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© 2019 Deloitte Ireland LLP. All rights reserved.

© 2019 Deloitte Ireland LLP. All rights reserved. Budget 2020

Budget 2020

Headline Verdana BoldBudget 2020Budget Briefing - 9 October 2019

Budget 2020 2© 2019 Deloitte Ireland LLP. All rights reserved.

Introduction

Mike Sheehan


Introduction Mike Sheehan

Personal & Business Tax Jackie Coughlan

Corporate & International Tax Caroline O’ Driscoll

VAT Ted Holohan

Brexit Donna Hemphill

Panel Discussion

Wrap- Up Mike Sheehan

Budget 2020


Devil is in the detail

At a glance – doesn’t seem like a whole lot

Budget 2020

Amounts involved


Full Year

€ m

Tax Credit Increases 43

SME Tax Reliefs 80

Housing – help to buy 40

CAT Relief 11

____

Tax Reliefs 174

The Minister Giveth

Budget 2020


Full Year

€ m

Carbon Taxes 157

CT Anti Avoidance 94

Tobacco 57

Stamp Duty – non residential property 141

Dividend withholding tax 80

____

Tax Increases 529

The Minister Takes Away

Budget 2020


Personal & Business Tax

Jackie Coughlan


Personal Tax Credits

Home Carer Credit

• Increased from €1,500 to €1,600

• Claimable where spouse/civil partner works in the home caring for:

− Child (under 16 / under 18 & in full time education)

− Individual over 65

− Individual permanently incapacitated by reason of mental or physical infirmity

• Carer can earn income of up to €7,200 without impacting on the credit

• Carer’s income does not take account of DSP carer benefit/allowance

Earned Income Credit

• Increased from €1,350 to €1,500

• Applies to those earning trading or professional income

• Includes employed directors (>15% holding) who don’t qualify for employee tax credit

• Aggregate of employee tax credit and earned income credit capped at €1,650


Other Measures

Stamp Duty on non-residential property increases from 6% to

7.5%

Inheritance/gift tax threshold from parent to child increases

from €320k to €335k

PRSI - additional 0.1% employer contribution to the National Training Fund Levy


Gains arising to employees on the exercise of KEEP share options will be liable to Capital Gains Tax on disposal of the shares, in place of the current liability to income tax, USC and PRSI on exercise.

Available for qualifying share options granted between 1 January 2018 and 31 December 2023.

Share-based remuneration incentive for unquoted SME companies to attract key employees.

Key Employee Engagement Programme (“KEEP”)

© 2017 Deloitte. All rights reserved


New Measures

KEEP

Amendments to qualifying companies & holding companies definitions to allow group structures to qualify

Existing shares to qualify?

Amendments to qualifying employee definition to reflect part-time and flexible working arrangements and movement within group structures


SARP & FED

Incentive to reduce the cost of bringing in skilled workforce to Irish operations

30% of income over €75k threshold exempt from income tax where certain conditions met

Income threshold of €1m

Incentive to support Irish companies expanding into new markets

Income tax relief up to €35k for travel to certain qualifying countries

Must have 30 days in a relevant country in 12 month period

Qualifying days = 3 consecutive days

Special Assignee Relief Programme (SARP) Foreign Earnings Deduction (FED)

Schemes extended from 31 December 2020 to 31 December 2022


Increase in credit from 25% to 30%

Applies to micro and small companies

New provisions are subject to State Aid approval

Credit can be claimed on qualifying pre-trading expenditure

Available via offset against VAT and payroll taxes

Limit for third level educational institutes increased from 5% to 15%

R&D Tax Credit

© 2019 Deloitte. All rights reservedEmployment Tax Update 2019

Dividend Withholding Tax

From 1 January 2020 rate increases from 20% to 25%

Does not impact an individual’s ultimate tax liability – marginal tax rates apply

From 1 January 2021 a modified Dividend Withholding Tax regime will apply


Employment and Investment (“EII”) – Main changes

FULL INCOME TAX RELIEF (40%) TO BE PROVIDED IN YEAR INVESTMENT IS MADE

ANNUAL INVESTMENT LIMIT INCREASED FROM €150,000 TO €250,000 PER ANNUM

INCREASED TO €500,000 PER ANNUM FOR MINIMUM INVESTMENT PERIOD OF 10 YEARS


Corporate & International Tax

Caroline O’ Driscoll


International Tax Developments


“The whole world’s in a terrible state o’ chassis”

Juno and the Paycock


International Tax…..


