2013FINANCE BILL

ABOUT MAZARS 2

INTRODUCTION 3

1. INCOME TAX 4

2. CORPORATION TAX 7

3. CAPITAL TAXES 9

4. LOCAL PROPERTY TAX 11

5. REAL ESTATE & AGRICULTURE 13

6. PENSIONS 16

7. CHARITIES 17

8. VAT & EXCISE DUTY 18

9. RECEIVERSHIPS 20

SUMMARY OF TAX CHANGES

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Finance Bill 2013

CONTENTS

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Finance Bill 2013

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In providing tailored solutions to the individual needs of our clients, Mazars Tax examine and offer a comprehensive range of tax services to national and international clients with a particular emphasis on helping them to structure their businesses and financial affairs tax efficiently.

Mazars has one of the largest teams of tax specialists in Ireland and provides a full range of tax services to small and medium sized enterprises, private and publicly quoted companies and individuals. Our approach entails coming forward with ideas and solutions that bring added value to clients, based on a comprehensive understanding of each client’s particular business. We are part of the International Mazars organisation, Europe’s largest independent firm of accountants and advisors, and as such are ideally placed to provide advice on cross border transactions and international tax issues.

Our areas of specialisation include:

Corporate Tax Services

Film Finance

International Tax Services / Cross Border Transactions

Private Client & Employers Tax Services

VAT Services

Research & Development

Entertainment Sector

Frank Greene t 01-449 6415e fgreene@mazars.ie

Noel Cunningham t 01-449 6408e ncunningham@mazars.ie

Gerry Vahey t 01-449 6423e gvahey@mazars.ie

Paul Meet 091-570 100e pmee@mazars.ie

Tax Partners

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ABOUT MAZARS

Finance Bill 2013

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The Department of Finance published Finance Bill 2013 (the “Bill”) earlier today, Wednesday 13 February. It sets out the finer details of the Budget measures announced last December.

Speaking at the publication of the Bill, the Minister for Finance Michael Noonan said, “while we have seen significant progress since Budget day on a number of key issues there is no doubt that the SME sector will be the driver of the economic recovery across the country. This Government is committed to supporting this key sector and each of the measures included in Finance Bill 2013 are designed to help this critical sector to trade, to grow into new products and markets, to sustain existing and to create new jobs.”

The Bill gives legislative effect to increases in indirect and capital taxes already announced. Specific detail is provided on the much anticipated Real Estate Investment Trusts (REITS).

New measures not previously announced in the Budget include:

• steps to improve access for small and medium enterprises to the ‘key employee’ provision of the R&D tax credit;

• Employment and Investment Incentive to be amended to allow the operating or management of hotels, guesthouses and other self-catering accommodation to qualify. This will be subject to a review after two years;

• the abolition of Foreign Service Relief in respect of ex-gratia payments made on retirement or removal from office.

The Finance (Local Property Tax) (Amendment) Bill 2013 was also published today. Much of the detail has previously been published. However, todays publication contains amendments to the Local Property Tax on foot of commitments previously made by the Minister. Specifically, residential properties affected by “pyrite heave” will be exempt from the charge.

As in previous years, we expect that amendments will be made to the Bill as it moves through the various stages in the Dail and Seanad before it is signed into law by the President.

INTRODUCTION

Finance Bill 2013

Universal Social Charge (USC)

From 1 January 2013, the standard rates of USC (i.e. up to 10%) will apply to both those aged 70 years of age and over and medical card holders (PAYE and self-employed income earners) whose annual income exceeds €60,000. Those individuals 70 or over and medical card holders with annual income of less than €60,000 will continue to be subject to a maximum USC rate of 4%.

It has also been clarified that the USC is chargeable on any balancing charge where it has arisen from capital allowances which would have been deducted in arriving at the income chargeable to the USC.

The provisions relating to the administration of income tax have been further extended to the USC in respect of record keeping and the PAYE system provisions.

Employer Funded TrustsThis piece of anti-avoidance legislation has been introduced to counteract particular schemes whereby a trust, funded by an employer, provides benefits (i.e. loans, provision of assets) to employees of that employer free of tax. Under the proposed legislation, the provision of any such benefits to employees (past, present or future), to the extent that the income is not already subject to income tax, will now be treated as income in the employee’s hands being subject to both income tax and USC.

In the event that the employee repays these loans, the relevant income tax and USC may be refundable.

Any such existing benefits in place prior to 13 February 2013 will also be subject to income tax and USC to the extent that the loans remain outstanding in any year of assessment

on the same basis as preferential loans under benefit-in-kind provisions.

Those schemes approved by Revenue (e.g. APSS, ESOT) will not be caught by these anti-avoidance provisions.

Benefit in KindIt has been confirmed that where a public sector employee receives a benefit from any public body, such a benefit will be subject to income tax as a benefit-in-kind.

The specified rate to be used in calculating the benefit-in-kind charge in respect of preferential loans provided by employers has increased from 4% to 5% in respect of non-home loans and from 12.5% to 13.5% in respect of home loans.

