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  General

Budget 2022

Yesterday, Tuesday 12 October 2021, Minister for Finance Paschal Donohoe and Minister for Public Expenditure Michael McGrath announced Budget 2022, the first budget speech for two years.  There were some stark figures announced in the early parts of Mr Donohoe’s speech, including the €17.25bn spent on Covid supports, the €240bn of debt forecast for next year and current inflation of 3.7% in September 2021 being the highest since June 2008.  However, there was positivity highlighted in the recent exchequer performances, in particular VAT and income tax receipts, and this allowed the Ministers to announce a budget package of €4.7bn split between €4.2bn worth of spend and €0.5bn of tax measures.  We have set out below some of the key tax measures announced in the budget speech. The draft Finance Bill will be published later this month which will provide more detail on each of these measures.  

Personal Tax

Every worker will benefit from the income tax measures introduced, and these were marginal amendments primarily to account for inflation and the increase to the minimum wage from €10.20 to €10.50 per hour. The main impact on personal tax is as follows:
  • The income tax standard rate band has been increased by €1,500. The entry point to the 40% income tax rate now increases to €36,800 for single individuals and €45,800 for married couples (with one earner).
  • The PAYE credit, personal tax credit and earned income credit will all increase by €50 to €1,700 from the tax year 2022 onwards.
  • The ceiling of the 2% USC rate will be increased from €20,687 to €21,295 to ensure it remains the highest rate of USC paid by full-time minimum wage workers. The threshold for the highest rate of Employer PRSI will also increase by €12 to account for the increase to the minimum wage.
  • The income tax deduction in respect of light and heat expenses incurred by employees working from home has been increased from 10% to 30%.
In general, the changes to income tax rates will save a single middle-income earner €415 per annum. 

Corporate Tax

The announcement of the new 15% corporation tax rate for large multinationals last week led to the first budget for many years, where a commitment to our 12.5% corporation tax rate was not reinforced. However, our 12.5% corporation tax rate will be retained for groups with a turnover of less than €750m, so it will still be the prevailing rate for SMEs. International influence on our corporation tax code was also seen in the announcement of the introduction of the interest limitation rules, which are adopting the ATAD measures from the OECD BEPs programme. These measures will seek to cap interest deductions at 30% of EBITDA. However, there will be exemptions, including where the interest deductions are less than €3m and certain financial institutes. Another measure of the ATAD programme is the anti-reverse hybrid rules which are also being adopted by Ireland from 1 January 2022. These rules are aimed at preventing transparent entities from avoiding tax when controlled outside of Ireland in jurisdictions where the income will not be subject to tax.  Outside of the international changes, there were no significant changes to the corporation tax code. There had been anticipation of changes to both transfer pricing and the R&D tax credit regime, which are both awaiting ministerial orders from prior year announcements. There may be more focus on these items in the finance bill.  A new tax credit has been announced for the digital gaming industry, presumably to drive growth in this area within Ireland. The credit will be calculated at 32% of eligible expenditure from a minimum spend of €100k to a max spend of €25m in relation to the design, production or testing of a game. In respect of new companies, the corporation tax start-up relief has been extended to the end of 2026 and will now be available for the first five years of trading instead of the first three years. It was also announced that there would be a 3-year extension to the Employment Investment Incentive Scheme (“EIIS”) and some legislative amendments to make it more accessible. 

Covid Supports

One key talking point for tax practitioners in advance of the budget was around the current position, which does not entitle a proprietary director a tax credit for PAYE withheld on their employment income where the company paying their wage is availing of debt warehousing. However, it was announced that debt warehousing is now being extended to income tax liabilities for those proprietary directors caught in this position to combat such situations.  It was welcome news that there would be no cliff edge to the Employee Wage Subsidy Scheme (“EWSS”). The EWSS is to be extended to 30 April 2022 but will be changed gradually between now and then to phase it out. There will be no change to the scheme for October and November. For December, January and February, there will be two rates of €151.50 and €203, while for March and April 2022, there will be a flat rate subsidy of €100. From 1 January 2022, no new applicants can apply for the scheme. The hospitality and tourism sector will welcome the announcement that the 9% VAT has been extended to 31 August 2022 for their industry.

