Tax Services

Commentary from Ernst & Young tax partners

Our commentary below covers:

 R&D regime – New rules excessively restrictive
 VAT – Definition of 'bread' 
 Funds Industry – new measures welcomed
 Stamp duty reliefs on financial transactions
 
Kevin McLoughlin, Head of Tax Services
"The Finance Bill contains the usual mix of legislation to enact proposals announced in the Budget, and some new measures. Although the thrust of many of the measures is positive, we are still faced with a very short space of time to properly digest and review over 270 pages of highly complex legislation with the promise of even more to come as the Bill continues its legislative journey through the Dáil."

"On the positive side, there are a number of measures – some technical – which should be positive in enhancing Ireland's competitive position as a destination for investment. Of particular note is the introduction of a 30% reduction in taxable income for individuals who take up certain types of positions in Ireland, something which is very welcome."

"Interestingly though, it extends to individuals relocating from countries with which Ireland has a tax treaty. This is unnecessarily limiting as it would exclude, for example countries such as Brazil – ironically at the same time, the Bill has measures to provide tax relief for individuals sent by Irish companies to Brazil! "

"The R&D measures on the use of credits to reward key R&D executives, while broadly positive, will not be of benefit to companies which do not pay Corporation Tax, which will unfortunately mean it may have no benefit to a large part its target market, namely the early stage R&D companies who invest heavily in R&D with a view to future income".

R&D regime – New rules excessively restrictive

Ian Collins, R&D Tax Director 
"While the refinements geared towards enhancing the SME sector through allowing the first €100K of R&D spend to benefit from a volume basis of relief and improving the cap on allowable outsourced activity are welcomed, the eagerly awaited proposal to allow companies use their R&D credit to reward key R&D employees is a real let down.  The rules are so excessively restrictive it is hard to imagine this will have any material take up."

VAT – Expanded definition of 'bread'

Jarlath O'Keefe, Indirect Tax Partner
"Following submissions by various representative bodies the Revenue in a welcome move has modernised its definition of bread to ensure that VAT will not apply to products such as bagels, wraps, naan breads or pitta bread. VAT will however continue to apply to croissants, danishes or brioche on the basis that their ingredients include higher levels of sugar and fat."

Funds Industry – new measures welcomed

Donal O'Sullivan, Financial Services Tax Partner
"There are a range of positive measures included for the international investment funds industry in Ireland.  New provisions strengthen Ireland as a location for fund management companies and funds and enhance the ability of fund managers to make their products more cost effective.  The Bill includes a number of measures to ensure Ireland will continue to be a leading location for UCITS funds."

Stamp duty reliefs on financial transactions

Donal O'Sullivan, Financial Services Tax Partner
There are specific stamp duty changes which extend reliefs to accommodate a range of financial transactions.  The primary aim is to allow these exemptions, in the case of investment funds, where there is no change in the economic ownership of the underlying assets being transferred.  This will also greatly benefit the Irish funds industry.