background image

On 27 September 2022, Ireland's Minister for Finance, Paschal Donohoe, delivered the Budget 2023. As provided in the tax policy changes document, some of the main tax measures of the budget include the following:

Income Tax

  • An increase of EUR 3,200 in the income tax standard rate band cut-off point for all earners:
    • single, widowed or surviving civil partner from EUR 36,800 to EUR 40,000;
    • single, widowed or surviving civil partners, qualifying for the single person child carer credit from EUR 40,800 to EUR 44,000;
    • married couples or civil partners (one income) from EUR 45,800 to EUR 49,000; and
    • married couples or civil partners (two incomes) from EUR 45,800 to EUR 49,000 (with an increase of EUR 31,000 max).
  • An increase in the personal tax credit from EUR 1,700 to EUR 1,775.
  • An increase in the employee tax credit from EUR 1,700 to EUR 1,775.
  • An increase in the earned income credit from EUR 1,700 to EUR 1,775.
  • An increase in the home carer tax credit from EUR 1,600 to EUR 1,700.

Universal Social Charge (USC)

  • The adjustment of the USC bands as follows, including an increase in the 2% band ceiling, with the exemption for incomes of up to EUR 13,000 maintained:
    • EUR 0 – EUR 12,012 @ 0.5%
    • EUR 12,013 – EUR 22,920 @ 2%
    • EUR 22,921 – EUR 70,044 @ 4.5%
    • EUR 70,045+ @ 8%
    • Self-employed income over EUR 100,000: 3% surcharge

Support for Enterprise/SMEs/Agri-sector

  • A three-year scheme of accelerated capital allowances will be introduced for farmers for the construction of slurry storage facilities, providing that the capital cost of the facilities may be written off over two years rather than seven years;
  • The Foreign Earnings Deduction (FED) will be extended to 31 December 2025, providing relief from income tax on up to EUR 35,000 of income for employees tax-resident in Ireland who travel out of the State to temporarily carry out duties of employment in certain qualifying countries;
  • The Key Employee Engagement Programme (KEEP) will be extended to 31 December 2025, including modifications to provide for the buy-back of KEEP shares by the company from a relevant employee and to increase the lifetime company limit for KEEP shares from EUR 3 million to EUR 6 million;
  • The Special Assignee Relief Programme (SARP) will be extended to 31 December 2025, with the minimum income limit for new entrants increased from EUR 75,000 to EUR 100,000;
  • The Section 481 Film Relief will be extended from its current end date of 31 December 2024 to 31 December 2028, providing relief in the form of a corporation tax credit equal to 32% of qualifying expenditure related to the production of certain audiovisual productions capped at EUR 70 million;
  • The Research and Development Tax Credit Finance will be changed in regard to the payment of the credit, including that companies will be given the option to call for payment of their eligible R&D tax credit or to request for it to be offset against other tax liabilities, and the existing caps on the payable element of the credit will be removed;
  • The Knowledge Development Box (KDB) will be extended to accounting periods commencing before 1 January 2027, along with an increase in the effective tax rate of the KDB from 6.25% to 10.0% that will be brought into effect by Ministerial commencement order once agreement is reached at the OECD/G20 Inclusive Framework on implementation of the Pillar 2 Subject to Tax Rule (STTR);

Carbon Tax

  • The Carbon Tax rate will be increased from EUR 41 to EUR 48.50 per tonne of CO2 effective 12 October 2022 for auto fuels and effective 1 May 2023 for all other fuels, with the impact of the increase for auto fuels offset by a reduction in the National Oil Reserves Agency (NORA) levy from 2 cents per litre to 0 cents per litre;

VAT Measures

  • A zero VAT rate will be introduced for the following supplies with effect from 1 January 2023:
    • newspapers and news periodicals, including digital editions;
    • automatic external defibrillators and period products;
    • all non-oral hormone replacement therapy; and
    • all non-oral nicotine replacement therapy;
  • The Flat-rate compensation percentage for unregistered farmers will be reduced from 5.5% to 5.0% from 1 January 2023 (compensation is for VAT incurred on farming inputs); and
  • The 9% VAT rate for gas and electricity, due to expire on 31 October 2022, will be extended to 28 February 2023.

Further to the tax policy measures above, Minister Donohoe also noted in his budget statement that Ireland aims to be part of this EU-wide response for capturing the windfall gains of energy companies (a windfall energy tax), but if this is not possible, the Irish government will bring forward its own measures.