Ireland: Finance Bill 2010
Ireland: Finance Bill 2010
The Department of Finance issued its 2010 Finance Bill on 4 February 2010. Many of the measures contained in the Bill reflect the announcement made by the Minister last December during his annual Budget Speech to Parliament. However the Bill has provided clarification on a number of provisions in addition to introducing some new legislation.
The key provisions are:
- The introduction of a Domicile Levy of EUR 200,000 for high net worth Irish citizens who are Irish domiciled but tax resident overseas.
- The abolition of the remittance basis for returning Irish citizens.
- The extension of the remittance basis for non-domiciled foreign citizens.
- An extension of relief from the income levy to Cross Border Workers and employees resident in Guernsey, the Isle of Man and Jersey.
- Increased reporting requirements for non-Revenue approved share schemes.
- The restriction of certain reliefs on restricted share schemes to shares held in a trust or other vehicle based in the EEA.
Domicile Levy minimum tax for Irish citizens resident abroad
With effect from 1 January 2010 all Irish citizens who are domiciled in Ireland will be liable to a domicile levy of EUR 200,000 where the following conditions are met:
- their worldwide income exceeds EUR 1 million and ;
- they have assets located in Ireland with a value in excess of EUR 5 million on 31st December of the relevant year
The domicile levy is subject to self assessment and is payable to the Revenue Commissioners on or before 31 October in the year following the year of valuation.
The levy payable will be reduced by the amount of income tax paid in Ireland in respect of the tax year ending on the valuation date.
Remittance basis – Irish citizens
With effect from 1 January 2010, Irish citizens will no longer be able to benefit from the remittance basis. This was previously available to them for the first 3 years after their return to Ireland, provided they had been tax resident abroad for at least 3 consecutive tax years.
Remittance basis non Irish citizens
In 2008 special provisions were introduced, which restricted the amount of employment income liable to income tax in Ireland for non Irish domiciled individuals (foreign citizens) individuals assigned into Ireland from a non EEA country, who remained employed under a non EEA contract.
With effect from 1 January 2010, this provision has been relaxed with the result that employees seconded into Ireland from an EU or EEA countries, who are employed under an EEA contract, will now qualify for relief.
When this relief was introduced it was only available where the period of assignment into Ireland was for a period of at least 3 years. With effect from 1 January 2010 an assignment lasting 12 months or more will qualify on the condition that it is the first assignment into Ireland and the employee was never previously tax resident in Ireland.
This relief operates by restricting the amount of employment income liable to to the lower of:
- Actual income earned or;
- EUR 100,000 plus 50% of the employment income exceeding 100,000
However, if the aggregate of employment income received in, plus employment income remitted into Ireland, exceeds EUR 100,000 plus 50% of the excess above EUR 100,000, the aggregate amount will be subject to tax in Ireland.
Income levy
The Bill contains a number of technical amendments exempting certain internationally mobile employees from the income levy introduced in 2009. These levies are generally charged on all income at rates from 2% to 6%.
An exemption applies to persons who are on an Irish payroll, but who are resident in a country with which Ireland has a Double Taxation Agreement. This exemption has now been extended from 1 January 2010 to persons resident in countries with which Ireland has concluded an Agreement Affording Relief from Double Taxation. Ireland has concluded such agreements with Guernsey, the Isle of Man and Jersey.
The Bill also extends relief from the income levy to persons eligible for Cross Border Workers relief. This relief is available to employees who reside in Ireland, but who work in a country with which Ireland has a Double Taxation Agreement for a period of at least 13 weeks and who spend at least 1 day per week in Ireland.
Employee share scheme reporting
The Bill introduces a new automatic reporting requirement which will oblige employers who grant shares to employees or directors, other than under Revenue approved arrangements, to make an annual return of such awards. At present, such a return is only required if specifically requested by the Revenue Commissioners. The legislation also provides for the imposition of penalties for employers who fail to make the required returns or who fraudulently or negligently make incorrect returns.
Restricted shares
Irish legislation provides for a reduction in the taxable value of shares granted to employees where the shares are subject to a restriction on disposal. To qualify for this relief, the shares must be held in a trust or other Revenue approved holding vehicle. The Bill specifies that in the case of shares held in a trust, the trust must be established in Ireland or in another European Economic Area (EEA) Member State, and that the Trustees must also be resident in such a State. This provision may present difficulties for non-EEA companies operating such schemes in which Irish employees participate.
Next steps
Irish citizens who are tax resident outside of Ireland and who hold assets in Ireland in excess of EUR 5 million should note that they may be liable to the Domicile Levy if their worldwide income exceeds EUR 1 million. Employers and assignees should review the costings of assignments to Ireland in light of the changes to the remittance basis and the extension of relief from the income levy. Employers with share remuneration schemes which are not Irish Revenue approved should put systems and controls in place to deal with the new reporting requirements. Employers with restricted share schemes where the shares are held in vehicles outside of the EEA should review their remuneration schemes for Irish based employees in light of the changes.
Source: Ernst & Young
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