Business tax

The Finance Bill contained a number of provisions which will be of interest to a broad cross section of businesses. We have detailed the key provisions of note below.

As part of Budget 2024, then Minister for Finance Minister McGrath committed to the introduction of a participation exemption in Finance Act 2024.  The introduction of a participation exemption for dividends will provide much-needed administrative simplification, and greater certainty for businesses, in a time of considerable change to the international tax landscape.

In addition to introducing the participation exemption for dividends, Minister Chambers announced during Budget 2025 that further consideration will be given in the coming year to the geographic scope of the participation exemption on dividends (in the context of Pillar Two rules), as well as the possible introduction of an exemption for foreign branch profits.

The participation exemption in respect of distributions was the subject of two separate public consultations held by the Department of Finance in 2024. The new participation exemption measures being introduced in the Finance Bill will apply to distributions made on or after 1 January 2025.

An overview of the scope and application of the new measures is provided below:

The new measures will exempt  foreign distributions from Irish corporation tax where certain conditions are met. Currently, distributions from a company which is not Irish tax resident are taxable in Ireland. Under certain complex tax rules, taxation relief may be available for such distributions in the form of a credit for foreign tax. Availing of the exemption will negate the necessity for a ‘parent company’ to claim this foreign tax relief in respect of ‘relevant distributions’ received from a ‘relevant subsidiary’.  

To be a relevant subsidiary, the subsidiary must be resident in a relevant territory for the purposes of foreign tax on profits (i.e. a tax that corresponds to Irish corporation tax and is imposed at a nominal rate of greater than 0%) and must not be generally exempt from foreign tax. These criteria must be met for the five years prior to the date of distribution. A relevant territory includes all countries in the EEA or a jurisdiction with which Ireland has concluded a double tax treaty. Excluded from the definition of relevant territories are those on the EU list of non-cooperative jurisdictions.

A parent company in relation to a relevant subsidiary is one which is tax resident in Ireland or, if not Irish tax resident, is resident for tax purposes in an EEA state which imposes a tax that corresponds to Irish corporation tax and is not generally exempt from foreign tax.

To be a parent company, the recipient must own at least 5% of the relevant subsidiary’s ordinary share capital, and be beneficially entitled to at least 5% of the relevant subsidiary’s profits available for distribution and assets on a winding up. For the purposes of this test, share capital in a relevant subsidiary which is held as trading stock by the parent company for tax purposes may not be included.

Indirect ownership through an intermediary can be taken into account in determining the 5% ownership criteria provided that the intermediary is tax resident in Ireland,  an EEA jurisdiction or a jurisdiction with whom Ireland has a tax treaty..

The parent company must satisfy the 5% minimum ownership criteria in the relevant subsidiary for 12 months. This 12 month period must include the date on which the relevant distribution is made but can be determined by including both the  period prior to, and after, the making of the distribution. Where the distribution is made out of the assets of the relevant subsidiary, the conditions of the Section 626B substantial shareholding exemption must also be met in respect of the shares of the relevant subsidiary.

Relevant distributions made on or after 1 January 2025 are eligible for the exemption where the necessary conditions are met. At the time the distribution is made, the receipt of the distribution must be considered income in the hands of the parent company and be taxable under Case III (and not computed under Case I principles which would exclude distributions received by a parent company which is a qualifying company under Section 110) or Case IV in respect of dividends paid on certain preference shares. The dividend can be paid in respect of all types of equity, including ordinary share capital and preference share capital. The distribution cannot be:

• deductible for corporation tax purposes in the foreign subsidiary’s jurisdiction
• a distribution on a winding up (capital distribution)
• an interest from debt claims or equivalent with rights to the company’s profits
• interest equivalent under the interest limitation rules
• made by an offshore fund

The exemption will not apply to distributions made to assurance companies taxable under the old regime or undertakings for collective investments.