Jan April May July/Aug Sept

TP consultationORIP regime UK

CFC effective

MLI deposited

Haven substance rules

Interest consultation

MLI effective

BEPS 2.0R&D review

Exit tax guidelines

CFC guidelinesEU notice 6 Aug/Interest limitation

TP feedback statement

2019

Oct

Technical

amendment

to exit tax


Jan Likely 2020

TP rules

Hybrid mismatch rules

DAC 6 Reporting

2020+

OECD BEPS 2.0

2021+

Interest limitation?


12.5% rate

“Ireland has a competitive corporation tax rate. It has served us well and it will not be changing”

Budget 2020


Irish Transfer Pricing Rules


Transfer pricing is the setting of the price for goods and services sold between related entities

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New Transfer Pricing Rules 2020

Broadens the scope

of TP

Adopts 2017 OECD

guidelines (DEMPE)

Removes pre July

2010 grandfatheringExtends TP to SME’s

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New Transfer Pricing Rules 2020

Enhanced TP

documentation

Extends to non

trading income

Extends to capital

transactions > €25m

Master

file

€250m

Local file

€50m

Exceptions

between 2

Irish

resident

companies

Certain

exemptions


Small = Exempt

Headcount <50

AND

Annual turnover <€10m

Or

Balance sheet <€10m

Transfer Pricing for SME’s


Transfer Pricing for Medium Enterprises1 January 2020

Headcount <250

And turnover <€50m or balance sheet <€43m

Applies to relevant arrangements


Relevant Arrangements?

Schedule D type transactions with a foreign counterparty

Consideration >€1m

Capital transactions with foreign counterparty >€25m

Reduced documentation requirements


OECD and BEPS 2.0


© 2019 Deloitte Ireland LLP. All rights reserved32

BEPS 2.0 – Global Tax Rules in a Digital Age

• Taxing rights where user is based?

• Taxing rights to market jurisdictions based on marketing intangibles?

• Reconsider nexus concept/significant economic presence?

Pillar 1

Allocation of taxing rights

• Income inclusion rule?

• Global minimum tax?

• Tax on base eroding payments?Pillar 2

Global Anti Base Erosion (GLoBE)


Global minimum tax rate

“The idea is if a company operates abroad, and this activity is taxed in a country with a rate below the minimum, the country where the firm is based could recover the difference.“

Pascal Saint Amans, Head of Tax Policy OECD


Future tax trends

Transfer pricing interventions doubled

MAP claims doubled

DEMPE

BEPS 2.0

Joint audits Europe

Data analytics - €164m (33%)

Robotics/automation


VAT

Ted Holohan


Carbon Tax

• Increase in Carbon Tax €6 per tonne.

• Carbon Tax change to auto fuel from midnight on the 8th October 2019.

• Carbon Tax change to other fuels, i.e. home heating etc. from May 2020.

• There will be additional relief through the Diesel Rebate Scheme for hauliers to compensate that sector for the increased cost of fuel.

VAT/VRT

• Reduction in qualifying CO2 thresholds for reliefs in respect of VAT reclaim on commercial vehicles.

• New Nitrogen Oxide (NOx) emissions based surcharge replacing the 1% diesel surcharge on new passenger vehicles registered in the State from 1 Jan 2020.

• Extension of VRT relief for hybrids and plug-in hybrid electric vehicles (subject to CO2 thresholds).

Tobacco Products Tax

• Increase of 50c on pack of 20 cigarettes with pro-rata increase on other tobacco products.

Carbon Tax/VRT/Excise

Budget 2020 changes


• The EU countries have asked for short-term measures to improve the functioning of the EU VAT system. This has resulted in the following:

1. Harmonized rules for EU cross border call-off stock supplies;

2. Harmonized rules for EU cross border chain transactions;

3. Harmonized rules for documenting the EU cross border movement of goods;

4. Mandatory VAT ID number verification for EU cross border supplies.

• The new rules will be effective as of 1 January 2020 and applicable until the implementation of the definitive VAT regime (if adopted, foreseen for 1 July 2022).

• The 2020 changes will affect different areas of your businesses, e.g.: the ERP system, the Tax Control Framework and policy, the order processes between suppliers and customers, the VAT compliance, the billing processes, the contracts, etc.

The transition to a single EU VAT area

The four quick fixes


• The four quick fixes of the EU VAT system aim to harmonize and simplify of the VAT rules across the EU. This can also mean stricter rules and less flexibility for the business. The exact impact for a trader depends on the business specifics of each trader and the strategic choices made.

• However, in any case the changes impact people, process and technology & data. The changes ask for a holistic approach involving various stakeholders such as Sales, Procurement, IT, Tax, Legal, etc.