Property

Much of the noise from opposition benches arose during the announcement of measures on property and housing. There was no inclusion of any form of a vacant home tax which had been raised in some pre-budget discussions and commentary. Instead, a new Zoned Land Tax will be introduced, which will be calculated as 3% of the market value of certain land suitable for residential units. This tax will have a two-to-three-year lead-in time and will replace the vacant site levy once brought into force.  The Help-to-Buy scheme has been extended to 31 December 2022 but will be reviewed during the year while relief for some specific pre-letting expenses incurred by landlords to be continued for a further three years to the end of 2024.

Indirect Taxes and Green Measures

Despite the pressures of climate change and having the Green Party as a coalition member, Budget 2022 was not as green-focused as some commentators may have predicted. Some of the measures for a Greener economy are set out below:
  • Carbon tax was increased by €7.50/tonne of CO2 from midnight for auto fuels and from 1 May 22 for other fuels. 
  • It was announced that the VRT rates will be increased from 1 January 2022, with a new rate table being brought into force.  
  • Tax relief was offered for income generated from selling self-generated electricity back to the grid. 
  • VRT relief on battery electric vehicles to be extended to the end of 2023. 
  • The Accelerated Capital Allowance Scheme for Energy Efficient Equipment has been extended for another three years to 31 December 2026. However, equipment operated by fossil fuels is no longer applicable for the scheme. Hydrogen-powered vehicles have now been included in the list of equipment that qualifies for the ACA scheme.
  • Smokers see an extra 50cent on a packet of 20 cigarettes. 
There was some good news for the farming industry, with Stamp Duty relief for Young Trained Farmers being extended to 31 December 2022 and stock relief to be extended to the end of 2024.

Summary

As has become normal practice, much of the headline items had already been leaked in advance of the budget announcement. Despite the commitment to continue the EWSS until Spring, there may rightly be some disappointment among both entrepreneurs and SMEs that there is not a greater focus on assisting them with any further tax incentives. However, given the backdrop of Covid and Brexit, it is a difficult period to control the finances, as some of the figures highlighted in our introduction suggest. We would hope the Covid supports and measures introduced can allow businesses to emerge from this difficult period, and perhaps future budgets can provide some much-needed tax incentives to our domestic SMEs and entrepreneurs. If you require expert assistance on this matter, please contact our Tax Partner, Brendan Murphy on brendan.murphy@robertsnathan.com or feel free to call on +353 (0) 87 9752896.
October 13, 2021
  Taxation

Artists Exemption (Income Tax and VAT Implications)