Film ReliefAs announced in the Budget, the current scheme of film relief will continue until 31 December 2015, after which time the relief will move from an investor-based relief to a Producer Company tax credit relief. This scheme will run to 31 December 2020 subject to EU approval and subsequent Ministerial Commencement Order.

1. INCOME TAX

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Finance Bill 2013

Double Tax ReliefAny foreign tax arising on foreign income which remains unrelieved after the relevant income tax credit may now be utilised against an individual’s charge to the USC. This change has effect from the 2011 and subsequent tax years. Similar provisions for the income levy have been enacted retrospectively for the 2009 and 2010 tax years.

In respect of foreign dividends arising from EU/EEA treaty partner countries, an additional tax credit may be claimed in respect of tax on those foreign dividends in circumstances where the existing credit is less than that amount that would arise under the source country’s tax rate.

Remittance Basis of TaxationThe Bill proposes to introduce an anti-avoidance measure in relation to the remittance basis of taxation. The proposed change counters a potential avoidance mechanism whereby a non-domiciled individual transfers his or her foreign source income or property bought using that income, to his or her spouse or civil partner, and, on or after 13 February 2013, that income or property is remitted to the State. Such remittances will be deemed to have been made by the non-domiciled individual. A similar amendment is made to the remittance basis of assessment for Capital Gains Tax.

Maternity BenefitMaternity benefit is to become taxable for all claimants with effect from 1 July 2013. The benefit will however continue to be exempt from the Universal Social Charge. Adoptive Benefit and Health and Safety Benefit payments will also be taxable

Foreign Earnings DeductionBudget 2012 originally announced the foreign earnings deduction. The Bill proposes that it will be extended to include work related travel to Algeria, Democratic Republic of Congo, Egypt, Ghana, Kenya, Nigeria, Senegal & Tanzania. It is hoped that this measure will help to facilitate increased demand of Irish goods and services abroad.

Tuition FeesThe tax relief available for tuition fees paid in respect of qualifying third level courses has been amended. The first €2,500 in fees paid for a full-time course (€1,250 for a part-time course) will be ineligible for tax relief in 2013. The Bill also provides for the following changes for 2014 and 2015:

• The first €2,750 in fees paid for a full-time course (€1,375 for a part-time course) will be ineligible for tax relief in 2014.

• The first €3,000 in fees paid for a full-time course (€1,500 for a part-time course) will be ineligible for tax relief in 2015.

Termination PaymentsWith effect from 1 January 2013, top slicing relief will no longer be available on ex-gratia lump sums where the non-statutory payment is €200,000 or more.

The maximum lifetime limit of €200,000 that may be paid tax free, in respect of termination or ex-gratia payments, is extended to cover ex-gratia payments made on account of the death or disability of an employee. Any amount exceeding €200,000 will be taxable in full.

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Finance Bill 2013

Foreign Service ReliefThe Bill provides for the abolition of Foreign Service Relief, in respect of ex-gratia payments made on retirement or removal from office. The relief is being abolished to prevent a situation whereby employees in multinational corporations, who had no “presence” within the Irish income tax system, could be transferred to Ireland for short periods to finish careers and be given significant “golden handshakes” which, based on foreign service relief, could be received almost free of tax in this country.

Employment Investment Incentive Scheme The Employment Investment Incentive Scheme (EIIS), which was first announced in 2011 has been extended until 2020. The extension is contingent on approval of the European Commission.

The bill proposes to permit the operating or managing of hotels, guest houses, self-catering accommodation or comparable establishment to qualify for the incentives where they meet the conditions required for tourist traffic undertakings.

The aim of the scheme is to allow individuals to claim a tax deduction for the cost of investing in certain companies. Its purpose is to provide companies with a relatively low cost of funds to promote the creation of jobs and to encourage companies to invest in research and development activities.

The key aspects of the EIIS are as follows:

• The maximum amount of investment that a company can raise in its lifetime is €10 million

• The amount that can be raised in a single year is subject to a cap of €2.5 million

• The individual must hold the investment for at least three years

• The individual gets a tax credit of 30%

• Maximum contribution limit on relief of €150,000 per investor.

Deposit Interest The rate of deposit interest retention tax is to be increased from 30% to 33%. The increased rate will apply in respect of payments, including deemed payments, made on or after 1 January 2013. The new 33% rate will also be the exit tax rate which will apply to life assurance policies and investment funds which make payments annually or more frequently. Where payments are not made on an annual basis, a 36% rate will apply.

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Finance Bill 2013

Start Up Exemption The three year corporation tax start up exemption is being extended to enable unused relief arising in the first 3 years of trading to be carried forward for use in subsequent years.

Close Company SurchargeClose companies may now retain an amount of undistributed investment and rental income of up to €2,000 without giving rise to a close company surcharge. This is an increase from the existing €635. For service companies, a similar increase is to apply in respect of the surcharge on undistributed trading or professional income. The aim of this change is to assist the cash-flow of companies by increasing the amount of income they can hold for use as working capital purposes.

