Budget Summary 2009
Personal Taxation
The changes below take effect from 1 January 2009 unless otherwise stated.
Rates of Tax
The current standard rate of income tax remains unchanged at 20%. The marginal rate of income tax remains unchanged at 41%.
Income Levy
A new income levy is being introduced that will apply at the rate of 1% to gross income up to €100,100 per annum or €1,925 per week. A rate of 2% will apply to income in excess of that amount. The levy is paid on gross income, before deductions for capital allowances or contributions to pensions. The levy does not apply to social welfare payments including contributory and non contributory social welfare pensions.
Standard Rate Cut Off Points
The standard rate cut off point for single persons is increased by €1,000 to €36,400.
For married couples with one income, it is increased by €1,000 to €45,400. For married couples with two incomes, it is increased by €2,000 to €72,800 (the maximum amount that can be transferred between spouses is €45,400).
For a lone parent /widowed parent, the standard rate band is increased by €1,000 to €40,400.
Personal Tax Credits / Employee (PAYE) Tax Credit/ Home Carer Credit
The above credits remain unchanged for 2009.
Mortgage Interest Relief
The current rate of mortgage interest relief is being increased from 1 January 2009 for first time buyers from 20% to 25% in years 1 and 2. This will then be reduced in years 3, 4 and 5 to 22.5% and again for years 6 and 7 in line with the standard income rate tax (currently 20%). The additional relief will be available to new first time buyers and first time buyers who have bought a house in the last 4 years i.e. from 1 January 2005.
Accordingly the maximum tax credit available has increased for a single person from €2,000 per annum to €2,500 in years 1 and 2, and €2,250 for years 3 to 5 inclusive and for a married couple from €4,000 per annum to €5,000 in years 1 and 2 and €4,500 for years 3 to 5 inclusive. The maximum tax credit for years 6 and 7 remain unchanged at the current rate of €2,000 per annum for a single person and €4,000 for a married couple.
The rate of mortgage interest relief for non first time buyers is being reduced from 20% to 15% from 1 January 2009. Accordingly the tax credit for mortgage interest relief for non first time buyers is reduced for a single person from €600 per annum to €450 per annum and for a married couple from €1,200 per annum to €900 per annum.
Tax on Savings
The rate of retention tax applying to deposit interest will increase from 20% to 23%. This increased rate will apply to payments, including deemed payments, made on or after 1 January 2009.
The rate of retention tax applying to life assurance policies and investment funds will increase from 23% to 26%. This increased rate will apply to payments,including deemed payments, made on or after 1 January 2009.
Full details in relation to Deposit Interest Retention Tax will be included in the Finance Bill.
Pensions
The Minister advised of a reduction in the annual earnings limit for the purpose of determining the maximum pension contribution on which tax relief is available. This earnings limit is €275,239 in respect of the 2008 tax year and will be decreased to an earnings limit of €150,000 for the 2009 tax year.
Health Expenses Relief
Health expenses relief will be granted at the standard rate (currently 20%) as opposed to the marginal rate (currently 41%) from 1 January 2009, with the exception of nursing home expenses which will be standard rated from 1 January 2010.
Health Levy
The threshold for payment of the health levy remains unchanged at €500 per week. The rate remains unchanged at 2% for individuals whose weekly earnings are less than €1,925 and with an increased rate of 2.5% on weekly earnings in excess of €1,925 (€100,100 pa).
PRSI
The employee's annual earnings ceiling will be increased to €52,000 per annum (previously €50,700).
The weekly PRSI exemption threshold remains unchanged at €352.
Increase in Specified Rates for Preferential Home Loans and Other Loans
Preferential loans made by an employer to an employee are liable to income tax on the difference between the employer's preferential rate of interest and the specified rate of interest. The specified interest rate for a home loan remains unchanged at 5.5% and has increased from 13% to 15% in respect of other loans. This change will take effect from 1 January 2009.
Levy on car parking facilities provided to employees by their employers.