Importantly, the distribution must be made either out of profits of the company or out of the assets of the company. The distinction is relevant in determining whether the section 626B criteria must also be met (as noted above).

Where a parent company avails of the exemption, it will not be entitled to any foreign tax relief in respect of the exempt distributions.

Where a parent company claims the participation exemption, all eligible distributions received during the accounting period must be included in the exemption claim. As such, parent companies do not have the option to decide which distributions are exempt in a given accounting period. A claim will need to be made annually by the parent company when availing of the exemption. Distributions which are not eligible for the exemption (for example, dividends received from a foreign subsidiary located in a non-treaty / EEA jurisdiction), or where the exemption is not claimed in respect of eligible distributions, will continue to be taxable in Ireland with foreign tax relief potentially available.

Where a business or part thereof, or the whole or greater part of assets used for the purpose of another business, are acquired by a relevant subsidiary from a company not resident in a relevant territory (within five years prior to the distribution being made), the exemption will not apply. A similar restriction applies where the subsidiary merges with another company not resident in a relevant territory.

A specific anti-avoidance provision is included in the exemption. Where obtaining a tax advantage is one of the main benefits of an arrangement, and there is a lack of commercial reasons for the arrangement, any distributions arising in respect of that arrangement will not be eligible for the exemption. 

Retirement relief provides relief from capital gains tax on the disposal of businesses by individuals where certain conditions are met. Currently, full relief from capital gains tax is available for individuals who transfer qualifying business assets to a child when the individual is aged 55 to 66. The relief for intergenerational transfers is currently capped at a value of €3 million for individuals aged 66 and over. Last year’s Finance Act provided that this €3 million cap would be removed for individuals aged 66-69 for disposals from 1 January 2025. This, in isolation, was seen as a welcome change, reflecting the increased longevity of individuals in business. 

However, last year’s Finance Act also set out a €10 million limit on the value of qualifying assets transferred to a child, with effect from 1 January 2025. There was concern within the family business community that this measure could impede well-organised lifetime inter-generational transfers of larger businesses, with the potential to negatively impact the success of those businesses and the employment they create.

In a welcome development, the minister’s Budget speech indicated that the €10 million limit will not come into effect. Instead, relief will apply subject to a 12 year clawback period (increased from the existing 6 year clawback period), in respect of assets transferred to a child with a value in excess of €10 million.

The Bill outlines the detail of how this new extended clawback period will operate. It is essentially a deferral of CGT, which becomes a permanent exemption from CGT if the child continues to own the qualifying assets for a period of at least 12 years.

• CGT in respect of the value of the assets transferring above €10 million will be deferred upon the making of a claim in the tax return of the parent for the year in which the transfer to the child occurs;
• If the child disposes of the assets within 12 years, the CGT which was deferred becomes due and payable, and will be assessed on the child (in addition to any CGT payable on the actual disposal);
• The CGT which was deferred is fully abated if the child owns the assets for at least 12 years. The abatement requires the making of a claim in the tax return of the child for the year in which the 12 year anniversary occurs.

It will be critical that this 12 year period is monitored, and a tax return making the relevant claim for abatement of the deferred tax is filed for the relevant year by the child. In the absence of doing so, the deferred CGT will become payable notwithstanding the qualifying assets may have been owned for 12 years and beyond.

The Bill also introduces an anti-avoidance provision the effect of which is to deny any claim for relief, deferral or abatement where a disposal of qualifying assets forms part of a tax avoidance scheme or arrangement.

Following a period of significant changes and improvements to the Research and Development Tax Credit (RDTC) (largely prompted by international tax developments), the Finance Bill proposes a further enhancement to the RDTC regime.

The threshold for the first payable RDTC instalment has been increased from €50,000 to €75,000. This is a further extension of the threshold which previously increased from €25,000 to €50,000 in last year’s Finance Act. The increased threshold of €75,000 would apply for claims made in accounting periods commencing on or after 1 January 2025.