GROUP RELIEFThe Bill provides that a company can surrender losses and other amounts eligible for group relief to an Irish resident company only if both companies are 75 per cent subsidiaries of companies resident in treaty jurisdiction or of quoted companies. It provides also that for the purposes of the 75% test, any share capital that it holds directly the sale of which would be taxable as a trading receipt of its trade is excluded. Also excluded is any share capital that it owns indirectly, in circumstances where the company with the direct holding of shares would treat the proceeds of the share disposal as a trading receipt of its trade. The section is effective for accounting periods ending on or after 1 January 2013.

AVIATION SECTORSignificant employment creation in the aviation sector has been identified by The AviationBusiness Development Task Force. In order to attract those operating in the aviation sector, the Bill provides for the introduction of an accelerated capital allowance scheme. These allowances will be available over a seven year period. Restrictions will be imposed on the offset of unused capital allowances against other income. The scheme will is subject to commencement by Ministerial Order.

R&D The Bill enhances the existing R&D tax legislation.

Volume Based Relief

The R&D system operates on an incremental basis for excess expenditure over that incurred in the 2003 base year. This incremental basis prevented long standing SME’s from claiming the credit, as the current year expenditure may not have exceeded the expenditure incurred in 2003.

Finance Act 2012 introduced a volume basis for accounting periods commencing on or after

2. CORPORATION TAX

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Finance Bill 2013

1 January 2012. The first €100,000 of qualifying expenditure could qualify for the credit, irrespective of the 2003 threshold amount. The Bill proposes an increase in the volume based relief for accounting periods commencing on or after 1 January 2013, such that the first €200,000 of expenditure may qualify for the credit.

These have been very welcome enhancements to the R&D regime for SME’s. Companies previously not entitled to claim the credit due to the 2003 restriction may now be entitled to claim R&D credits of up to €25,000 for 2012 and €50,000 for 2013.

Key Employees

Perhaps the most interesting amendment imposed by Finance Act 2012 was the introduction of an option for a company to surrender part of its R&D tax credit to a key employee. However, a noted difficulty associated with the 2012 definition of key employee was that it was particularly narrow. It required that 75% of the employee’s salary must qualifying for the R&D tax credit and 75% of the duties of the employee must relate to R&D activities.

The Bill has now reduced each of these qualifying percentages to 50%, broadening the range of employees that can qualify.

The 2013 amendments should allow more employees of SME’s to claim the credit, the 2012 amendments having been broadly targeted at employees of MNC’s. Unfortunately, the revisions don’t go as far as to include technologically minded business owners who are themselves intrinsically linked to the R&D activities of their companies.

CAPITAL ALLOWANCES ON INTANGIBLESThe period of ownership required to avoid the clawback of capital allowances claimed on qualifying specified intangible assets which are sold or ceased to be used in the trade has been reduced from 10 years to 5 years. This amended applies to expenditure incurred by a company after 13 February 2013.

This is a welcomed amendment as it provides greater flexibility for companies locating their IP activities in Ireland.

EMPLOYMENT GRANTS AND SUBSIDIESThe Bill clarifies that employment grants and recruitment subsidies paid to an employer who employs a person under the Wage Subsidy Scheme is exempt from income tax and corporation tax.

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Finance Bill 2013

As announced on Budget day, the rate of capital acquisitions tax CAT (i.e. gift and inheritance tax) is being increased from 30% to 33% for gifts and inheritances taken on or after 6 December 2012.

For the purpose of gift and inheritance tax, the relationship between the person who provided the gift or inheritance (i.e. the disponer) and the person who received the gift or inheritance (i.e. the beneficiary), determines the maximum tax-free threshold. This is referred to as the “group threshold”.

The Bill clarifies that interest on the late payment of discretionary trust tax by certain trusts runs from the valuation date for both the 6% and 1% once off annual charge until the date that the tax is paid.

Where a refund of discretionary trust arises, a claim for repayment must be made within 4 years of the valuation date or the date of payment of the tax where the tax was paid within 4 months of the valuation date.

The exemption from CAT for certain insurance policies taken out on the lives of certain individuals now extends to Capital Redemption Policies issued by Life Assurance Companies. Also the exemption for CAT of investment limited partnerships in certain situations will continue to apply notwithstanding the fact that an investment limited partnerships will now not be considered an investment undertaking.

Inheritances taken by a child over the age of 21 of an ARF or an AMRF are exempt from CAT. From the date of the passing of Finance Act 2013 this exemption from inheritance tax is now extended to vested PRSA’s.

Capital Gains TaxThe rate of capital gains tax was increased from 30% to 33% in respect of disposals made on or after 6 December 2012.

For individuals who are not domiciled in Ireland, such individuals pay Irish CGT on foreign gains to the extent that the gain is remitted to Ireland. The charge to CGT is now extended to cover circumstances where a non-domiciled individual transfers amounts derived from such gains to his or her spouse/civil partner and the spouse/civil partner remits these amounts to Ireland. These amounts remitted to Ireland by the spouse/civil partner are now liable to CGT.