Background - Income Tax Income earned by writers, composers, visual artists and sculptors from the publication, production or sale of their works is exempt from income tax in Ireland in certain circumstances. For the year 2015 and subsequent years the maximum amount of income which is exempt is €50,000 per annum. The exemption applies to certain artistic works which are original and creative and generally recognised as having cultural or artistic merit. Earnings derived from such works are exempt from income tax from the year in which the application was made. The exemption does not apply to PRSI and USC. In addition to income from the sale of works, the following payments also qualify as exempt income, subject to the overall maximum relief figure: 
  • Arts Council Bursaries when paid directly to individuals by the Arts Council. 
  • Residencies when paid directly to the individual by the Arts Council for the purposes of producing a qualifying work. (Income from residencies which relate to teaching art or facilitating other individuals to create works of art or similar type practices do not qualify for exemption.) 
  • Cnuas payments under the Aosdana Scheme.
  • Payments from the sale of qualifying works abroad, which fall within the guidelines. 
  • Advance royalties.
Advanced Royalties Where an individual receives advanced royalties, which are attributed to the subsequent publication of a book or other writing, an application must be submitted to Revenue in the tax year in which the royalties are paid, if the advance royalties are to be exempt. Confirmation from the publisher that the book will be published must accompany the application. Where an application is received in the tax year in which the advance royalty is received, but where a determination has not yet been granted, any tax liability arising on the advance royalty must be paid. If a determination is subsequently granted by Revenue, the individual’s tax liability will be reviewed, and any overpayment of tax will be repaid. Advance royalties paid before the year of the application are not exempt. How to Apply for Artists Exemption Writers, composers, visual artists and sculptors seeking Artists Exemption should submit an application form to the Revenue Commissioners together with samples of their work and any supporting documentation in the form of testimonials etc. which they consider appropriate. Practical Application If you receive income greater than €50,000 during the tax year, you will not be taxed on the first €50,000 but USC and PRSI will still apply. Anything over €50,000 will be subject to Income Tax, USC and PRSI.  An analysis will need to be carried out to determine the income that is exempt under the Artists Exemption and income that is not exempt. If you have a mixture of income that is exempt and not exempt, this will need to be separated.  Example; Artists Exempt Income of €40,000 and non-Artist Exempt income of €10,000. The Artists exempt income is exempt from Income Tax but it is still subject to USC and PRSI. The non-Artist Exempt income is subject to tax at the Author’s marginal income tax rate.    Background - VAT Authors are deemed to provide a good if the books are printed and a supply of a service if they are in the form of an e-book.  In cases where the Artist Tax Exemption has been granted it is important to note that this applies to income tax only. The exemption does not extend to VAT.  For example – if an author who was granted an Artist Exemption sells a book, it would not be subject to income tax provided the sales were not greater than €50,000 but it would still be VATable. Sale of books in Ireland The sale of books in Ireland would be considered a sale of a good. Therefore, if an author supplies goods and their sales of books and other printed matter are greater that the goods threshold of €75,000, they must register for VAT in Ireland. The VAT rate applicable to the sale of books in Ireland is zero. Supply of Services in Ireland If an author supplies a service in Ireland e.g. an appearance, talk, interview, reviews etc. and are paid for this service, they will have to register for VAT in Ireland if they reach the service threshold of €37,500. They would be liable to VAT at the standard rate of VAT of 23% on any income earned from the services. VAT on e-books All digitised publications regardless of their VAT rate when printed (e.g. a book liable at zero rate) are treated as a supply of services rather than goods and are classified at the Standard Rate i.e. 23%. Place of Supply for Sales Outside of Ireland If Authors sell work to private customers (B2C) outside of Ireland then they apply VAT as normal until they reach a certain threshold. Each EU country has a different sales threshold. Once the threshold has been reached, VAT is charged in the country to which they sell e.g. France’s threshold is €35,000. Therefore, if the author supplies goods to France and their sales are below €35,000, they can continue to apply Irish VAT as normal but once they reach sales of €35,000 in France, they will be required to register for VAT in France. From July 2021, B2C sellers dispatching their goods from a single country will no longer be required to register for foreign VAT and complete multiple VAT filings in countries where they are selling. Instead, they may opt to simply complete and file a new OSS filing alongside their regular domestic VAT return that will list all their EU sales. The seller then remits the VAT due to their home VAT authority, which then forwards the taxes to the appropriate countries. This effectively removes the distance selling provisions.  If they sell to a VAT registered company (B2B) in another EU state, the supply can be zero rated and Irish VAT does not apply. Any sales made to countries outside of the EU, whether dispatched from Ireland or sold from within the non-EU country, is outside the scope of VAT. This means that there is no need to charge VAT, Irish or other, on any sales made to or taking place outside of the EU. VAT on Royalties VAT on Royalties received from Ireland, is applied at the standard rate of 23%. No Irish VAT applies if the royalties are received from outside Ireland.  Supply of both Goods and Services If an author has income from both the supply of goods and the supply of services (e.g. an appearance), it is important to understand when the author will be required to register for VAT in Ireland. This is because there are two different thresholds in respect of both goods and services. In general, authors whose total turnover from the supply of goods and services does not exceed the goods threshold of €75,000, are not accountable unless they elect to register for VAT. For the provision to apply, at least 90% of that turnover must be derived from the supply of taxable goods. Example 1: If an author has total turnover of €76,000 from the supply of both goods and services, and if €68,400 of those sales were derived from the supply of goods, the author would be required to register for VAT in Ireland. (i.e. €68,400/€76,000 = 90%).  Example 2: If the author had a total turnover of €76,000 and the supply of goods did not exceed €68,400, they would not have to register for VAT, but they can elect to. However, if the services provided reach €37,500, they would have to register for VAT To learn more and to discuss your situation in detail, please contact Brendan Murphy here
https://www.robertsnathan.com/member/brendan-murphy/ or Amy Hartnett 021-4217940 who would both be happy to hear from you.
October 6, 2021
  Audit

Audit Changes For Your Irish Subsidiary

What are the key issues for CEOs and CFOs of UK corporate groups with Irish subsidiaries to consider?

