Budget 2016 delivers welcome tax rate reductions for individuals

Irish finance minister, Michael Noonan delivered a package of measures within his Budget 2016, designed to improve the tax position for individuals based in Ireland.

As the fastest growing economy in Europe, Noonan unveiled a welcome, but modest, boost to businesses with staff across Ireland.

There’s no doubt that Ireland is taking the initiative by aligning its tax and economic policies with its vision of competing in a global tax environment.

Below is a brief round-up of headline reductions in the taxation rates of individuals:

Income tax
The three lower rates of Universal Social Charge (USC) were reduced, in addition to an increase in the USC thresholds. The third rate of USC – applying to those with income from €18,669 to €70,044 – is reduced to 5.5 per cent and will reduce marginal tax rates below 50 per cent for middle income earners.

Capital gains tax
The Government is introduction a specific 20 per cent rate of CGT, applying to entrepreneurs disposing of a business from 1 January 2016; subject to an overall limit of €1m.

Employment and Investment Incentive (EII)
EII will now allow for investments in expansion to nursing homes and all eligible SMEs can qualify regardless of their geographic location.

Pension fund levy
The 0.15 per cent annual pension fund levy is due to terminate at the end of this year and will not be renewed. Mr Noonan did not unveil any changes to pension contribution thresholds or ceilings.

Local Property Tax (LPT)
Mr Noonan proposes postponing the pending revaluation of the annual tax charged on residential property in Ireland to 2019; providing a small benefit to homeowners as growing property values since 2013 will not result in higher LPT charges.

VAT
There will be no changes to existing VAT rates, with the nine per cent rate for Ireland’s tourism sector to be retained, along with the 13.5 per cent rate of VAT on newly-built properties.

Corporation tax
Corporation tax relief for start-up companies in their first three years of trading has been extended until the end of 2018, for companies whose annual corporation tax liability on qualifying income and gains does not exceed €40,000.



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Last updated: 19th October 2015