3. CAPITAL TAXES

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Group Relationship to Disponer Pre Budget 2013(from 7/12/11 to 5/12/12)

Post Budget 2013(from 6/12/12)

A Son/Daughter €250,000 €225,000

B Parent/Brother/Sister/Niece/Nephew/Grandchild

€33,500 €30,150

C Relationship other than Group A or B

€16,750 €15,075

Finance Bill 2013

The Bill confirms that an individual who is aged 66 or over and who transfers assets qualifying for retirement relief to their child from 1 January 2014 will qualify for full retirement relief where the value of the assets does not exceed €3 million. It also provides for the aggregation of the value of disposals made by such individuals on or after 1 January 2014 for the purposes of the €3 million limit.

Relief for Farm RestructuringAs announced in the Budget, relief from capital gains tax will be available on disposals of farm land where the proceeds of a sale of farm land are reinvested for the same purpose i.e. the purchase of other farm land.

The sale and purchase of the farm land must occur within a 24 month period, and the initial sale or purchase transaction must occur within the period from 1 January 2013 to 31 December 2015 e.g. if land is sold on say 30 December 2015 the subsequent purchase of the land must occur by 29 December 2017 to get the CGT relief. This relief will also apply to farm land swaps subject to certification by Teagasc for all transactions seeking relief.

Full relief from capital gains tax will be given where the consideration for the farm land that is purchased is equal to or greater than the sale proceeds of the farm land that was sold. Where the consideration for the purchase or exchange is less than the consideration for the farm land sold or exchanged, partial relief will be given on the same proportion.

Where farm land is sold within 5 years from the date of purchase or exchange of the farm land, capital gains tax shall be charged as if this relief did not apply i.e. CGT is payable on the gain on the original sale together with CGT due on any gain on the sale of the new land. The 5 year test is not applicable where the land is disposed of subject to a CPO order.

The relief is subject to a Ministerial Commencement Order.

Carried Interest ProvisionThe Budget announced a review took place of the “carried interest” tax provisions to assist companies which are involved in innovation activities to access venture capital funding.

Currently in certain circumstances a rate of capital gains tax applies of 15% (12.5% for corporates) to venture capitalists who receive carried interest with respect to certain specific investments.

The scope of the relief has been expanded so that it is not limited to carried interest derived from investment in trading companies at the start – up phase only. The relief is linked to the overall performance of the venture capital investment portfolio. The requirement for investments in the target companies to be held for 6 years has been reduced to 3 years. This relief has also been extended to individual venture fund managers.

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Finance Bill 2013

Finance (Local Property Tax) Act 2012 (the “Act”) has previously been signed into law and today the Minister announced a small number of changes to the Act following debate in the Oireachtas.

An annual Local Property Tax (“LPT”) will be charged on all residential properties in the State and will be administered by Revenue under self-assessment. LPT is a tax payable on the market value of residential property and will come into effect from 1 July 2013.

For LPT purposes, residential property means any building or structure (or part of a building) which is used, or is suitable for use as, a dwelling. This includes any shed, outhouse, garage or other building or structure and included grounds of up to one acre.

In general those liable will be the owners of the residential property. This includes the owners of rented residential properties. In the case of long leases (over 20 years) and life interests, the tenant will be liable for the tax. The trustee or beneficiaries are jointly liable where a residential property is held in trust. If a property is jointly owned, one of the owners will need to make a return and pay the tax.

Certain properties will be exempt from LPT. The main exemptions are:

• New and previously unused properties purchased from a builder or developer

between 1 January 2013 and 31 October 2016 will be exempt until the end of 2016;

• Properties purchased by a first time buyer between 1 January 2013 and 31 December 2013 will be exempt until the end of 2016;

• Certain properties situated in unfinished housing estates (Ghost estates) to be specified by the Minister for the Environment Community and Local Government ;

• Property fully subject to commercial rates;• Diplomatic property;

• Registered Nursing Homes;

• Residential properties that are owned by a charity or a public body and used to provide accommodation and support for community living for the elderly and the disabled; and

• Properties affected by “pyritic heave”.

Revenue will write to residential property owners in March 2013 and will include an LPT return form for completion. It is understood that Revenue will provide guidance on how to value property at this time. If the guidance provided by Revenue is followed, the property valuation will not be challenged by Revenue provided the property is less than €1m.

The return must be completed and sent back to Revenue by 7 May 2013 if submitting by paper and by 28 May 2013 if submitting online. The valuation used in 2013 will be valid for the years 2013 to 2016 unless circumstances change.

The amount payable will depend on the market value of the residential property on 1 May 2013. For the purposes of calculating LPT, property values will be organised into market value bands. Our enclosed table summarises the bands and the applicable LPT liabilities. Today’s Bill provides that the LPT is to be

4. LOCAL PROPERTY TAX

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Finance Bill 2013

amended to exclude any increase in value due to modifications to a home to enhance access for a person with a disability

Payment MethodsRevenue will offer a range of methods for paying the tax.

Single payments can be made by way of:

• Debit or Credit cards• Single Debit Authority• Cash payments through certain payment

service providers

Alternatively, phased payments can be made in equal instalments from 1 July 2013 until the end of the year. These payments may be made by way of:

• Deduction at source from salary/occupation pensions;

• Deduction at source from certain social welfare payments;

• Deduction at source from certain scheme payments made to farmers by the

• Department of Agricultural, Food and the Marine;

• Direct Debit, or

• Cash payments through certain payment service providers.