Following this latest increase, that companies with RDTC claims of €75,000 or less will receive the full benefit of their RDTC claim in one up-front instalment in respect of year 1. Companies with RDTC claims of more than €75,000 but less than €150,000, will receive €75,000 of their RDTC claim in respect of year 1 because of this increase in threshold. Companies with RDTC claims above €150,000 will continue to receive a first instalment amount based on 50% of the RDTC claim.

This is a positive update and will provide a vital cash-flow benefit to companies engaged in smaller R&D projects.

The Department of Finance has estimated that based on 2022 RDTC claims (the latest data available), that increasing the payment threshold to €75,000 will increase, to circa 44%, the proportion of claimant companies qualifying for payment of the credit in full in the first year.

Company start-up relief provides for a reduction in a new company’s corporation tax liability for the first five years of trading. A company may be entitled to the relief if the corporation tax liability due in a tax year is €40,000 or less (with marginal relief available for companies with a corporation tax liability of up to €60,000). The total tax relief available is the lower of €40,000 or the Employer PRSI paid in the period, subject to a maximum PRSI payment of €5,000 per employee.

The Finance Bill includes an amendment to this relief to allow Class S PRSI paid by an individual in respect of emoluments from the company to be included in calculating the total PRSI paid, for the purpose of determining the tax relief due. The amount of Class S PRSI which can be included is capped at €1,000 per individual per year (reduced proportionately where the accounting period is less than 12 months). This welcome amendment should provide targeted support for small, owner-managed start-up companies.

The Bill provides for certain amendments to the existing debt warehousing provisions to give effect to the previously announced reduction of the 3% p.a. interest rate applicable to warehoused debt to 0%. Since being announced in February 2024 Revenue have been applying this reduction on an administrative basis.

The amendments provide that no interest will apply where taxpayers engaged with Revenue before 1 May 2024 to make arrangements to pay their warehoused debt, have entered into an agreement with Revenue in relation to those payment arrangements (whether before or after 1 May 2024), and continue to comply with their ongoing tax obligations. 

The Bill also sets out how removal from the warehousing scheme will operate where a taxpayer fails to satisfy the criteria for the reduced rate, including the date from which interest at the standard rate (either 8% or 10% per annum as appropriate) will apply and the amount of debt on which interest will be applied.

These amendments are relevant to the existing debt warehousing provisions for PAYE, PRSI, VAT, income tax, refunds of Temporary Wage Subsidy Scheme payments and refunds of the Employment Wage Subsidy Scheme payments.

Finance Act 2022 introduced EU-wide automatic reporting obligations for digital platform operators in respect of certain sales made via their platform under DAC7.

The Bill makes technical amendments with respect to the actions that a reporting platform operator can take where a seller fails to provide the required information for reporting. The Bill provides that where a seller, that is not an excluded seller (for example a governmental entity), fails to provide this information, the reporting platform can either:

• withhold payment of any consideration due to the reportable seller and prevent the seller from opening a new account, or
• close the account of the reportable seller and prevent the seller from reopening the account or opening a new account.

However, the reporting platform operator is required to pay the consideration withheld to the reportable seller within 24 months of the relevant date (being 60 days from the issuance of the second written reminder to the seller). The account of the reportable seller will remain closed, and the seller will be prevented from opening a new account until the required information is provided. The Bill also removes the requirement for the reportable platform operator to prevent the reportable seller from connecting with other users on the platform where the seller has not provided the required information. 

In addition, the Bill contains an amendment to provide that where a platform operator that is not Irish resident or not resident in any other jurisdiction but is incorporated, has a place of management or has a permanent establishment in Ireland fails to comply with its DAC7 obligations, Revenue shall revoke the Platform Operator ID issued to the operator. However, the Platform Operator ID can only be revoked 30 days after the issuance of a second written reminder by Revenue.

