Budget 2010

October 2008

April 2009

December 2009

Budget Strategy

- Objective - Rebuild Nations Self Confidence- Restore International Reputation

- How- Bold – Decisive – Innovative Steps

- Conclusion - Worst is Over- Return to Growth in 6 – 9 Months

€4 Billion Question ?

Social Welfare19%Day to Day

Expenditure 25%

Capital Investement

24%

Other Taxes 7%

Public Sector Pay25%

Public SectorPaySocialWelfareDay to DayExpenditure CapitalInvestement Other Taxes

Signalled Changes

• Taxation of child benefit X

• Introduction of carbon tax • Introduction of property tax

2010

• Review taxation exempt income / reliefs • CAT/CGT Business Reliefs X

• Pension Contributions / Lump Sums ?

• Reduce VAT/Excise • Car Scrappage

Personal Tax

Income Tax Rates

• No Changes

• Reminder – Income Tax – PRSI– Health Levy– Income Levy

Simplify and Reform Tax System

- Reform and Fairness

- Social Contribution

- Low Rate

- Broad Base

- Income Tax

- Progressive Rates

- 2011

Employee

>€75k €75k-€175k €175k+

Income Tax 41 41 41

PRSI 4 - -

Health Levy 4 5 5

Income Levy 2 4 6

51% 50% 52%

IT, PRSI, Health Levy & Income Levy

Self-Employed

>€75k €75k-€175k €175k+

IT 41 41 41

PRSI 3 3 3

Health Levy 4 5 5

Income Levy 2 4 6

50% 53% 55%

IT, PRSI, Health Levy & Income Levy

International Comparisons: Overall marginal tax rates for

employees on €80,000

0%

10%

20%

30%

40%

50%

60%

Total

Why No Tax Increase?

- Reached Limit of Taxation

- Heaviest Burden on Higher Earners - Income Levy : Gross - High Earners Cap

High Earners Cap

- Introduced 2007

- Restricted Specified Reliefs

- Aim - Effective Rate 20%

How It Worked 2009

- 20% Effective Rate- Restricted Relief to Higher of:

- €250,000OR

- 50% of Income

2010- Now 30% Effective Rate

- Entry Point €125,000- Full Restriction if Income > €400,000

- Finance Bill Clarification

2009 2010

€’000 €;000

Income 600 600

Specified Reliefs 400 400

Allowed 300 150

Restricted 100 250

Taxable 300 450

Tax @ 41% 123 185

Effective Rate 2009 20% 30%

High Earners Cap - Example

Tax Exiles

New Irish Domicile Levy

- Non Resident Domiciled Individuals

- Worldwide Income > €1m

- Irish Located Capital > €5m

- Annual Levy €200,000

- Details in Finance Bill

Mortgage Interest Relief

• Budget 2009– Relief to cease for loans over 7 years

• Interest Relief now until 2017– Home Owners in Negative Equity – New Loans before 1/7/2011 – Loans from 1/7/2011 to 31/12/2012

(Restricted)

Residential Rental Property

• Reminder – current position

• Tax deduction for interest reduced to 75%

Investments/Savings

• Existing 25%/28% Tax

• New National Savings Product – National Solidarity Bond– 5/7 Years – 2010– Details to be announced

Pension

- Overhaul Imminent- No Immediate Change - Frame Work Policy to Review- Likely Outcome

- Max Tax Tree Lump Sum €200k- Excess Taxable?- SSIA Type Scheme- No Tax Relief

Child Benefits

• Children’s Allowance – 10% cut to allowance– Future Taxation / Means Test ?

• Incentive in 2009– Preschool – Free Year– Effective 1/1/10

Business Taxation

Ireland Inc

Business Taxation• Corporation Tax

– 12.5% tax rate unchanged– International Brand

• Employers– Employers PRSI unchanged (8.5 – 10 ¾ %)– Employer Job Incentive Scheme– Details to be announced

New Company Set Up

• Introduced 2009

• Profits < €320k per annum

• 3 Year Period

• Extended set up’s in 2010.