A system of deferral arrangements for owner-occupiers will be implemented to address cases where there is an inability to pay the LPT under specified conditions. The deferred tax remains a charge on the property until the property is sold or transferred to another person.

Failure to submit the return or make a payment will result in Revenue imposing penalties and interest on the liable person. For a company or self-employed individual this can include a surcharge on their corporate/income tax returns and for a PAYE worker an order for their employer to deduct the LPT from their salary.

Although the household charge has been abolished and the NPPR is to be phased out in 2014, any unpaid charges will be incorporated into the LPT and will have to be discharged. Interest and penalties will apply to any outstanding amounts. Any unpaid LPT will become a charge on the property.

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Finance Bill 2013

REITSThe Bill provides for the introduction of Real Estate Investment Trust (REIT) companies. The section inserts a new Part 25A containing the specific provisions relating to the taxation of REIT companies. The regime provides, on meeting certain specified criteria, for a tax exemption in respect of the income and chargeable gains of a property rental business. The income and chargeable gains can be derived from both residential and commercial properties. There is no requirement as to the location of the rental properties as the definition is broad. Conditions to be met in order to qualify as a REIT include tax residence in Ireland and not in another jurisdiction; being Irish incorporated; listing on the main market of a recognised stock exchange in a Member State; and that it is not a closely held company.

Among the criteria for tax exemption is:

• that 75% of the aggregate income of the REIT derives from carrying on property rental business. Provided this limit is respected, it can carry on “residual business”, defined as any business which is not property rental business;

• the property rental business should consist of at least three properties, none of whose market value should exceed 40% of the total market value of the properties constituting the property rental business;

• subject to having sufficient distributable reserves, it should distribute at least 85% of the property income for each accounting period. Where it fails to do so, a charge to tax under Case IV Schedule D arises on the amount of undistributed income up to the 85% required level;

• it should maintain a property financing costs ratio of at least 1.25:1. Property financing costs are defined as debt finance or finance leases for the purposes

of property rental business, including interest, discounts, premiums, net swap or hedging costs and fees or other expenses associated with raising finance.

Where the property, having been acquired by the REIT, is subsequently developed in circumstances where the cost of development exceeds 30% of the market value of the asset at commencement of the development and where sale takes place within three years from completion of the development, any profits arising are taxable at 25%.

Where a company becomes a REIT, the assets of the company are deemed to have been sold immediately prior to it becoming a REIT and reacquired by the company immediately on becoming a REIT. The deemed sale and reacquisition are treated as being for market value. Any gain arising is subject to corporation tax under capital gains tax principles. Where an asset of the REIT ceases to be used for the property rental business and begins to be used for the purposes of its residual business, there is a deemed sale from the property rental business to the residual business at its market value on the date it ceases to be so used. This does not give rise to a tax exempt profit for the property rental business and instead is taxed as a chargeable gain. This treatment applies equally where an asset ceases to be used for the residual business and commences to be used for the property rental business.

A shareholder within the charge to corporation tax will generally, unless it is a qualifying company within the meaning of section 110(1) TCA 1997, be taxable under Case IV of Schedule D in respect of distributions from the REIT. A qualifying company for the purposes of section 110(1) will be chargeable to corporation tax under Case III of Schedule D.

There is an anti-avoidance provision contained in Section 705Q that has the effect of dis-applying the legislation to any transaction entered into by or on behalf of a REIT, or to

5. REAL ESTATE & AGRICULTURE

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Finance Bill 2013

which it is directly or indirectly a party, where the transaction is undertaken otherwise than for bona fide commercial reasons or where it forms part of a scheme or arrangement of which the main purpose or one of the main purposes is the avoidance of liability to tax.The earliest date from which a company can be a REIT is 1 January 2013.Except where specifically stated, reference to a REIT refers to both a company and group REIT.

Living City InitiativesThe Living City Initiative is a targeted pilot tax incentive scheme which seeks to promote the regeneration of certain urban areas on a pilot basis scheme by:

• encouraging people back to the centre of Irish cities to live in historic buildings; and

• encouraging the regeneration of the retail heartland of central business districts.

It has been decided that the pilot phase will be targeted at Waterford City and Limerick City at owner occupiers rather than property developers.

The initiative will provide tax incentives for works performed to refurbish residential Georgian houses and retail buildings. There will be a requirement that the costs of refurbishment work must be at least 10% of the pre-works value of the property for the relief to be claimed.

Residents will be able to claim tax relief for the cost of the refurbishment works in the relevant Georgian houses at a rate of 10% per year for a period of 10 years against their income. Relief is only allowable for the years in which the house is the principal private residence of the person. If the property is sold within 10 years, entitlement to the relief stops and the new owner will not be entitled to claim any relief.

Retailers will be entitled to claim accelerated capital allowances in respect of the development and upgrade of retail premises over a period of 7 years at a rate of 15% for the first 6 years and 10% for the final year.

This relief commences on the date that the Finance Act 2013 becomes law and ending five years after that date.