A flat rate levy of €200 per annum will be charged on employees whose employer provides them with car parking facilities. The levy will be confined to employer provided car parking facilities situated in the main urban centres.
Cycle to work scheme
From 1 January 2009, the provision of bicycles and associated safety equipment by employers to employees who agree to use the bicycles to cycle to work will be treated as a tax exempt benefit in kind.
The exemption may only apply once in any five year period in respect of any employee. There will be a limit on the value of such purchases of €1,000 per employee.
Change in basis of Benefit in Kind charge for company cars
The Finance Bill will contain provisions to change the basis of the BIK charge to relate it to the cars' level of CO2 emissions.
Charge on Non-Principal Private Residences
A new local authority charge of €200 per dwelling will come into effect in 2009. This will be payable by the owners of private rented accommodation, holiday homes and other non-principal residences. This will not apply to any new dwellings as yet unsold.
CGT
Capital Gains Tax Rate
The capital gains tax rate is being increased from 20% to 22%. This will take effect in respect of disposals made from midnight on 14th October 2008.
Capital Gains Tax Payment Dates
For 2008 the capital gains tax on disposals made in the period from January to September was due for payment by 31 October in the same year and the capital gains tax on disposals made between October and December was due by the following 31 January. The capital gains tax payment dates for 2009 have been changed in the following manner:
- For disposals occurring between January and November, the capital gains tax will be payable by mid December in the same year.
- For disposals occurring in December, the capital gains tax will be payable by the following 31 October (in line with the existing income tax pay and file date).
Business Tax
The trading Corporate Tax rate of 12.5% remains unchanged.
Three Year Tax Exemption for Start up Companies
The Minister announced a three year tax exemption for Start-up Companies. This will apply to new start up companies commencing to trade on or after 1 January 2009. Such companies, to the extent that their tax liability for each year does not exceed €40,000, will be exempt from tax, including capital gains tax, in each of the first three years of trading. This measure is being examined to ensure it is compliant with EU rules on State Aid and further details of this incentive is to be contained in the Finance Bill.
Preliminary Tax Payment Dates for "Large Companies"
Currently a "large company" is defined as a company whose corporation tax liability in the preceding accounting year exceeds €200,000. Companies considered to be large were previously obliged to pay preliminary corporation tax, amounting to 90% of the final liability for the current accounting period, one month before the end of the current accounting period (and no later than the 21st day of that month).
The preliminary tax payment for 'large companies' will now be split into two instalments, in the following manner:
- The first instalment will be payable in the sixth month of the accounting period (by the 21st day of that month). This payment must equal either 50% of the corporation tax liability for the preceding accounting period or 45% of the corporation tax liability for the current accounting period.
- The second instalment will be payable in the eleventh month of the accounting period (by the 21st day of that month) and the amount payable will bring the total preliminary tax paid to 90% of the corporation tax liability for the current year.
This above preliminary tax payment dates for 'large companies' will apply to accounting periods commencing on or after 14 October 2008.
Tax Credit Scheme for Research and Development Expenditure
The Minister announced an increase in relation to the tax credit scheme for Research and Development expenditure. The rate of tax credit for incremental expenditure undertaken on qualifying research and development has increased from 20% to 25%. This will apply to accounting periods commencing on or after 1 January 2009.
Tax Incentive Schemes
Capital Allowances Scheme for certain Energy-Efficient Equipment
There is currently a tax incentive which provides for capital allowances of 100% on expenditure incurred by companies on certain equipment, in the year of purchase. The Minister extended this scheme to include energy efficient data server systems, electricity provision equipment and control systems.
Capital Allowances on Newly Constructed Commercial Buildings
Previously, where newly constructed commercial buildings are used before being sold and the sale does not take place within 1 year of first use, the purchaser got the value of capital allowances on expenditure on a restrictive basis. The Minister has announced that this one year limit for disposal will be extended to 2 years.
Seveso-listed Industrial Facilities
The Minister announced that a new ring-fenced tax incentive scheme will be introduced to facilitate the removal and relocation of Seveso-listed industrial facilities, which hinder the residential and commercial regeneration of Docklands in urban brownfield areas. Further details of the scheme will be announced in the Finance Bill and it is subject to clearance from the European Commission from an EU State-Aids perspective.