• The four quick fixes can also be seen as an opportunity for standardization and enhancement of internal controls across the EU.

• Some changes only require small changes for people, process, technology & data whereas others can have a bigger impact.

The transition to a single EU VAT area

The four quick fixes

Procurement

TaxIT

SalesLegal

4 quick fixes

The approach we suggest:1. Determine which quick fixes will impact the current supply chains (‘must do’s’);2. Determine which benefits can be derived from the quick fixes (‘nice to haves’);3. Determine the actions and priorities for the stakeholders including Sales, Procurement, IT, Tax,

Legal, etc.;4. Initiate the process of change.

Example of a small change with a high financial impact

The new rules require businesses to validate the VAT ID number of a customer in the case of an EU cross border supply. Not doing this creates a risk of an additional VAT liability if the VAT ID number turns out invalid at the time of the supply. This risk eats out your profit margin (average standard rate in the EU is 20%). Generally businesses only validate VAT ID numbers as part of the Master Data set up in the ERP system.

A new process for continuous VAT ID number verification is recommended. IT can automate this process or you can outsource this task. Sales and Legal may want to take risk restricting measures in the contracts.


Quick fix call-off stock supplies

Current situation 2019

• As a standard VAT registration and reporting obligations for the supplier in the EU country of dispatch and in the other EU country of

storage.

• 18 EU countries currently have a call-off stock regime in place that relieves the supplier from registration and reporting obligation in

the EU country of storage.

• The various EU countries apply different sets of rules creating difficulties in daily practice.

Trader Customer (B2B)

GOODS

INVOICE

Storage

1 2


Quick fix call-off stock supplies

Situation 2020

• A harmonized set of rules across all EU countries (maximum storage period is 12 months).

• The new rules are mandatory to apply (not optional).

• The supplier will perform a “standard” EU cross border supply in the country of dispatch and has no registration and reporting

obligations in the country of storage (if and as long as all conditions are met).

• The supplier and the customer will face additional administrative requirements (double EU Sales Listing and stock registers).

• As a supplier and as a customers you need to have in place new controls to ensure that the call of stock rules are applied if the

conditions are met and a default scenario is known and in place once no longer met.


GOODS

INVOICE

Storage

1 2


Quick fix chain transactions

Current situation 2019 – standard rule

• Chain transactions concern subsequent supplies of goods involving 3 parties (or more), whereby only one cross border movement

occurs in the course of the subsequent supplies.

• As a general concept only one leg in the chain can be considered the cross border supply for VAT. Hence, Supplier 2 has VAT

registration and reporting obligations in the dispatch or arrival country, possibly also triggering VAT cash flow in these countries.

• Currently the rules for allocating the cross-border movement to a leg in the chain can result in mismatches between countries and

create uncertainty about applying the 0% VAT rate (or VAT exemption) or not. The average standard VAT rate is 20% in the EU.

• The simplified triangulation rules may reduce the administrative burden in the case of a 3 party supply chain. Applying the simplified

triangulation is mandatory (not optional).

Supplier 1 Customer (B2B)

GOODS

INVOICE

Supplier 2INVOICE

321


Quick fix chain transactions

Situation 2020

• A harmonized set of rules across all EU countries with new criteria to determine the leg in which the cross-border supply takes place.

• The rules are strict and leave less room for flexibility. This increases certainty for apply the 0% VAT rate (or VAT exemption).

• The party arranging the transport and the VAT ID numbers used will be decisive factors.

• The simplified triangulation rules as such do not changed and will still reduce the administrative burden if applicable. However, with

more certainty on the VAT qualification of the supplies it will be easier to apply the simplified triangulation regime.

Supplier 1 Customer (B2B)

GOODS

INVOICE

Supplier 2INVOICE

1 2 3


Quick fix proof of transport

Situation 1 January 2020

Harmonization of proof of transport & rebuttable

presumption

Supplier indicates goods have been

transported by him or on his behalf

Two items from A

One item from A + one item from B

Supplier is in possession of written statement of buyer

that goods have been transported

Two items from A

One item from A + one item from B

A

documents related to transport, e.g.:

• Signed CMR document

• Bill of lading

• Airfreight invoice

• Carrier invoice

B

supportive documents related to transport,

e.g.:

• Insurance policy

• Bank payment doc

• Doc issued by public authority, e.g. notary

• Receipt warehouse keeper

Supplier ships

Buyer ships


Situation 1 January 2020

Quick fix VAT identification number

45


GOODS

INVOICE

• A supply of goods from one EU country to another to a taxable person is subject to 0% VAT (VAT exempt) if the supplier can prove the

cross border movement (documentation) of the goods and if the customer provides its valid VAT number to the supplier.