The Platform Operator ID can be reinstated, or a new ID issued, where the operator demonstrates to Revenue, with documentary evidence, and provides a written assurance that it will comply with its Irish DAC7 obligations. 

DAC7 also introduced a common legal basis by which EU Member States are obliged to facilitate other Member States in conducting joint tax audits. Finance (No.2) Act 2023 provided the legal basis and procedural arrangements for Revenue to conduct joint tax audits with the competent authorities of other EU Member States. The Bill contains technical amendments to clarify the powers, rights and obligations of a Revenue Officer that participates in a joint audit in another EU Member State.

BEPS Pillar One is an OECD initiative designed to provide for changes in how profits of large multi-national enterprises (MNEs) are allocated to market jurisdictions (i.e. where sales are made to end customers).

Pillar I is divided into two components:

1.  “Amount A” - developed to allocate more profits of MNE groups to market jurisdictions and;

2. “Amount B” - an approach intending to simplify how to determine profits allocable to marketing and distribution activities of MNE groups in certain low capacity jurisdictions.

Whilst Amount A is to be applicable initially to MNE groups with a turnover of €20 billion or more, Amount B is intended to be applicable to all MNE groups (regardless of size).

By establishing simplified guidelines, Amount B aims to facilitate transfer pricing compliance by MNE groups by allowing them to determine marketing and distributions pricing policies more efficiently while ensuring adherence to OECD guidance. This can be particularly beneficial for MNE groups operating in jurisdictions with varying regulatory requirements, as it promotes consistency and reduces disputes with tax authorities across the EU and beyond which adhere to the Amount B rules.

The Finance Bill provides for the introduction of “Phase I” of the Amount B rules into Irish law. Provision is made for the application of the Amount B rules to transactions between NME constituent entities based in Ireland and in “covered jurisdictions” (as defined by the OECD – the most recent list issued on 17 June 2024). It is intended to have effect for accounting periods beginning on or after 1 January 2025.

The key features of simplified approach as per the Finance Bill Amount B proposals are as follows:

• The rules apply in respect of a “qualifying arrangement”. Such arrangements must involve a distributor or sales agent or commissionaire of tangible goods (“market party”) for wholesale distribution. The arrangement should enable reliable pricing through one-sided transfer pricing method for determining the profits of the market party. Therefore, transactions that involve unique and valuable contributions, or involve the assumption of economically significant risks, by the market party are not eligible. Further, the market party must not incur operating expenses less than 3% or more than 30% of its annual net revenues.
• The market party must be a company tax resident in a “covered jurisdiction” (and whose profits are liable to tax in that jurisdiction) with whom Ireland has a tax treaty.
• Companies that choose to adopt the simplified approach must document in their local file that it is intended the Amount B methodology will be applied for a minimum duration of three years. During this period, if any transaction subsequently fails to meet the criteria for a qualifying arrangement, this should be documented in the Local file. 

MNE Groups based in Ireland and covered jurisdictions should review and assess whether the inter-company distribution arrangements within those countries can be treated as qualifying transactions per the proposed rules and evaluate whether it is beneficial for them to opt for the simplified approach under Amount B. 

The proposed rules will have an impact on existing Irish transfer pricing compliance requirements including:

• Disclosure of application of the Amount B approach in their Irish corporation tax return.
• Maintenance of additional information in relation to the qualifying arrangements as a part of their Irish Local File including:
  • Functional analysis of the qualifying arrangement;
  • Legal contracts / agreements relating to the qualifying arrangement;
  • Analysis evidencing compliance with financial criteria required to be fulfilled as per OECD guidance;
  • Financial statements of the market party for the relevant accounting period;

Developed by the OECD, the Global Anti-Base Erosion (GloBE) rules seek to ensure that large groups with consolidated global revenues in excess of €750 million pay a minimum 15% effective rate of tax in each jurisdiction in which they operate. The rules were implemented into Irish law in Finance (No. 2) Act 2023 and reflected aspects of OECD commentary and guidance that were available at that time. The Bill proposes various technical amendments and clarifications to these rules. 