Development LandNew provisions have been introduced relating to certain individuals who are engaged in, or deemed to be engaged in, the trade of dealing in or developing land. These are:

1. The release of loans, incurred to acquire the land which is held as trading stock, will be treated as an income receipt in the year of release. This can also apply in cases of bankruptcy and insolvency. However, losses carried forward incurred in the actual trade will be available for offset against the income.

2. Loss relief claimed on interest deductions will only be allowable where the interest is actually paid and loss relief claimed on the write-down in the value of land will only be allowed in situations where the land has been sold. This applies to individuals in any particular tax year if less than 50% of their total income for that year and the two previous years derives from dealing in or developing land.

These provisions are effective on or after 13 February 2013.

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Finance Bill 2013

Farming A number of measures are introduced to create additional jobs in the farming and agri-food sectors:

• The general stock relief of 25% for farmers is to be extended for a further three years to 2015, subject to commencement order.

• The definition of registered farm partnerships is extended to include other registered partnerships such as beef production partnerships. Clearance is currently being sought from the European Commission.

• The young trained farmer’s stock relief at a rate of 100% is also to be extended for a further three years to 2015.

• If seeking to qualify for the 100% stock relief for the first time in 2012 or any subsequent year, part of the qualification process will require a business plan to be submitted to Teagasc.

• The (cash equivalent) amount of stock relief at the 100 per cent rate which can be received by a qualifying farmer, who first qualifies as such in the year of assessment 2012 or a subsequent year of assessment, is limited to €40,000 in a single year of assessment and €70,000 in aggregate over the course of the scheme (i.e. 4 years).

• In order to qualify for the 100% rate, the young trained farmer must fall within the definition of small and medium-sized enterprises for the year in question.

• The provisions relating to the 100% stock relief are all subject to commencement order of the Minister of Finance.

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Finance Bill 2013

Additional Voluntary Contributions (AVCs)Individuals will be allowed a once-off option to withdraw up to 30% of the accumulated value of funded AVC’s made to supplement retirement benefits. Withdrawals will be liable to PAYE at an individual’s marginal rate, unless the administrator has received a certificate of tax credits and standard rate cut-off point from Revenue. The option to withdraw will be available for 3 years from the passing of the Bill. The option is available in respect of AVC’s made for the purposes of providing benefits in retirement, but does not include AVC’s made towards purchasing notional service. Provisions have been put in place in cases where the AVC fund is subject to a pension adjustment order. The Bill also outlines types of contributions that are excluded from this once-off withdrawal option, and include employer contributions to an approved scheme, a statutory scheme or a PRSA.

Approved Retirement Funds/Approved Minimum Retirement FundsThe Bill proposes to temporarily rescind certain provisions in relation to ARF’s and AMRF’s. The provisions which are being temporarily rescinded relate to:

• the increase in the minimum guaranteed pension income for life from €12,700 per annum to 1.5 times the state pension i.e. currently €18,000 which applies to individuals aged under 75 years in order to allow such individuals to have access to an ARF, and

• the increase in the maximum “set aside” amount required to be placed in an AMRF from €63,500 to 10 times the rate of the State Pension, currently €119,800 where individuals do not meet the specified income requirement and choose not to purchase an annuity.

The Bill proposes to reinstate the previous limits of €12,700 and €63,500 in respect of ARF options exercised on or after the date of the passing of the Finance Act 2013. The intention is that the lower limits will apply for a period of 3 years, whereupon the higher limits will be reapplied by Finance Act 2016. Special provisions have also been announced to ensure that individuals who were affected by the higher limits in the period since 6 February 2011 are not disadvantaged by these new provisions.

6. PENSIONS

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Finance Bill 2013

In his December Budget speech, the Minister announced significant changes to the manner in which tax relief on charitable donations is to be granted. This announcement is the product of the public consultation process announced in February 2012. The enacting legislation will be contained in Finance Bill 2013. The Bill is scheduled to be published on 13 February.A new tax relief regime applies to charitable donations received from 1 January 2013. The key features of the new regime include:

• a blended rate of relief (31%) will apply in respect of all donations. • the different tax treatments applying to donations received from employees and self-

assessed donors will be abolished. • an annual limit of €1 million will be introduced per individual donor. The minimum €250

donation amount remains unchanged. • donations will be removed from the high earner restriction list.

The below table illustrates the operation of the new regime.

In addition to the above amendments, steps have been announced with the intention of simplifying and reducing the administrative burden. These include the charity being:

• only required to obtain a donor’s PPS number the first time a declaration is signed. Thereafter charities can use their own identifier when communicating with the donor.

• permitted to use enduring declarations from donors for a period of up to 5 years. • able to submit refund claims electronically to the Revenue Commissioners.

The processing of claims for relief will be dependent on the donor’s personal circumstances and Revenue’s records. Claims for relief in respect of donations made by PAYE donors will only be processed and refunded by Revenue once the donor’s P35 return has been filed. In the case of self-assessed taxpayers, relief claims will be processed when the donor’s individual tax return has been filed.

No changes have been announced in relation to the treatment of donations made by corporates. Corporates will continue to obtain relief at a rate of 12.5%.