• The 0% VAT rate (VAT exemption) shall not apply if the supplier cannot file a correct EU Sales Listing.

• The published examples of justified shortcomings to the EU Sales Listing do not include an invalid VAT ID number of the customer.

• Hence you need to have in place VAT ID number verification procedures or tools that allow continuous verification.

1 2


Brexit

Donna Hemphill


Brexit considerations

1

2

3

5

4

Supply chain

People

Financial environment

Regulatory, legal and data

Market access and trade


Revenue guidance – preparing for Brexit

• Register for Customs – obtain Economic Operator Registration and Identification (EORI) number

• Decide who will submit your customs declarations – customs agent/in-house

• Know the key data required for a customs declaration Commodity code Customs value Origin

• Customs documentation Commercial invoice Packing list Licences?

• Making payments of duty and VAT Cash TAN Deferred payment


Supply chain review

Do you rely on UK-based suppliers?

• Can goods be sourced directly from the EU

• What are the incoterms – who arranges transport?

• What tariffs are applied to your goods?

Do you have customers in the UK?

• Who will take on responsibility for the completion of customs formalities?

• Lead times / shelf life

• Are contracts in place?

Do your goods move through the UK on the way to or from Europe?


Customs declaration

• Supplier name / address• Importer EORI• Pieces• Weight• Declarant• Deferment account• Customs currency and value• Valuation statement• Country of origin• Country of dispatch• Customs procedure code • Commodity code• Transport details• Freight charges• Preference• And many more…..

A OFFICE OF DISPATCH/EXPORT

2 Consignor/Exporter No

3 Forms 4 Loading lists

5 Items 6 Total packages 7 Reference number

8 Consignee No 9 Person responsible for financial settlement No

10 Country first 11 Trading 13 C.A.P.

destin. country

14 Declarant/Representative No 15 Country of dispatch/export 15 C. disp./exp. Code 17 Country destin. Code

a b a b

16 Country of origin 17 Country of destination

18 Identity and nationality of means of transport at departure 19 Ctr. 20 Delivery terms

21 Identity and nationality of active means of transport crossing the border 22 Currency and total amount invoiced 23 Exchange rate 24 Nature of

transaction

25 Mode of transport 26 Inland mode 27 Place of loading 28 Financial and banking data

at the border of transport

29 Office of exit 30 Location of goods

Marks and numbers - Container No(s) - Number and kind 32 Item 33 Commodity Code

No

34 Country origin Code 35 Gross mass (kg)

a b

37 P R O C E D U R E 38 Net mass (kg) 39 Quota

40 Summary declaration/Previous document

41 Supplementary units

A.I. Code

46 Statistical value

Type Tax base Rate Amount MP 48 Deferred payment 49 Identification of warehouse

B ACCOUNTING DETAILS

Total:

50 Principal No Signature: C OFFICE OF DEPARTURE

represented by

Place and date:

Code 53 Office of destination (and country)

not valid for

Stamp: 54 Place and date:

Result:

Seals aff ixed: Number: Signature and name of declarant/representative:

identity:

T ime limit (date):

Signature:

44 Additional

information/

Documents

produced/

Certificates

and authori-

zations

47 Calculation

of taxes

1

1

1 D E C L A R A T I O NEUROPEAN UNION

D CONTROL BY OFFICE OF DEPARTURE

52 Guarantee

51 Intended

offices

of transit

(and

country)

Co

py

fo

r th

e c

ou

ntr

y o

f d

isp

atc

h/e

xp

ort

31 Packages

and

description

of goods


NI/ROI Border

No customs tariffs on goods moving from Ireland to Northern

Ireland

No requirement to complete declarations or other formalities for

import or export of most goods (Exceptions for - dangerous

chemicals, ozone depleting substances and F-gases, endangered

species, rough diamonds and dual-use or torture goods)

No corresponding UK Government checks or inspections on imports or exports at or near the border

Only apply a small number of measures on certain goods:

• VAT

• Excise

• Licences


Panel Discussion


Panellists:

Dan Hogan

Brexit Finance Manager

Dairygold

J.J Kett

CEO Voicesage

Conor Mowlds

Chief Commercial Officer Port of Cork


Wrap Up

Mike Sheehan


Budget 2020

€3000 - Gift from each parent to each child

€1270 - CGT exemption

€500 – Tax free vouchers

Rollover – CGT losses

EIIS – Investments

Maximise pension contributions


Thank

You

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