On 1 October, the Irish Minister for Finance (the “Minister”) delivered the Budget statement for 2025. The Budget statement allows the Government to set out its spending priorities for the following year and to announce key tax policy developments.
From a corporation tax policy perspective, the main announcements were as expected (announcement of the introduction of a participation exemption for foreign dividends and on-going consideration of a foreign branch exemption), there were some surprise changes to stamp duty (including the introduction of a 6% rate on residential property with a value exceeding €1.5 million) and a number of income tax measures that will be welcomed in advance of an upcoming General Election.
Some significant tax policy decisions have been put on the long finger including, the policy response to a report of the Funds Review Team and the policy response to an independent review of share-based remuneration.
We have included a summary of the key announcements below. It is expected that the Finance Bill to implement the changes announced will be issued during the course of next week. More changes may be announced at that time.
Corporation Tax
- A participation exemption for foreign dividends will be introduced from 1 January 2025. This follows a series of public consultations, the most recent of which included draft legislation to implement the exemption. Throughout the consultation process, stakeholders (including Matheson) have advocated in favour of an exemption that is not limited in scope to dividends received from subsidiaries resident in EU, EEA and double tax treaty partner jurisdictions. It is unlikely that the proposed geographic scope of the exemption will change in the version that will be published in the Finance Bill next week. However, the Minister confirmed that geographic scope will be further considered next year.
- The Minister confirmed that work will commence on a foreign branch exemption. It is clear from the documents accompanying the Budget statement that the introduction of such an exemption is still under consideration.
- The Minister noted the publication of a consultation paper on the tax treatment of interest.
- The Minister confirmed that the R&D tax credit will be reviewed in the coming year. In the meantime, the first year payment threshold will be increased from €50,000 to €75,000.
- The Minister has received the report of the Funds Review Team which he will bring to Government shortly. Afterwards, he will publish the report and announce next steps.
- The Minister announced a new deduction for expenses of up to €1 million for a first listing on an Irish or EEA stock exchange.
Stamp duty
Two stamp duty changes will take effect from midnight on the date of the Budget statement:
- the rate of stamp duty applicable to residential property valued above €1.5 million will increase to 6%. The existing rate of 1% will continue to apply to values up to €1 million, and 2% will apply on values above €1 million, with the new third rate of 6% to apply to any value in excess of €1.5 million (the 6% rate will apply only to the increment above €1.5 million only). The normal transitional arrangements will apply for transactions in process, i.e., if a binding contract is signed before midnight on the date of the announcement, the increased rate will not apply;
- the higher rate of stamp duty on bulk acquisitions of houses will increase from 10% to 15%.
VAT
- VAT registration thresholds will be raised to €85,000 for the supply of goods and to €42,500 for the supply of services.
Income tax
A number of income tax rate reductions and increases to tax credits were announced including increases to the personal, employee and earned income credits, an increase in the standard rate cut off point to €44,000 and a reduction in the 4% USC rate to 3%.
Capital Acquisitions Tax
The capital acquisitions tax group thresholds will be increased as follows:
- Group A threshold to €400,000
- Group B threshold to €40,000
- Group C threshold to €20,000
Other
- Improvements will be made to the Employment Investment Incentive, the Start-Up Relief for Entrepreneurs and the Start-Up Capital Incentive.
- The independent review of share-based remuneration will be published shortly, and contains a number of recommendations, which the Minister will consider in due course
The real detail of any tax changes will be included in the Finance Bill which is expected to be published next week. We will issue another update at that time. In the meantime, should you wish to discuss any aspect of Budget 2025, please reach out Olivia Long, Caroline Austin, your usual Matheson contact or any of our Tax partners.