7. CHARITIES

17

Old Regime € New Regime €

Donation 10,000 10,000

Tax relief for donor (assumed) 4,100 Nil

Tax relief for charity Nil 4,493

Total funds to charity 10,000 14,493

Finance Bill 2013

Special ProvisionsIn tandem with the Budget announcement, the threshold for the cash receipts basis of accounting for VAT will increase from €1 million to €1.25 million. This measure is aimed at improving the overall cash flow position of qualifying businesses.

It has also been confirmed that the farmer’s flat-rate addition has been reduced from 5.2% to 4.8% with effect from 1 January 2013.

Public Bodies – Sporting activitiesA measure has been introduced which has extended the turnover calculation related to the activities of a public body to include income which is derived from the provision of sporting and physical education activities. This could possibly create an obligation on certain state bodies to register and account for VAT.

VAT & Financial ServicesThere were some interesting provisions in relation to the ever complicated area of VAT & financial services. Firstly, the scope of the exemption for management activity and agency related activity has been refined and limited to certain undertakings specified under the TCA 1997 as opposed to a broader remit in the context of activities alluded to in the VAT Exemption Schedule. Secondly, what is now deemed to be a qualifying activity in terms of VAT recovery has now been specified to a more limited range of activities than previously defined.

Excise DutyExcise duty on a pint of beer, cider, and a standard measure of spirits has already increased from the date of the budget by 10 cent. The duty on a 75cl bottle of wine has increased by €1. Excise duty has increased by 10 cent (inclusive of VAT) on a packet of 20 cigarettes and roll your own tobacco will increase by 50 cent per 25 gram pack. All of the above excise duty increases will be applied on a pro-rata basis to other alcohol and tobacco products.

There were no increases to levies applied to petrol and diesel. Licensed road hauliers are to receive a relief from excise duty on auto-diesel with effect from 1 July 2013.

Carbon TaxThe Bill provides for an extension of carbon tax to solid fuels on a phased basis over two years commencing 1 May 2013. A rate of €10 per tonne will apply with effect from 1 May 2013 and this rate will increase to €20 per tonne on 1 May 2014.

Motor Tax and VRTThe rates of both VRT and motor tax across all categories increased with effect from 1 January 2013. The new rate to be applied will again depend on the year in which the vehicle was first registered. For private vehicles first registered prior to 1 July 2008, motor tax will increase by 7.5% annually. For electric cars the rate will reduce by 23.5%.

For motor vehicles first registered after 1 July 2008, the rate of motor tax payable will continue to be dependent on the level of Co2 emissions. These changes are outlined in the table on page 22.

8. VAT & EXCISE DUTY

18

Finance Bill 2013

19

Finance Bill 2013

The Bill introduces significant changes to the sections dealing with the accountability for VAT arising on the supplies of services by receivers and liquidators. These changes have provided clarity and have extended the responsibility of liquidators, receivers and other such persons (e.g. mortagees in possession) to pay over the VAT collected in relation to the supply of services by them while acting as asset receivers and/or receiver-managers in respect of a business.

Relevant persons are now legally obliged to account for VAT on service related income (e.g. operating a hotel, renting property where an option to tax has been exercised, or where the original borrower had a waiver of exemption in place). To date, on a strict reading of legislation, relevant persons were only accountable for VAT on the disposal of goods in satisfaction of a debt.

In addition to the above, the receiver’s responsibility in the context of the capital good scheme (“CGS”) has also been clarified and extended. The receiver is now legally obliged to maintain the capital goods record and provide for any positive or negative adjustments relating to changes of taxable use in a given period.

Whereas heretofore the receiver was liable for any capital goods scheme adjustments on sale or disposal of the property asset, any capital good scheme adjustment arising on the letting of the property asset was the responsibility of the borrower. Now the receiver/liquidator/MIP will be responsible and liable for any VAT arising under a capital goods scheme adjustment in either circumstance. The flip-side of these changes is that the liquidator/receiver/MIP will potentially be able to avail of positive capital goods scheme adjustments arising where taxable disposals or taxable lettings give rise to a re-imbursement of VAT previously forgone.

9. RECEIVERSHIPS

20

Valuation Band € Mid-point of valuation band

€

LPT in 2013 (half year charge)

€

LPT in 2014 (full year charge)

€ 0 to 100,000* 50,000 45 90

100,001 to 150,000* 125,000 112 225

150,001 to 200,000* 175,000 157 315

200,001 to 250,000* 225,000 202 405

250,001 to 300,000* 275,000 247 495

451,000 to 500,000 475,000 427 855

650,001 to 700,000 675,000 6078 1,215

850,001 to 900,000 875,000 787 1,575

950,001 to 1,000,000 975,000 877 1,755

Property valued at 1,001,000

** 901 1,802

Property valued at 1,250,000

** 1,212 2,425

Property valued at 1,500,000

** 1,525 3,050

*The Department of Finance estimates that 85% to 90% of properties will fall within the first five bands **Properties valued over €1 million will be assessed at the actual value (no banding will apply) at 0.18% on the first €1 million in value and 0.25% on the portion of the value above €1 million

