While the most important tax measure for Irish business was the pre-budget confirmation that the 12.5% corporation tax rate will continue to apply to roughly 160,000 domestic SMEs, the budget did also contain some welcome developments for indigenous business, in particular with the changes to the Employment Investment Incentive (EII) rules and the corporation tax exemption for certain start-up companies – both of which have been expanded with a view to increasing uptake and further support start-ups and early stage businesses. Other positive news was the announcement of the extension of emergency-type measures, including the tapering of the EWSS until April 2022 and the confirmation of the extension of the commercial rates waiver for hospitality and related sectors until the end of 2021.

We would hope that any further measures will place an even greater emphasis on the SME landscape given that this year’s budget was largely dominated by health, housing and managing the cost of living. The detail of how the EII scheme will extend to a wider range of investment funds, for example, will be one for SMEs to watch. This could in itself have the potential to significantly increase the flow of capital to small and medium-sized business. Any such changes, especially if they were to be combined with an enhanced capital gains regime for entrepreneurs, could certainly provide a well-timed boost to the domestic Irish economy and its post-COVID recovery.

Digital Gaming tax credit

Great to see some detail today on the new Digital Gaming tax credit. The headline rate of 32% is very attractive and should help Ireland become more relevant in the gaming sector. The fact that the credit is refundable is also good news as many companies operating in this space are still quite small and may not pay corporation tax yet. As a country we currently only employ in the region of 2,000 people in a sector which is worth over $120 billion – so lots of room for growth.


Delivering on housing is a key commitment of the Government. The extension of the current Help-to-Buy scheme to the end of 2022 is welcome and will provide first-time buyers with an enhanced and valuable incentive over the year. A review of this scheme has also been announced for 2022 and it is hoped that this review will lead to both an extension from 2023 and additional tax relief above the current cap of €30,000. With a further three year extension of tax deductible pre-letting expenses for landlords aimed at increasing the supply of properties to the rental market, it is hoped both measures will relieve pressure in the market in the short term.

The new zoning tax is intended to increase supply, not raise taxes. It will be wide ranging and include small zones and serviced sites. There is scope to increase the rate if it does not work. As supply is a key issue, this can help. The 3% Zoned Land Tax will come into effect no earlier than 2023 and will replace the current 7% Vacant Site Levy imposed by local authorities. We await further details in the Finance Bill to fully understand the extent of the Zoned Land Tax which may provide further clarity.


As expected, the Budget announcement was generally quiet on the VAT front with no changes to the core VAT rates. Confirmation of the expiration of the 9% VAT rate cut at the end of the 2022 summer season (from 1 September 2022) will be greeted with disappointment by the hospitality sector who were hoping for an indefinite reduction but is not surprising following the Department of Finance signalling pre Budget that pent up demand is expected to drive more activity in the sector as the economy recovers than an extension of the VAT rate cut not always passed on to customers

Aviation crew changes

Current Irish tax provisions require airlines, who have their place of effective management in Ireland, to treat the earnings of crew members as Irish employment income subject to PAYE withholding even where the crew member does not live and work in Ireland. Separately that crew member may have an obligation to pay tax in the country in which they normally live – where that country has a lower personal tax rate than Ireland the crew member may still end up paying the higher Irish tax rate depending upon what, if any, tax treaty may be in place between Ireland and their home country. These provisions can create issues in staff recruitment and retention for Irish managed airlines.

The Minister has indicated that an exclusion from PAYE withholding will apply for non-resident air crew where certain conditions are met with specific detail to be announced as part of the Finance Bill. Any measures which assist the embattled airline industry, relieve the administrative burden for both parties in managing compliance obligations as well as enable talent management are very welcome.


The Budget speech included an extension of tax relief for farmers looking to increase their herd value. Specifically, general stock relief of 25% is extended to 31 December 2024, and there is an extension of the increased stock relief rate of 50% for registered farm partnerships and 100% for young trained farmers until 31 December 2022. In addition stamp duty relief will continue for Young Trained Farmers until the end of 2022. These combined measures should encourage the next generation of farmers in the Agri sector. However the level of relief is capped, and the interaction of claiming the relief alongside the use of certain losses and capital allowances can diminish the value of the relief for certain farmers, in particular those incurring significant expenditure on farm buildings

Working from home

Employees who work from home can already claim a tax deduction from Revenue for 10% of the annual utilities and 30% of the annual broadband costs which relate to the number of home-working days provided certain conditions are met. The budget announcement seeks to align the tax relief for utilities with that of broadband costs. While a change to the tax relief was needed, it is very modest in the context of rising energy prices when hybrid working arrangements look set to continue for the foreseeable future.

Tax bands

After many years of static tax bands and credits, it is welcome that a measure of inflationary relief has been provided to income tax credits and the standard rate band. This move will decrease the tax burden for all income earners and ease the impact of increased costs of living. The alignment of the lower 2% USC band to reflect the increase in minimum hourly wage also ensures such earners are protected from paying USC at the higher rate of 4.5% on such increases


The extension of the EWSS until the end of April 2022 provides much needed support and certainty for the heavily hit retail sector as they need to invest for their busier periods.

The effective use of the Brexit Adjustment Reserve will be critical to support those manufacturing businesses who face uncertainty in their biggest export market.

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