Insights
On 27 September 2022, Finance Minister Paschal Donohoe presented Budget 2023 to Dáil Eireann.
This budget has been designed to protect those most affected by inflation, and as a result this was primarily a cost-of-living budget.
The budget introduced taxes and other measures to help curtail the effects of the current cost of living crisis. Minister Donohoe has revised the forecasted inflation rate for 2022 to 8.5% and to just over 7% for 2023, while updating the core (non-energy related) inflation rate to 5.25% for 2022 and approx. 4.5% for 2023.
The headline 12.5% corporation tax rate is here to stay, which is essential to the employment market, with an unemployment rate of 4.3% recorded in August 2022.
In response to the above, the budget introduced and/or extended numerous reliefs and measures to assist those most affected by the rising cost of living.
Information on some of the changes introduced are detailed below.
Business Taxes
- Temporary Business Energy Support Scheme
This is being introduced to assist businesses with their energy costs but still requires approval by the EU Commission.
The scheme will be open to business that carry on a Case I trade (i.e., non-professional services trade), are tax compliant and have experienced a significant increase in their natural gas and electricity costs. Businesses will be required to register for the schemed within the required time limits (TBC) and it will operate on a self-assessment basis.
It is proposed that the scheme will operate by comparing the average unit price for the relevant bill period in 2022 with the average unit price in the corresponding reference period in 2021.
If the increase in average unit price is more than 50 per cent, then the threshold would be passed, and the business would be eligible for support under the scheme. Once eligibility criteria are met the support will be calculated on the basis of 40 per cent of the amount of the increase in the bill amount.
A monthly cap of €10,000 per trade will apply and an overall cap will apply on the total amount which a business can claim.
- Employee retention/attraction reliefs
Foreign Earnings Deduction (FED) has been extended to 31 December 2025.
Key Employee Engagement Programme (KEEP) has been extended to 31 December 2025 and facilitates the buy-back of KEEP shares by the issuing company and increasing the company limit to €6 million.
Special Assignee Relief Programme (SARP) has been extended to 31 December 2025 and increases the minimum income limit for qualifying new entrants to €100,000.
- Research and Development Tax credit
Finance Bill 2022 will introduce changes to the payment provisions of the repayable R&D tax credit. The minister did not provide further details on this.
- Knowledge Development Box (KDB)
Finance Bill 2022 will extend the sunset clause of the KDB to 4 years, to accounting periods commencing before 1 January 2027. The KDB will have a new effective rate of 10%, to come into effect from a date to be set by commencement order.
- Section 481 Film Relief
Finance Bill 2022 will extend Section 481 from its current end date of 31 December 2024 to 31 December 2028.
- Small Benefit Exemption
The benefit that an employer can provide to an employee in the form of a one-off voucher has been increased to €1,000 in a year and the employer can now give 2 vouchers. This is applicable from 2022.
Personal Taxes
- Rate Band Increases
The standard rate band will increase from €36,800 to €40,000 for single individuals and from €45,800 to €49,000 for married couples/civil partners with one earner. This represents one of the biggest tax cuts in recent years.
- Tax Credit Increases
The personal, employee and earned income tax credits will each increase by €75 from €1,700 to €1,775. While the Carers tax credit is set to increase by €100 to €1,700.
- Universal Social Charge (USC)
The 2% USC rate band will increase to €22,920 ensuring that a full-time adult worker who benefits from the increase in the hourly minimum wage rate will remain outside the top rates of USC.
The reduced rate concession for medical card holders is being extended for a further year
- Rent Tax Credit
Renters are set to benefit from the re-introduction of a rent tax credit of €500 per year. The credit will also be available in early 2023 in respect of rent paid in 2022.
- Help To Buy Scheme
The Help to Buy Scheme is being extended at the current rates for another 2 years.
Indirect and Other Taxes Measures
- VAT
The 9% VAT rate for the hospitality sector will cease at the end of February 2023.
The 0% VAT rate is extended to newspapers (including digital editions), defibrillators, HRT, Nicotine Replacement Therapy, and feminine products.
- Vacant House Tax
A new Vacant House Tax has been introduced at a rate of 3 times the property’s current LPT liability in respect of properties that are occupied for less than 30 days per year.
- Excise
50c is added to the price of a packet of 20 cigarettes.
Petrol and diesel excise reductions will remain in place until 28 February 2023.
- Stock relief
The 100% relief for young, trained farmers is extended to 31 December 2024 as is the 50% relief for farmers in farm partnerships.
- Farmer Stamp duty relief Extensions
Young Trained Farmer Stamp Duty Relief – extended to the end of 2025.
Farm Consolidation Stamp Duty Relief – extended to the end of 2025.
Farm Restructuring Capital Gains Tax Relief – extended to the end of 2025.
- Extension of Residential Development Stamp Duty Refund Scheme to the end of 2025.
- Defective Concrete Products Levy
New levy of 10% on certain concrete products at point of first supply, including concrete blocks and concrete pouring.
- Revenue Projects
Revenue will conduct a range of targeted projects which will include PAYE compliance interventions with a focus on share schemes, and debt management activity.
Social Welfare Measures
- Energy Bill assistance
Three payments of €200 towards every household’s electricity bills will be paid, with the first payment coming before Christmas with the other two paid in the new year.
- Once off social welfare payments
Double Child Benefit to be paid in November 2022.
€200 payment for those on Living Alone Allowance.
€500 lump sum for families availing of Working Family Payment.
€500 lump sum for carers.
€500 cost of disability payment.
- Social Welfare Increases
€12 extra per week for social welfare payments.
€2 increase in the weekly rate for a qualified child.
Increased eligibility for the Fuel Allowance.
€20 increase in the domiciliary care allowance for sick children. What