Smart Economy• Irish Economic Focus• Research & Development tax

credits– Qualifying R & D – 25% cash refund

• Intellectual Property• Awaiting Innovation Taskforce

Report

Support Motor Industry

• Car Scrappage Scheme– Car over 10 years old– €1,500 off VRT– Emissions band A or B

• Environmentally Friendly– Extension of VRT Relief to 2012

• VAT Margin Scheme

Supporting Retail Sector

• VAT Rate

– Reduced from 21½% to 21% from 1/1/10

• Excise Reduction on Alcohol

Supporting Agriculture

• Waste Management Capital Allowances – No Income Levy

• Forestry & Bio Energy

Supporting Other Industries

• Construction– Retrofit

• Tourism – Railway Scheme

• Other – Energy Efficient – Extends to Catering/Hospitality

Supporting Financial Services

• Incentives to develop International Funds Industry Hub

• Changes expected in Finance Bill

Incentives to Protect Employment

• Training Fund

• Food Industry

• Employment Job Incentive Scheme

Employment Subsidy Scheme

• Enterprise stabilisation fund– Assist Irish export companies in difficulty

• Second round now open– Eligibility extended Non Export– Minimum of 10 full time employees– Jobs at risk / Commit to retain jobs– Tight Deadline/ Immediate Application

Getting Credit Flowing

• Review Committee NAMA – External Review Process

• Review Banking Policies– Particular Focus on Retail, Car, Tourism &

Agriculture

New and Other Taxes

Carbon Tax

• €15 per Tonne on Fossil Fuels

• Effective Midnight 9/12/2009– Petrol 3.5% Increase

– Diesel 4.6% Increase

• Effective 1/5/2010– Home Heating …. 8.7%

• Commencement Order – Coal & Briquettes

Other Taxes

• Site Valuation Tax – Residential Property– Establishing Ownership Register– Valuation Database

• Water Charges – Based on Usage

Capital Gains Tax (CGT)& Capital Acquisitions Tax (“CAT”)• No changes currently

• Rate 25%

• Finance Bill?

Stamp Duty

• No changes currently

Anti Avoidance

• Clearly Signalled

• Tax Avoidance Schemes

• Strengthening Revenue Power

Conclusion

Tax Planning in the

Current Environment

Current Environment

• Existing Legislation

• Finance Bill / Finance Act

• Maximise available remaining tax reliefs– Secure tax savings– Improve cashflow

• Window of Opportunity

Cashflow Saving Tax Tips

• Preliminary Tax – If profits decreasing – base on current year

• Move to a cash receipts basis for VAT

• Review direct debits for PAYE / VAT

• Directors loan v Salary

• Use of a Redundancy Rebate

Losses

• Ability to Use Losses • Losses arising

– Land write downs / restricted– Capital allowances claims – obsolete assets– Stock / Bad Debt provisions– Inter group loans – write off / down

• Use – Carried back to prior year (company)– Offset against other Income (Personal)

Tax Based Funding/Reliefs• Pensions • Seed Capital Relief

– Start ups – Tax relief on investments up to €600k – Set against Income Tax bill in prior 6 years– Refund of income tax

• Business Expansion Scheme– Tax relief of €150,000 pa for individuals– Qualifying company can secure €2m– Lack of other tax incentives for individuals

Opportunities with Reduction in Asset Values

• Take assets out of company

• Re-organise company structure

• Transfer assets to children

Opportunities for Family Businesses / Companies

• Low valuations – opportunity to transfer

• CAT threshold for children €434k

• Significant tax reliefs remain at present

• Retirement Relief: extract €1.5m cash tax free (if husband & wife qualify)

• Commission on Taxation Report

Company Pension Schemes

• Significant pension fund contribution – Based on age, years of work and salary

• 25% tax free lump-sum

• Changes Signalled

Conclusion

Economy

• Worst is Over?

Tax

• Watch this Space