Key Dates in 2013 March Revenue will issue LPT return forms including an estimate of the LPT and a

detailed explanatory booklet to liable persons

1 May Property valuation date – value valid up to and including 2016

7 May LPT return forms due to Revenue if paper filing

28 May LPT return forms due if filing electronically

From 1 July Phased payments such as direct debit or deduction at source payments commence (From 1 January in subsequent years)

15 July First direct debit payment date as referred to in the Summary of Budget Measures

21 July Bank single debit authority payments deducted. No date is specified for other single payment mechanisms

Single Person

Bands 2012 2013

Standard 20% €32,800 20% €32,800

Top 41% Balance 41% Balance

Married or Civil Partnership (dual income)

Bands 2012 2013

Standard 20% €65,600* 20% €65,600*

Top 41% Balance 41% Balance

Income Tax Rates and Bands

PRSI Limits for Employees

2012 2013

PRSI First €127 per week 0%Balance 4%

(exempt <€352 per week)

All 4%

(exempt <€352 per week)

SUMMARY OF TAX CHANGES Budget 2013

PRSI

mazars.ie Tel: 01 4494400 twitter.com/mazarsireland

*Only on Class A and H Employer

*Maximum amount allowed where one individual is working is €41,800

PRSI Limits for Self-Employed including Proprietary Director

2012 2013

PRSI 4% of earnings with noceiling

Minimum €253

4% of earnings with no ceiling

Minimum €500

Tax CreditsPersonal € €Single 1,650 1,650

Married/Civil Partnership 3,300 3,300

Widowed 2,190 2,190

One Parent Family Credit(including widowed)

1,650 1,650

2012 2013

PAYE 1,650 1,650

Child

Incapacitated child (max) 3,300 3,300

Widowed Parent

Year 1-5 3,600 -1,800 3,600 -1,800

Dependent Relative(max) 70 70

Blind Person

Single 1,650 1,650

Married or Civil Partners(both blind)

3,300 3,300

Home Carers (max) 810 810

Age Credit

Single/Widowed 245 245

Married/Civil Partnership 490 490

These notes are based on the Budget speech and Financial Resolutions and not on legislation, which will not be available until the Finance Bill is published. Our Budget Release isfor general information purposes only and clients should contact our Taxation Department before acting on any matters arising herein.

Age Exemption Limits - over 65 years of age

Single/Widowed 18,000 18,000

Married/Civil Partnership 36,000 36,000

Mortgage Interest 2012 2013

1st timebuyer*

Year 1 & 2 25% Year 2 25%

Year 3,4 & 5 22.5% Year 3,4 & 5 22.5%

Year 6 & 7 20% Year 6 & 7 20%

Others** Year 1 to 7 15% Year 2 to 7 15%

*4% rate applies for individuals aged 70 or over and individuals who hold full medical cardswith income up to €60,000.

*3% surcharge for self employed income in excess of €100,000 regardless of age

Single Parent/Widowed Parent/Surviving Civil Partner Parent

Bands 2012 2013

Standard 20% €36,800 20% €36,800

Top 41% Balance 41% Balance

Rent Allowance

Single - Under 55 (max) 1,200 1,000

Single - Over 55 (max) 2,400 2,000

*Married - Under 55 (max) 2,400 2,000

*Married - Over 55 (max) 4,800 4,000PRSI Limits for Employers

2012 2013

PRSI <€356 per week 4.25%>€356 per week 10.75%No ceiling)

<€356 per week 4.25%>€356 per week 10.75%No ceiling)

*Also relates to Widowed, Surviving Civil Partner or in a Civil Partnership

* Claims allowable on interest up to a maximum of €10,000 for a singleperson and €20,000 for a married couple or widowed persons

** Claims allowable on interest up to a maximum of €3,000 for a singleperson and €6,000 for a married couple or widowed persons

** Claims allowable on interest up to a maximum of €3,000 for asingle person and €6,000 for a married couple or widowed persons

Universal Social Charge

2012 2013

Exempt €10,036 €10,036

First €10,036 2% 2%

Next €5,980 4% 4%Balance 7%* 7%*

First time buyers who took out their first mortgage during2004-2008 will receive 30% mortgage interest relief

NB

Loans taken out on or after 1 january 2013 will not qualify formortgage interest relief.

Mazars is present in 5 continents.

CONTACTS

Mazars

Frank Greene, Tax ServicesTel: +353 (0)1 4496415Email: fgreene@mazars.ie

Noel Cunningham, Tax ServicesTel: +353 (0)1 4496408Email: ncunningham@mazars.ie

Gerry Vahey, Tax Services Tel: +353 (0)1 4496423Email: gvahey@mazars.ie

Harcourt Centre Block 3 Harcourt Road Dublin 2 IrelandTel: +353 (0)1 4494400Fax: +353 (0)1 4750030

Paul Mee, Tax ServicesTel: +353 (0)91 570100Email: pmee@mazars.ie

Salthill Galway IrelandTel: +353 (0)91 570100Fax: +353 (0)91 583242

Detailed information available on www.mazars.ie