The Bill amends Ireland’s implementation of the rules to reflect OECD guidance issued after last year’s Finance Act passed through the Oireachtas. The relevant changes are summarised below:   

• The transitional country-by-country reporting (CbyCR) safe harbour will be an important relief for multinational (MNE) groups seeking to minimise the compliance burden arising in the first years of the rules. The OECD’s December 2023 guidance provided important clarification on the operation of this safe harbour. The Bill now proposes to reflect elements of this guidance in Irish law. The Bill also transposes complex anti-avoidance rules that were included by the OECD in the above guidance, confirming that these provisions will apply to arrangements entered into after 15 December 2022.   
• The GloBE rules require groups to track certain deferred tax liabilities under what are known as the DTL recapture rules. Reflecting MNE groups’ concerns regarding the enormous compliance challenge created by these tracking obligations, the Bill includes OECD-approved simplification measures aimed at reducing this burden.
• The Bill also reflects OECD guidance aiding both the identification of hybrid entities as defined under the GloBE rules, as well as the allocation of taxes to group members classified as hybrid and reverse hybrid entities.

The Bill clarifies the order of utilisation where a group has a mixture of tax losses available for use. The rules confirm that tax losses should be used on a Last-In-First-Out (LIFO) basis, meaning that tax losses arising in the most recent year will be used first, before losses arising in prior years are utilised. This will be a particularly important clarification for groups carrying tax losses into the rules on transition where certain of those losses provide for more valuable relief when utilised, e.g. losses calculated under GloBE principles. 

The Bill also includes significant updates for in-scope financial services groups.

In its June 2024 guidance, the OECD advised that domestic top-up taxes in respect of securitisation entities should generally be imposed on other group members located in the jurisdiction, and not on the securitisation entity itself. Ireland has adopted this guidance, with the result that qualifying securitisation entities may fall outside the scope of Ireland’s domestic top-up tax where the necessary conditions are met. The domestic top-up tax liability in respect of such securitisation entities may be collected from other Irish members of the MNE group. However, it should be noted that the scope of these measures is highly targeted and will not apply to all SPVs or Section 110 companies. 

Finally, the Bill includes a proposal to remove standalone investment undertakings from the scope of Ireland’s domestic top-up tax. As a result, where an investment undertaking, such as a unit trust, investment limited partnership, or common contractual fund is not a member of any consolidated group it may fall outside the scope of Ireland’s domestic top-up tax, even where its revenues are above €750 million

In his Budget speech, the Minister noted that he would introduce a measure to narrow the benefit of agricultural relief for capital acquisitions tax to active farmers.

The Finance Bill confirms that the existing rules for agricultural relief will apply to gifts and inheritances up to 31 December 2024, and introduces a new provision (Section 89A) to apply to gifts and inheritances taken on or after 1 January 2025.

Many of the requirements of the new provision adopt the existing agricultural relief rules. In particular, the gift or inheritance must comprise ‘qualifying’ agricultural property, the definitions of qualifying agricultural property are retained (including the existing rules relating to solar panels), after the gift or inheritance at least 80% of the gross assets of the beneficiary must comprise agricultural property, the assets must be retained by the beneficiary for six years after the gift or inheritance otherwise a clawback of the relief will arise, and the relief continues to provide a 90% reduction in the market value of the assets for capital acquisitions tax purposes. However, unlike the existing rules, the new provision does not permit a gift of cash to a beneficiary on condition that the sums are invested in agricultural property to qualify for relief.

