Budget 2021 – An Employers Guide

An Employers Guide to Budget 2021

In an unprecedented Budget Minister for Finance Paschal Donohoe has announced a total budgetary package amounting to €17.75 billion. But what does it mean for Irish employers? In this article we break-down what Budget 2021 means for you, your business and your employees?

Budget 2021 Corporate Tax

Budget 2021: Business Taxation & Support

  • The Government re-affirmed their commitment to Ireland’s 12.5% corporation tax rate.
  • Further updates to Ireland’s Corporation Tax Roadmap will be published at a later date.
  • All intangible assets acquired after 13 October 2020 to be brought fully within the tax depreciation balancing charge rules.
  • Exit Tax rules to be amended to clarify the operation of interest on instalment payments.
  • Extension of the Knowledge Development Box relief available in respect of certain IP development activities until December 2022
  • Companies qualifying for Knowledge Development Box relief may be entitled to a deduction equal to 50% of its qualifying profits. This relief is to be extended for a further two years until the end of December 2022.
  • The accelerated capital allowances scheme for energy efficient equipment is being extended for a further 3 years
  • The additional 5% of qualifying expenditure allowed as an increased film corporation tax credit for certain qualifying films to be extended by one year to December 2021.
  • Announcement of a COVID Restrictions Support Scheme which will provide weekly payments to qualifying businesses (intended to be those whose trade has been significantly impacted as a result of the restrictions in the Government’s ‘Living with COVID-19’ Plan) of up to €5,000 in the form of an advanced credit for tax deductible trading expenses.
  • A modified Dividend Withholding Tax scheme will be introduced from 1 January 2021

Budget 2021: Vat Rates

  • No further extension of the temporary reduction in the VAT rate from 23% to 21% (due to expire at the end of February)
  • The VAT rate applying to certain activities in the hospitality and tourism sector to reduce from 13.5% to 9% from 1 November 2020 through to December 2021.
Budget 2021 Income Tax

Budget 2021: Income Tax

  • The ceiling of the second USC rate band will be increased from €20,484 to €20,687
  • The weekly income threshold for the 11.05% rate of employer’s PRSI will be increased from €395 to €398 from 1 January 2021. This will ensure that the 8.8% rate of employer’s PRSI applies in respect of workers on the minimum wage, once it is increased on 1 January 2021.
  • The Earned Income Credit for the self-employed will increase by €150 to €1,650 from the tax year 2020 onwards
  • Employers can pay remote workers €3.20 per day without a benefit-in kind charge arising
  • €175 increase in the Dependent Relative Tax Credit to €245.
  • The Employment Wage Subsidy Scheme (EWSS) will continue until 31 March 2021 with further schemes to follow depending on economic conditions.
  • Tax debt warehousing provisions to be expanded to self-employed income tax payments and temporary wage subsidy scheme repayments.

Budget 2021 Motor Tax

Budget 2021: Carbon and Motor Tax

  • The rate of Carbon Tax will increase by €7.50 from €26.00 to €33.50 per tonne from midnight on 13 October 2020 for auto fuels.
  • Legislation will be provided in the Finance Bill to increase Carbon Tax each year by €7.50 up to 2029 and by €6.50 in 2030 to achieve €100 per tonne.
  • The application to other fuels will be delayed until May 2021
  • A New VRT regime is to be introduced from January 2021 in order to align with international standards and to ensure vehicles with higher levels of CO2 emissions are taxed appropriately.
  • VRT relief for plug-in hybrid and electric will expire. VRT relief will be tapered for battery electric vehicles.

Budget 2021: Property

  • Residential development stamp duty refund scheme to be extended by one year to construction operations commenced by 31 December 2022, with the time allowed between commencement and completion of a qualifying project in order to be eligible for the refund also to be extended from 24 months to 30 months.

Budget 2021: Capital Gains Tax

  • Entrepreneur’s relief to be available on disposals of shares by persons who have held the shares for a continuous period of three years at any time prior to the disposal (Previously a person had to own at least 5% for a continuous period of 3 years in the 5 years immediately prior to the disposal).
  • Introduction of a capital gains tax anti-avoidance measure to address the disposal of certain foreign currency debts.

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