The change

A growing number of UK groups are approaching us around their group and local Audit requirements for their Irish subsidiary companies.  In part this has happened due to recent changes (July this year) where the Institute of Chartered Accountant England and Wales (ICAEW) have decided to revoke their status as a Recognised Accounting body (RAB) in Ireland. This means that for UK member Audit firms of ICAEW they will no longer be registered by them to sign off audits on the Irish companies within their client groups. 

Subsidiary Audit

We work with several Irish and UK based subsidiary companies of large international groups to provide
group and local audit services.  Many of these are household names with subsidiaries that can avail of audits from firms outside of the parent group audit firm and have expert auditor service requirements. Where the local subsidiary is not a significant component within the overall group then Parent / Group Auditors will often be satisfied to have the subsidiary audited by a firm which is not necessarily part of their network, and this is where we come in. We have been engaged recently on a number of these audits where local management have chosen to avail of audit services from firms other than Big4/5 as previously mandated by their group.  We can act as Auditor to companies with group reporting and audit assurance requirements to the group level based on our large firm backgrounds and experience.   We have been involved in multi-national audits to include reporting to the group finance function and group external Auditors.  We speak their ‘language’ and can communicate effectively and efficiently and ensure that all reporting deadlines and obligations are met.

Audit Requirements Ireland - Do I need an audit?

The common initial question we are asked is whether the Irish company can avail of audit exemption due to its size.  This is referred to as the Small company Audit exemption: Small Company Audit Exemption  What must a company do to qualify for the small company exemption? In order for a company to qualify for the small company audit exemption the company must satisfy TWO or more of the following conditions in the current financial year and in the preceding financial year (unless it is its first financial year):
  • Balance sheet total does not exceed €6m 
  • Turnover does not exceed €12m 
  • Number of employees does not exceed 50
Also the company must not come within any of the 18 classes of companies listed in the Fifth Schedule to the 2014 Act (generally financial services / banks and insurance).  More importantly the company’s annual return, to which Financial Statements are attached, must be filed on time for the year in question and the previous year. It is therefore vital to maintain annual return filings in CRO (equivalent to Companies House) to maintain the audit exemption for these smaller companies. However even if the individual subsidiary company qualifies as a small company, where it is part of a group then it must also consider whether it can avail of the small group company audit exemption.  Thus, it is a ‘look through’ position and where the subsidiary forms part of a larger group it may still require to be audited.   Small Group Company Audit Exemption Audit Exemption applies to any group company if the group as a whole qualifies as a Small Group.  The entire group and all its subsidiary undertakings must, taken as a whole, satisfy two of the following 3 conditions in order to claim a Group Company Audit Exemption.  The conditions must be met in the year and also in the preceding year unless it is the holding company’s first financial year):
  • The balance sheet total of holding company and subsidiaries taken as a whole does not exceed €6m net (or €7.2m gross)
  • The amount of turnover of the holding company and subsidiaries taken as a whole does not exceed €12m net (or €14.4m gross)
  • The average number of persons employed by the holding company and its subsidiaries does not exceed 50.
 

Filings and Efficiencies 

With our services;
  • You have a professional and dedicated Audit team with local knowledge and international experience from a contactable team.  
  • We can ensure that the local statutory audit and financial statements of the subsidiaries are completed.  
  • We can also have the local statutory Audit completed efficiently at the same time as group financial reporting and group audit reporting thus saving time and avoiding the need for a return visit or information requests from Auditors later in the year when you are in your normal monthly reporting cycles.
This is an option that many CFOs of subsidiaries and their accounting teams have found to be hugely beneficial and allows for a better long-term relationship with their local Auditors.  