The new provision retains the requirements for the beneficiary to be an ‘active farmer’ for six years after the gift or inheritance. An active farmer includes (i) a beneficiary who holds a specified farming qualification and who uses the agricultural property for the purposes of farming on a commercial basis, (ii) a beneficiary who spends more than 50% of their working time using agricultural property (including the property comprised in the gift or inheritance) for the purposes of farming, or (iii) where the agricultural property is leased by the beneficiary to a person who satisfies either of these requirements. In order to encourage flexible use of agricultural lands, the new provision allows the beneficiary to satisfy the active farmer test for different parts of the agricultural land through a combination of these requirements.

The new provision introduces additional requirements for the disponer. In particular, for the six years before the gift or inheritance the disponer must have owned the property, and (i) held a specified farming qualification and used the agricultural property for the purposes of farming on a commercial basis, (ii) spent more than 50% of their working time using agricultural property (including the property comprised in the gift/inheritance) for the purposes of farming, or (iii) have leased the agricultural property to a person who satisfied either of these requirements. The disposer is also permitted to have satisfied the active farmer test for different parts of the agricultural land through a combination of the requirements set out above.

A helpful transitional provision for the new requirements for the disponer has been included as part of the new rules. The new requirements for the disponer only have to be satisfied for the period from 1 January 2025 to the date of the gift or inheritance where such gift or inheritance takes place before 31 December 2030. This means that the new requirements are being phased in from 1 January 2025 onwards, with the full six year requirement taking effect for gift and inheritances after 1 January 2031.

Accelerated capital allowances of 50% per annum over two years are available for certain eligible farm safety equipment and adaptive equipment for farmers with disabilities. The Bill includes provisions to broaden this relief for expenditure incurred by farmers on certain equipment eligible under Targeted Agriculture Modernisation Schemes (TAMS) and which does not currently qualify for accelerated allowances. 

Stock relief reduces taxable farm profits by reference to a specified percentage of the increase in value of farm trading stock over an accounting period subject to certain conditions being met. The Bill confirms that this relief is being extended to the end of 31 December 2027 for general stock relief, Young Trained Farmers stock relief and Registered Farm Partnerships stock relief. 

Relief from stamp duty is available in respect of transfers of agricultural land to young trained farmers subject to certain conditions being met. One of these conditions is that the transferee must spend at least 50% of his or her normal working time farming the land for five years after the transfer. The relief is being amended to provide that a transferee can satisfy this condition where the land is leased to a company and the individual (i) spends at least 50% of their working time farming the land as an employee of the company; (ii) holds at least 20% of the ordinary share capital of the company; (iii) is a director of the company, and (iv) has the ability to participate in the financial and operational decisions of the company.

Relief from stamp duty is also available in respect of certain leases of farmland. The relief is being amended to provide that the relief can be claimed by a company where at least one individual (i) holds at least 20% of the ordinary share capital of the company; (ii) is a director of the company; (iii) can participate in the financial and operational decisions of the company, and (iv) within four years from the date of lease holds a specified farming qualification or spends at least 50% of their working time farming land.

The Bill also introduces a cap on the stamp duty relief available in respect of leases of farmland to a single undertaking within the meaning of Commission Regulation (EU) No. 1408/2013 (as amended) to comply with EU state aid rules.

Last year’s Act introduced a new capital gains tax relief for angel investors which had yet to come into effect. The Finance Bill provides for the replacement of the existing legislation incorporating some updates to the operation of the relief. The commencement of the relief is still subject to Ministerial Order which is expected to be issued shortly.

The relief provides for a lower rate of capital gains tax of 16% for investors in innovative start-up companies, or 18% where the individual invests via a partnership. This lower rate of capital gains tax applies to gains arising on the disposal of eligible shares up to twice the value of the investor’s initial investment and subject to the lifetime limit.

To qualify for the relief a number of conditions must be met, both by the investor and the company. One such condition is that a company must obtain two ‘certificates of qualification’ from the Revenue, being a certificate of going concern and a certificate of commercial innovation. For an

investment to qualify, a company is obliged to provide copies of these certificates to the investor. The draft legislation outlines the information a company is required to submit to Revenue to obtain these certificates, which includes the submission of a business plan in respect of the use of the proposed investment.

