Budget April 2009

Introduction
This budget was designed to address the adverse financial position of the country. The most significant increases were in personal taxation. The corporate tax rates remain the same in the hope of encouraging investment from companies abroad.

 

Income Tax

Income Levy

The income levy that was introduced in the last budget has been doubled. Salaries below €15,028 are exempt. From 1st May 2009, rates will be applied to PAYE income as:

 

 

The combined rate for the 2009 calendar year will be (This will mainly affect self-employed individuals):

 

 

No income levy will be levied on termination payments or PAYE exclusion orders. This levy continues to be based on gross income, before deductions for capital allowances or pension contributions.

Deposit Interest Retention Tax (DIRT)
From 8th April 2009, DIRT tax on deposit accounts will increase from 23% to 25% and Life assurance policies and funds will now become liable to tax at 28%.

Mortgage Interest Relief
Mortgage interest relief will be discontinued in respect of any home loan in place over 7 years.

Rental Properties

The deductibility of loan interest on residential properties has been reduced from 100% to 75% for both new and existing mortgages with effect from 7th April.

This will not affect any loans on commercial properties.

 

Abolition of Capital Allowance Schemes for the Health Sector

Capital allowances for new projects in the health sector are abolished. Existing completed projects are unaffected and transitional arrangements will apply to projects at an advanced stage of completion. This affects private hospitals, nursing homes, convalescent homes and mental health centres.

The scheme for specialist palliative care and child care facilities are unaffected.

Income Tax Rates

The standard and marginal income tax rates of 20% and 41% remain unchanged.

There is no change to the single and married rate bands.

 

PRSI/Levies
The Employee PRSI annual ceiling on which individuals were required to contribute PRSI was €52,000 (€1,000 p/w).  This ceiling is now increased to €75,036 (€1,443 p/w) effective from 1st May 2009.

The health levies are also doubled, increasing from 2% & 2.5% to 4% and 5% respectively.  The €100,100 limit is reduced to €75,036.

 

Corporation Tax

The corporation tax rate remains unchanged at 12.5%.

A new scheme of tax allowances for the acquisition of intellectual property (including patents, registered designs, brands, trademarks, copyrights) has been introduced. The write off period will be based on standard accounting treatment or companies can opt for a 15 year write off period. The allowances can be set-off only against trading income derived from the use of the intangible assets and not against other income. The annual allowances are restricted to 80% of the income arising in the period with any excess carried forward. The existing reliefs for capital expenditure on patents and know-how for companies are being discontinued subject to transitional arrangements.

 

Residential Development Land

 The special 20% tax rate applying to income arising from dealing in or developing residential lands was abolished retrospectively to 1st January 2009.

Any such income realised by an individual is to be subject to income tax at their marginal income tax rates. This 20% rate applicable to companies is to be replaced by a 25% rate for accounting periods ending on/after 1 January 2009.

 

VAT

VAT Margin Scheme for Second Hand Cars initially announced in the budget has now not been included in the Finance Bill.

No change was made to the standard VAT rate and it remains at 21.5%.

 

Capital Gains Tax (CGT)

From 8th April the rate of capital gains tax (CGT) has been increased from 22% to 25%.
               

Capital Acquisitions Tax (CAT)

 Similar with the CGT increase, the CAT rate increases from 22% to 25% for gifts or inheritances received on or after 8 April 2009.

The CAT thresholds are also reduced by 20% as follows:

 

 

Stamp Duty

 “Trade-in” Scheme

This new scheme allows a builder to exchange a new residential property for an old house and to defer the stamp duty that would be payable on the acquisition of the old property until the later of when the old house is sold, or 31 December 2010. Interest is payable on the stamp duty deferred. Stamp duty is payable on the acquisition of the new property in the normal way.

Other Amended Regulations

Excise Duty

From midnight on 7th April 2009, the excise duty on diesel increased by 5 cent per litre and the excise duty on cigarettes increased by 25 cent per packet of 20.

 

Life Assurance Levy

Life assurance premiums received by an insurer on or after 1 August 2009 will have a new levy of 1% applied.

 

Non-Life Assurance Levy

The non-life insurance levy increased from 2% to 3%. The new rate will apply to renewals and offers of insurance issued by an insurer on and from midnight on 7 April 2009 where premiums are received by the insurer on or after 1 June 2009.

 

Interest on Late Payments

There is a reduction in the rate of interest to apply to late and underpayments of tax. The daily rate is to be reduced from 0.0273% to 0.0219% for income tax, corporation tax, capital taxes and stamp duty. For other taxes the daily rate is to be reduced from 0.0322% to 0.0274%. The annualised equivalents are approximately 8% and 10% respectively. The new rates take effect from 1 July 2009.

Summary

It is hoped the measures announced in this mini Budget will assist in restoring and renewing the economy. In the future the Government have stated they may consider other measures e.g. the introduction of a carbon tax or property tax and the elimination of

unnecessary tax reliefs.  
  

If you have any queries in relation to any of the above please contact a member of our Taxation Department