Contact

As we approach the accounting year end for many companies now could be a good time to have a review of your Audit and Advisory needs and whether our specialist subsidiary audit services could work for your company. For a confidential initial brief meeting or discussion, please contact:  Aidan Scollard FCA Partner and Registered Auditor  Roberts Nathan Email aidan.scollard@robertsnathan.com Office + 353 1 876 4550 Mobile +353 86 25 23 026  
October 4, 2021
  Business Advice

The Process To Think Through When Selling Your Business

Selling a business is time consuming, emotive and can be costly if not executed correctly.   As we emerge from the rollercoaster of lockdowns over the last eighteen months, our economy is starting to roar back into life, and as a result, there is an increased interest in SME's across all sectors from both trade and private equity buyers. This, coupled with the availability of both debt and equity funding, makes it an opportune time to consider an exit strategy.  In this article, we explore a range of considerations when selling a business.

Preparation

Preparation is key to achieving the best value. The preparatory phase is when you should engage with your adviser and thoroughly review the business and its value drivers. Ask, 'why would someone want to buy my business" and then focus on this.   Prospective purchasers will demand transparency, so dealing with potential red flags and 'deal breakers' in advance of the buyer due diligence process will help protect value.   Telling your businesses story is essential and understanding how to present its financial information, both historical and forecast, is a crucial element of the process. What is the succession plan? With many owner-managed businesses, the owner is the business. A potential buyer will attribute little value to a company where its driving force (the owner) will be exiting or retiring in a short period after the sale.   Early tax planning protects value. The shareholders should consider the tax implications in advance of the process as time is of the essence where restructuring is required to effect a tax plan. Early key questions to be answered;
  • Is there an opportunity for family members (children and siblings) to be involved in utilising tax reliefs such as business asset relief for capital acquisitions tax purposes? 
  • Is there an option to claim retirement relief or entrepreneur relief for capital gains tax purposes?
  • Is there an option to review the group structure as a holding company can be beneficial when selling all or part of a business?
Perhaps the desired solution is a hybrid approach, providing a portion of the business to the next generation while selling a portion externally to generate some funds personally.  It is crucial to consider the tax considerations above with the overall commercial plan. 

Identify Prospective Purchasers 

Understanding and researching the potential buyers for your business is an essential part of the process.  Every business owner can name several potential buyers, be that a management team or a key competitor.  However, other potential buyers may not appear on a list, may have different strategic reasons for buying and may pay a premium for the business, i.e. new market entrant, acquiring IP, or gaining access to resources (e.g. people).   Keeping the process confidential during these early stages is vital as it may 'spook' potential customers or suppliers or unsettle critical employees. Having an adviser on board will help maintain confidentiality.  

Negotiating The Deal 

Once potential purchasers are identified, they may enter a period of limited due diligence.  Much valuable insight can be gained during this period for the vendor, regarding how the due diligence has conducted the type of queries and questions raised. Having this insight early on will help in the price negotiation phase.    It's not advised to name your price, solicit offers for potential acquirers setting strict deadlines for offers. The seller must maintain control of the process at this stage.  A second round of offers may be required until a preferred bidder is selected, after which they may enter a period of exclusivity to carry out a more detailed assessment of the company.    This selection criteria should not be based on price alone, and factors such as, ability to execute the deal and sources of funding should also be considered.     

Closing The Deal  

Negotiating the transaction documents is the final part of the process and also very important for both buyer and seller protection.   Considerations will need to be given to the deal structure.  Will part of the consideration be based on an 'earn out' from future profits?  Will the owner-manager be required to remain with the business for a period post-sale to help with the handover of relationships and integration?  The sale process is a time consuming and very involved process for the business owner, and often management teams are distracted by the process taking their' eye off the ball' to the detriment of the business.      Getting your advisers involved early in the process will help avoid many of the common pitfalls and ultimately protect the value that in many cases has been built up in the business over many decades.  At Roberts Nathan, we have worked on many buy-side, sell-side and management buy-outs in the recent past, and we have a wealth of experience advising owner-managers through the transaction process.  Please get in touch with us if you would like to understand more, my details are in the link below: 
https://www.robertsnathan.com/member/derek-dervan/
September 9, 2021
  Taxation

