Budget 2013 implications for start-up’s, companies and those considering registering an Irish company in 2013

By Andrew Lambe. 7th December 2012

In Budget 2013 the Irish Government wielded the axe against it’s citizens in the form of tax increases, benefit cuts and the introduction of a property tax, however for the taxation of companies in Ireland the effect is minimal. In fact, there is some good news from the Budget for those considering the registration of a company in Ireland in 2013. As expected, the main corporate tax rate of 12.5% is being retained and the Irish Government have once again reaffirmed their absolute commitment to same.

The main points for Directors of limited companies and those considering an Irish company setup are as follows:

Corporation tax exemption for start-ups

The 3 year tax relief for start-up companies is being reformed to allow any unused credits be carried forward beyond the first 3 years of trading. This is subject to the maximum amount of relief in any one year not exceeding the eligible amount of employers’ PRSI in that year.

Closed Company Surcharge

The minimum level at which this charge applies has been increased to €2,000 from €635. The aim is to reduce the administrative burden and assist in cash flow for SMEs.

Research & Development (R&D) Tax Credit

The first €200,000 of qualifying expenditure will now benefit from the 25% R&D tax credit on a volume basis, with no requirement to refer to the 2003 base year spend. This is an increase of €100,000. For R&D expenditure in excess of €200,000 the relief continues to be based on incremental costs in excess of the 2003 spend. A full review of the R&D Tax Credit regime will be carried out in 2013.

Employment and Investment Incentive Scheme 

This scheme (formerly the BES scheme) will continue to run until the year 2020. While uptake to date has been slow, there is expected to be additional interest in 2013 and future years.

Carried Interest

Carried interest is the return received by venture capital managers for managing investments in certain venture capital funds. Under relieving provisions introduced in 2008, these returns are treated as a capital gain rather than income and are taxed at a lower rate of 15% for individuals holding interest through a partnership or 12.5% for corporates. The relief is to be reviewed to ensure that it operates as intended, in particular to assist small businesses in accessing funding.

Aviation sector

An accelerated capital allowances scheme, over seven years, will be introduced for aviation specific facilities. This will be in place for a five year period and will serve to further bolster Ireland’s status as a leading player in the aviation sector.

Taxation of Micro Enterprises: Reduction in Compliance Costs

There is to be a joint consultation between Revenue and the Department of Finance to identify measures to ease the administrative burden of tax compliance costs for Micro Enterprises. Micro Enterprises are businesses with a turnover of less than €75,000 per annum. rebate of statutory

FATCA Agreement with US

Ireland has reached agreement with the US in respect of compliance with FATCA, (Foreign Account Tax Compliance Act) which broadly seeks to facilitate the reporting of Irish accounts held by US persons, and the reciprocal exchange of information regarding US financial accounts held by Irish residents. This will be of particular interest to the financial services community.

Pension Contributions for Company Directors

Relief for pension contributions is continues at the marginal rate of tax. There was speculation that relief would be restricted to a lower rate of tax however this idea has been dismissed.

However with effect from 1 January 2014, tax relief for pension contributions will be capped in respect of pension schemes that deliver an annual pension in excess of €60,000 per annum.

Company Directors who have made Additional Voluntary Contributions (AVC’s) will be allowed a once-off option to withdraw up to 30% of the value of funded Additional Voluntary Contributions made to supplement retirement benefits. Withdrawals will be liable to tax at the individual’s marginal rate. This option will be available for 3 years from the passing of the Finance Act 2013.

For more information and a free consultation on how you can register a company in Ireland, please don’t hesitate to contact Company Bureau in Dublin on +353 1 6461625.

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