Finance Act 2020
Ireland has confirmed in Finance Act 2020 a wide range of tax measures previously announced in Finance Bill 2020, and provides technical amendments to Irish transfer pricing rules, the application of the Restrictions Support Scheme and the Employment Wage Subsidy Scheme.
The key amendments announced in the Act are summarized below.
Employment and personal tax
The employment and personal tax measures in the Act are in line with those announced in the Bill, including changes made to the USC bands, increases made to certain credits such as the earned income credit for the self-employed, relaxation of the 5% shareholding test under the Entrepreneur Relief, and the extension of the income tax warehousing regime to the self-employed.
Corporation Tax and Capital Gains Tax
The Act includes key tax provisions announced in the Bill with regard to corporation tax and capital gains tax. In particular, the Act confirms the extension of the Knowledge Development Box relief until 31 December 2022, the extension of the accelerated capital allowances for energy efficient equipment for a further 3 years (until 31 December 2023) and the application of the balancing charge provisions in relation to capital expenditure incurred on the provision of specified intangible assets on or after 14 October 2020.
In addition, the Act confirms that the amendments to the application of Ireland’s transfer pricing rules to non-trading transactions (which, according to the Budget for 2021, were to apply for chargeable periods commencing on or after 1 January 2021) are under further revision and will be subject to the Commencement Order.
The Act confirms the temporary reduction of VAT applicable to the hospitality and tourism sectors from 13.5% to 9%.
In addition, the temporary VAT exemption for the supply of personal protection equipment and other items and equipment supplied to the Health Service Executive and other health care services for the use in the delivery of COVID-19 pandemic health care services has been extended until 31 April 2021 (from 31 October 2020).
Other tax measures
The Act introduces a new tax measure whereby the accelerated capital allowance at a rate of 50% will apply on certain qualifying farm safety equipment subject to some limits and a certification process. The measure will also apply to equipment designed to allow greater access to farm machinery to a disabled person and, by extension, to facilitate greater participation in farming enterprises.
In addition, the Act provides some technical amendments to the COVID Restrictions Support Scheme (CRSS) that was announced in the Bill, by announcing a mechanism for dealing with overclaims that may arise specifically due to the early lifting of restrictions and introducing an appeals mechanism to afford a business refused entry to the scheme the right to appeal to the Tax Appeals Commission.
Finally, a significant amendment was confirmed regarding the eligibility criteria for the Employment Wage Subsidy Scheme (EWSS). The Bill introduces a ‘second specified period’ whereby the period of assessment as to whether an employer’s turnover (or customer orders) has reduced by 30% will be based on a comparison between 1 January 2021 to 30 June 2021 and 1 January 2019 to 30 June 2019. Employers will need to reconsider their eligibility for the scheme and undertake the revised projections for their anticipated turnover for the 1st half of 2021 and compare it to the first half of 2019.
Finance Act 2020 (Act 26 of 2020), as signed into law by the President on 19 December 2020, is available here.