Budget 2009
Introduction
This year’s Budget marked a major shift in tax policy with everyone earning any income, however small, subject to a new income tax levy. Also, minimal increases were brought in for the standard rate taxation bands. From a commercial viewpoint, the retention of the 12.5% tax rate, the extension of the R&D relief and the assistance to new start-up companies is welcomed.
Income Tax
Income Levy
A new income levy has been introduced that will apply at rate of 1% to gross income up to €100,100. A levy of 2% will apply to income in excess of this limit. The levy will be paid on gross income before deductions for capital allowances or contributions to pensions. The levy will not apply to social welfare payments including contributory and non-contributory social welfare pensions.
Deposit Interest Retention Tax (DIRT)
From 1st January 2009, DIRT tax on deposit accounts will increase from 20% to 23%. Life assurance policies and funds liable to tax at 23% will now become liable at 26%.
Mortgage Interest Relief
For first time buyers, mortgage interest relief is being increased from 1 January 2009 from 20% to 25% in year 1 and 2 and 22.5% in years 3, 4 and 5. This relief will be backdated to those who made a purchase in the last 4 years.
For non-first time buyers mortgage interest relief will be reduced from 20% to 15%.
Benefit-in-Kind (BIK)
The "specified rate" for preferential loans (other than home loans) has increased from 13% to 15%.
The BIK charge on company cars will be related to the car CO2 emissions levels.
A levy of €200 will be payable by an employee where the employer provides them with car parking facilities. This will be confined to employer provided car parking facilities situated in the main urban centres.
Health Expenses
Relief on health expenses will only be granted at the standard rate of tax (20%) from 1st January 2009, with the exception of nursing home expenses which will be standard rated
from 1st January 2010.
Pension Contribution Limit
The annual earnings limit allowable to contribute to pension schemes is reduced from €275,239 to €150,000 for 2009.
Income Tax Rates
Standard Rate 20%, Top Rate 41%
Standard Rate Bands |
Euro |
Single/Widowed |
36,400 |
Married Couples, one income |
45,400 |
Married Couples, two incomes |
72,800 |
No changes have been made to personal or married tax credits or the employee tax credit.
PRSI/Levies
The Employee PRSI Annual Ceiling will increase from €50,700 to €52,000 in 2009.
Corporation Tax
The corporation tax rate remains unchanged at 12.5%.
Research & Development
The current 20% rate of tax credit for qualifying research and development expenditure by a company is being increased to 25%. This will apply to accounting periods commencing on or before 1st January 2009.
Start-up companies
The government have announced a 3 year tax exemption for new start-up companies commencing to trade in 2009. The company will be exempt from tax, including capital gains in each of the first three years of operation where their tax liability in each year does not exceed €40,000. This is subject to EU approval. This relief only applies to incorporated businesses.
Preliminary Corporation Tax
The single preliminary corporation tax payment for companies with liabilities in excess of €200,000 has been split. The first instalment will be payable on the 21st day of the sixth month of the accounting period with the balance due on the 21st of the eleventh month. The first instalment can be based on 50% of the liability of the preceding period or 45% of the liability for the current period. The second instalment must bring the total payments up to 90% of the liability for the year. This new payment provision will apply to accounting periods commencing after 14 October 2008.
Energy Efficient Equipment
The government have extended their list of energy efficient equipment for accelerated 100% capital allowances. All energy efficient equipment must be new assets, not leased and purchased for the company’s own trade.
VAT
The major change in VAT has been the increase of the standard rate of VAT by ½ % to 21.5%.
This increased rate of VAT will be effective from 1st December 2008.
The farmer’s VAT flat rate addition has been maintained at 5.2%
Motor Tax
These rates have increased by 4% for cars below 2.5 litres in CO2 bands A to D and 5% for cars above 2.5 litres in CO2 band D to E. Goods and all other vehicles will increase by 4%.
No change to motor tax for electric vehicles.
Trade plate licences will also increase by 4%.
Capital Gains Tax (CGT)
The rate of capital gains tax (CGT) has been increased from 20 to 22% with immediate effect.
For 2009, the CGT payment dates have being amended and now disposal of assets in the period of January to November will be due for tax payment in mid December and tax due on disposals in December is due the following 31 October.
Stamp Duty
Commercial Property
The government announced the top rate of tax has been reduced from 9% to 6%for the calculation of stamp duty on commercial property.
Other Changes
The annual stamp duty charge by government on ATM cards and debit cards has been reduced by half from €5 to €2.50 in each case. The stamp duty on combined ATM/debit cards has been reduced from €10 to €5. The stamp duty on cheques has increased by 20 cent from 30 cent to 50 cent per cheque.
Other Amended Regulations
Excise Duty is increased on wine by 50 cent per bottle. No increase on the excise on
beer and cider and there will be a reduction of 50% in the excises applicable in
low alcohol beer and cider with an ABV of less than 2.8%.
Increased excise duty on cigarettes by 50 cent per pack.
Increased excise on petrol of 8 cent per litre. There was no increase for excise on diesel.
Excise licences, including off-licences are being increased to €500 in each case. The increase will apply from the appropriate annual renewal dates in 2009.
The duty on betting will increase from 1% to 2% from 1st January 2009.
A new air travel tax will apply to all departures from Irish airports from 30th March 2009. The general rate will be €10 per person with €2 applying to shorter journeys (under 300 Kilometres). The air travel tax will not apply to certain individuals i.e. where a passenger is under 2 years old, disabled and the assisting persons or members of the crew.
Summary
For this years Budget the full impact will only become apparent once the Finance Bill has being EU approved and introduced by the Government.
If you have any queries in relation to any of the above please contact a member of our Taxation Department.