Ireland: Tax measures in budget 2021

Ireland: Tax measures in budget 2021

The government today, 13 October 2020, announced the details of budget 2021.


An overview of the tax measures included in the budget provides the following:

Business taxation

  • Re-affirmation of commitment to Ireland’s 12.5% corporation tax rate.
  • Update on Ireland’s corporation tax roadmap to be published and to summarise decisions implemented to date and outline areas for future consideration, consultation and action.
  • Disposals of certain intangible assets to be brought within the scope of capital allowances balancing charge rules.
  • Exit tax rules to be amended to clarify the operation of interest on instalment payments.
  • Knowledge development box (KDB) relief to be extended for a further two years to 31 December 2022.
  • Work to commence on the development of a tax credit for the digital gaming sector with a view to supporting qualifying activity from January 2022 onwards.
  • Existing scheme of accelerated capital allowances for investment in energy efficient equipment to be extended for a further three years to 31 December 2023 with the criteria and efficiency standards for the regime to be reviewed over the coming year.
  • The additional 5% of qualifying expenditure allowed as an increased film corporation tax credit for certain qualifying films to be extended by one year to December 2021.  
  • Announcement of a COVID restrictions support scheme which will provide weekly payments to qualifying businesses (intended to be those whose trade has been significantly impacted as a result of the restrictions in the government’s “living with COVID-19” plan) of up to €5,000 in the form of an advanced credit for tax deductible trading expenses. 

Income tax

  • €203 increase to the 2% USC rate band from €20,484 to €20,687. No other changes to individual (personal) tax rates or bands.
  • €4 increase in the weekly threshold for the higher rate of employer’s PRSI from €394 to €398.
  • €150 increase in earned income credit for the self-employed to €1,650.
  • €175 increase in the dependent relative tax credit to €245.
  • The employment wage subsidy scheme (EWSS) to continue until 31 March 2021 with a similar scheme to be introduced for beyond that date when economic conditions become clearer.
  • Tax debt warehousing provisions to be expanded to self-employed income tax payments and temporary wage subsidy scheme repayments. 

Property tax

  • The enhanced “help to buy” scheme which was introduced as part of the government stimulus package on 23 July 2020 to be extended to 31 December 2021.
  • Residential development stamp tax (duty) refund scheme to be extended by one year to construction operations commenced by 31 December 2022, with the time allowed between commencement and completion of a qualifying project in order to be eligible for the refund also to be extended from 24 months to 30 months.
  • Stamp duty consanguinity relief applicable to transfers of agricultural property between certain family members to be extended for a further three years to 31 December 2023.
  • The reduced 1% rate of stamp duty applicable to qualifying farm consolidation transactions to be extended to December 2022. 

Indirect tax

  • The value added tax (VAT) rate applying to certain activities in the hospitality and tourism sector to reduce from 13.5% to 9% from 1 November 2020 through to December 2021. 
  • The rate of carbon tax to increase by €7.50 per tonne/CO2 from midnight in respect of auto fuels and from 1 May 2021 in respect of other fuels. It was also signalled that next week’s Finance Bill will include a schedule setting out future annual increases to the tax in order to bring the rate to €100 per tonne/CO2 by 2030.
  • The methodology for calculating vehicle registration tax (VRT) and annual motor tax to be amended in 2021 in order to align with international standards and to determine vehicles with higher levels of CO2 emissions are taxed appropriately.
  • Excise duty on a packet of 20 cigarettes to be increased by 50 cents (including VAT) from midnight with a pro-rata increase on other tobacco products.
  • The flat-rate addition for farmers (which compensates non-VAT registered farmers for irrecoverable VAT on their input costs) to increase from 5.4% to 5.6% from 1 January 2021. 

Capital gains tax

  • Entrepreneur’s relief to be available on disposals of shares by persons who have held the shares for a continuous period of three years at any time prior to the disposal (rather than a continuous period of three years in the five years prior to disposal as is the requirement currently).
  • Introduction of a capital gains tax anti-avoidance measure to address the disposal of certain foreign currency debts.

Read more about the tax measures in the 2021 budget on a dedicated webpage of the KPMG member firm in Ireland

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