The draft legislation limits the type of investment being sought by the startup to an initial risk finance investment. Therefore, where a start-up is raising finance to fund new economic activity or which is subsequent to its initial round of investment, these subsequent fundraising rounds may not qualify for the relief. This is likely to prove challenging for start-ups that will undoubtedly have fundraising needs more than once in the early part of their lifecycle.

The relief is designed to be compliant with the  the State Aid General Block Exemption Regulation (GBER) which sets out forms of state assistance which are compliant with EU State Aid rules. In a change from the provisions introduced in last year’s Act, the draft legislation provides that details relating to the fundraising company, and the investors claiming relief, are to be provided to the Revenue for the purposes of preparing annual GBER compliance reports. In addition, Revenue may make publicly available information relating to the fundraising company and the amount eligible financing it has received.

In a welcome move, the lifetime limit on gains in respect of which this relief can apply is being increased from €3 million to €10 million. The reduced rate of capital gains tax will only in respect of the disposal of eligible shares that are issued on or before 31 December 2026.

While the intention behind the relief is welcome, there remains a number of issues with the legislation as currently drafted which will, in practice, make it difficult for this relief to be availed of by innovative start-ups and their investors.

The Finance Bill extends the scope of exemption from capital gains tax available on the disposal of certain assets, including certain historic and archaeological property and monuments. A capital gains tax exemption is forwarded covering the disposal of certain assets defined in the Historic and Archaeological Heritage and Miscellaneous Provisions Act 2023 (“the Act of 2023”): specifically, “certain archaeological objects”, “national monuments”, “registered monuments” and “relevant archaeological objects”.

The exemptions will come into effect from the date on which the relevant sections of the Act of 2023 (in which the assets in question are defined) come into operation.

The Finance Bill includes provisions to allow a corporation tax deduction for expenses incurred by a company in connection with its first listing (IPO) on a regulated market or multilateral trading facility in an EEA state.

The tax deduction is available in the year of listing and includes listing expenses incurred both in that year and the three preceding years (or the period for which the company has been trading / has been an investment company if less than three years). The overall tax deduction is capped at €1 million.  

The relief will be available to investment companies as an expense of management, or to trading companies as a trading deduction. The relief will be available for companies whose shares are admitted to an eligible exchange between 1 January 2025 and 31 December 2029. While this relief is a welcome introduction which should encourage companies to access capital markets, we would like to have seen further measures introduced to support and maintain the attractiveness of Irish equity capital markets. 

The Finance Bill includes two updates in respect of Ireland’s network of Double Tax Agreements (DTAs). Firstly, the Bill adds the Sultanate of Oman to the list of countries with which Ireland has agreed DTAs. Secondly, the Bill puts forward an update to Ireland’s existing DTA with Jersey (covering the exchange of information) reflecting changes made to that agreement to ensure it is BEPS compliant. These changes will come into effect once the Bill is passed, completing the legislative and ratification process needed to grant these agreements the force of law.

Accelerated capital allowances at a rate of 100% of qualifying expenditure on the provision of gas or hydrogen-powered commercial vehicles and/or their refuelling equipment may currently be claimed where the expenditure is incurred for trading purposes.

The Finance Bill proposes to extend the relief for expenditure incurred up to 31 December 2025 to allow the Department of Transport time to review the climate policy objectives underlying the scheme and to determine its future trajectory.

The Bill amends the emissions-based capital allowances regime for expenditure incurred on motor vehicles used for business purposes. The current CO2 emissions thresholds which determine the amount of expenditure on business cars that can qualify for tax relief will be adjusted downwards. This provision will apply to expenditure incurred from 1 January 2027 except in cases where a contract for the hire of a car is entered into, and the first payment under that contract is made, prior to that date.