Tax Relief for Heritage Items
The tax relief in respect of the donation of heritage items to approved State institutions is being limited to 80% of the market value of the heritage item donated. The ceiling on the aggregate value of donations qualifying for each of these schemes in any one year will remain at €6m.
Farming Tax
The farmer's flat rate addition remains unchanged at 5.2% for 2009. This flat rate addition is designed to reimburse non VAT registered farmers for the VAT they incur on their inputs.
Stamp Duty relief is available for farmers acquiring land, who are aged under 35 and have specific agricultural training. This relief was due to terminate on 31 December 2008. The relief is now being extended for 4 years and the relief will apply in respect of instruments executed no later than 31 December 2012.
Stamp Duty relief is available to a farmer consolidating his/her holding. The relief is due to terminate on 30 June 2009 and this termination date will be extended to 30 June 2011.
Provision is being made to renew the 25% general farming stock relief and the special 100% stock relief for young trained farmers for a further 2 years to 31 December 2010.
Provision is being made to extend the 31 December 2008 deadline of the scheme of capital allowances for expenditure on certain pollution control measures relief to 31 December 2010.
VAT
The VAT registration thresholds for businesses will remain unchanged at €37,500 for services and €75,000 for goods.
The standard rate of VAT will be increased from 21% to 21.5% with effect from 1 December 2008.
This increase will apply to all goods and services which are currently subject to VAT at 21%. The Zero rate and 13.5% rate remain unchanged.
Stamp Duty
The Minister announced stamp duty reform for all non residential property. The top rate of duty is being reduced from 9% to 6%.
These changes will apply with immediate effect.
Financial Cards
The stamp duty on financial cards remains at €30 per annum in respect of charge cards and credit cards.
The stamp duty on ATM / Debit cards is reduced from €5 per annum to €2.50 per annum and from €10 to €5 per annum in respect of Combined ATM/ Debit cards.
Bills of Exchange (including cheques)
The rate of duty on bills of exchange will increase from 30 cent to 50 cent in respect of those drawn on or after 15 October 2008. This increase will also apply to cheques supplied by financial institutions to customers or after 15 October 2008.
VRT & Motor Tax
Motor Tax Rates
Motor tax rates will increase by 4% for cars below the 2.5 litre threshold and CO2 bands A, B, C and D.
For cars above the 2.5 litre threshold and CO2 bands E, F and G, the motor tax rate will increase by 5%.
The motor tax rates for goods and all other vehicles will increase by 4%.
These new rates will apply to motor discs taken out for periods beginning on or after 1 January 2009.
There will be no increase for electric vehicles.
Other
Mineral Oil Tax on Petrol
The mineral oil tax on petrol will be increased by 8 cents per litre (including VAT), with effect from midnight on 14th October 2008.
Tobacco Excise
The Excise Duty on a pack of 20 cigarettes is being increased by 50 cents (including VAT), with a prorata increase on other tobacco products, with effect from midnight on 14th October 2008.
Alcohol Excise
Excise duty on a standard bottle of wine is being increased by 50 cents (including VAT), with a pro-rata increase on other wine and certain other fermented and intermediate products, with effect from midnight on 14th October 2008.
Excise Licences A range of alcohol related licensing fees, including off licences but excluding pub licences, are being increased to €500 in each case. These increases will apply from the appropriate annual renewal dates in 2009.
Betting Duty Rate
The betting duty rate will be increased from 1% to 2% with effect from 1 January 2009.
Air Travel Tax
With effect from Monday 30th March 2009, a new air travel tax will apply to all departures from Irish airports. The general rate applying will be €10 per passenger however a lower rate of €2 will apply to shorter journeys of under 300 kilometres. This air travel tax will not apply in certain instances.
The Finance Bill will provide that the tax will be payable by the appropriate airport authority to the Revenue Commissioners.