset • cash rebate - over max 3 years • carried forward to offset future CT

Research and Development Overview • Overall 37.5% tax relief – 300% deduction @ 12.5% • Accounting treatment: • EBIT enhancement • R&D in nominal ledger • Internal back-up: • timesheets • RTI grants • memos detailing activities

Research and Development Overview • € 100K R&D exp - benefit on a volume basis • Excess € 100K - incremental basis over base year • Outsourcing limits - greater of 5%/10% or € 100K • Reward key employees: • portion of R&D credit • key employees involved in development of R&D • key employees - 75% of time spent of developing R&D • can be director/5% shareholder

Research and Development Overview R&D tax credit - a valid claim • 13 key criteria provided • Detail each R&D project separately • Submit claim as part of Corporation Tax Return for relevant year • Claim must be lodged within 12 months of accounting year-end

Research and Development Overview • Company incurs R&D spend in 2003 of € 100,000 • In year ended 31/12/2011 company incurs R&D spend of € 600,000 • Incremental spend € 500,000 • Company has paid € 50,000 in CT in preceding accounting period • Company will not have a CT liability for the next 3 accounting periods

Recent Changes re Corporation Tax Group Losses • Effective for accounting period ending on or after 1 Jan 2012 – time apportion losses • Grouping CT Losses -can now also include companies: • Resident in a treaty country and • Quoted on a recognised stock exchange • E.g. now can group losses between 2 Ire cos held directly by a US parent • Does not include CGT groups

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