The Bill provides that the current two-year waiting period for eligibility to qualify as an approved charity will be removed. In addition, where a charity has merged or restructured into another entity, the condition that the predecessor entity must have been approved for two years will no longer apply.

The Bill provides that the exemptions from income tax which apply to certain income arising to charities will be amended so that a charity may benefit from the income tax exemption only where it applies the income to charitable purposes by the end of the fifth year after the year in which the income is received. It also provides that a charity may obtain an extension to this period provided it can satisfy the Revenue Commissioners that it is in the process of applying the funds for charitable purposes.

The Bill provides for a new income tax / corporation tax exemption for certain National Governing Bodies (NGB) for sporting organisations for income which is applied to qualifying projects within a period of ten years from when the income is received. The list of qualifying projects includes capital projects on sporting facilities, measures to support elite athletes, payment of interest on monies borrowed for capital projects, purchasing of sports equipment and measures to support the participation by women and people with disabilities in sport. The relief only applies to an approved sporting body which is recognised by Sport Ireland as a NGB with a “Type C” Code of Governance, and which has a tax clearance certificate. In addition, DIRT will be refundable for deposits held by the NGB, where DIRT has been paid in respect of those deposits under this measure.

The Bill introduces an amendment to the existing scheme of tax relief for donations to “approved sports bodies” for the funding of certain capital projects. The change means that individuals can elect to either to take a deduction for a relevant donation (which must be at least €250 in a year of assessment) against their total income, or to allow the approved sports body to claim the relief associated with the donation.

The Bill also provides for a new scheme of tax relief for donations to certain NGBs where the donations are used to fund projects to purchase certain sporting equipment, to support elite athletes in competitive sport, and to support the participation of women and people with disabilities in sport.

The relief will operate in the same way as the scheme of tax relief for donations to “approved sports bodies” for funding capital projects. Individuals can elect to either to take a deduction for a relevant donation (which must be at least €250 in a year of assessment) against their total income, or to allow the NBG to claim the relief associated with the donation to the NGB. Where the donation is made by a company, relief is available to the company making the donation. 

Individuals who make qualifying investments in corporate trading companies can claim relief from income tax on the amount invested under three different incentives (subject to certain limits):

• Employment Investment Incentive (EII) which provides for tax relief of up to 40% of the investment made in certain companies up to certain limits each tax year;
• Start-Up Relief for Entrepreneurs (SURE) which provides tax relief to entrepreneurs who leave an employment to set up their own company; and
• Start-Up Capital Investment (SCI) which is a tax relief for family members who invest in early-stage micro companies founded by their relative(s).

A number of amendments were made to the complex law which provides for these reliefs. Some of the more substantive amendments include the following:

• Relief under the EII, SURE and SCI regimes will be extended for a further two years to apply in respect of eligible shares issued on or before 31 December 2026.
• For shares issued since 1 January 2024, the proportion of the investment that will qualify for relief is 87.5% where the investment is an initial risk finance investment or a follow-on investment and where each member of the relevant Relief for Investment in Corporate Trades (RICT) Group has been in any market for less than the seven or 10 year eligibility periods that apply (i.e. 10 years post-incorporation or seven years post commercial sales).
• In all other follow-on risk finance investments, the proportion of the investment that will qualify for relief is 50%.
• The purpose of these amendments is to bring the rules in line with the maximum tax relief thresholds provided for in the General Block Exemption Regulation (GBER).
• The maximum qualifying investment on which an investor can claim relief under the EII will be increased from €500,000 to €1 million in a year of assessment from 1 January 2025.
• The employment related conditions which must be met by companies to avoid a clawback of 10/40ths of the relief for investors in the company under EII will be amended in respect of shares issued on or after 1 January 2025.
• The SURE provisions will be amended to provide for an increase in the maximum investment amount on which an investor can claim relief in a year of assessment from €100,000 to €140,000, and to align it with the GBER rules by providing that the relief available may not exceed the maximum tax relief thresholds as provided for in GBER.