Business Succession Planning

Business Succession Planning As many Irish businesses reopen following the lifting of Covid restrictions, the discussion around the succession of the business may be back on the table for many business owners and their families. Obviously tax plays a major role in these discussions and we have touched on some of the key areas of tax to consider in this regard below.  However, a commercial decision also needs to be made around what the future plans for family members are and their desire to be involved in the business. Not all situations result in the next generation being actively involved in the business and sometimes an external sale may be considered as a more appropriate solution for everyone involved.    We will look at business sales to external purchasers in a later article but for now we will focus on the situation where a business will be passed onto the next generation.  The first thing which needs to be considered when passing over a business is the market value that would be attributed to the business or the shares in the company running the business if it has been incorporated. This value will then be used for capital gains tax, capital acquisition tax and stamp duty considerations as outlined below.  Capital Gains Tax Capital gains tax is deemed to arise at market value to the vendor when passing on assets but retirement relief may be available to mitigate the liability in many instances. The thresholds for retirement relief change from the age of 66 therefore, owners are generally encouraged to consider their plans in advance of reaching this milestone. However, the threshold for passing on business assets or shares to your children after 66 is €3m so can still be useful for businesses not valued above this level. In advance of reaching 66 there is no upper cap on value hence for larger businesses the age of 66 is an important timeline in relation to planning.  Should the conditions of retirement relief not be met, entrepreneur relief may still be available to limit the capital gains tax to 10% on the first €1m of consideration.  Capital Acquisitions Tax A child has a tax free lifetime gift limit from their parents of €335,000 currently. However, for many children involved in a business, a relief may be available which reduces the value being received to 10% of the market value. This is referred to as business asset relief and has a number of conditions around ownership and involvement in the business to qualify. Given this reduction and the current lifetime gift limit, this could result in a business valued as high as €3.35m being passed onto a qualifying child free from capital acquisitions tax. For the successor of the business another major advantage of the relief is that they will have a base cost for a future sale of the market value transferred before any relief is applied. This can help significantly reduce their capital gains tax charge on a future sale. 

Interaction of CGT and CAT

There is a requirement in both retirement relief and business asset relief for the assets to be held by the successor for 6 years, otherwise these reliefs may be subject to a clawback. It is also important to note that where both CGT and CAT apply on a transfer, a tax credit may be available for the CGT suffered against the CAT due. This is referred to as same event credit and is only available where the assets are held for two years by the successor from the date of gift.   Stamp Duty A recipient of a gift may suffer stamp duty at market value of the assets. Stamp duty on business assets is generally applied at 7.5% whereas shares in a trading company would be subject to stamp duty at 1%.  Conclusion Where there is a plan to allow a new generation take over a business it is important to consider the tax implications in advance. Retirement relief and business asset relief may result in value passing without a significant tax leakage.  Now may be an opportune time to consider such a transfer. Many businesses which have had limited trade in the past 18 months may have a lower market valuation and it is always a fear that there may be changes to capital taxes in future budgets as the government try to ensure a strong exchequer take given the cost of covid reliefs.  In Roberts Nathan we have experienced teams in both tax advisory and corporate finance advisory to help you with such business decisions. Please use the link to contact Brendan Murphy for any questions on any part of the above:
https://www.robertsnathan.com/member/brendan-murphy/
August 19, 2021
  Taxation

Returning or Relocating to Ireland (Tax Implications)

With the Covid pandemic hopefully nearing an end, we have seen an increased interest in expats looking to return home to Ireland. Perhaps it is the long absence from being home during the last 18 months or the new flexibility around home working for many industries which has led to this. If you are someone returning or relocating to Ireland from abroad, it is important to look at the rules regarding your residency position from a tax perspective and also your employer should consider any employment tax considerations.  We have outlined an overview of the key considerations for anybody in this position below.  Residency and Domicile There are two basic tests of residence in Ireland: 1)The current year test: If you are present in Ireland for 183 days in a calendar year, you will be regarded as Irish tax resident for the year. 2)The two-year test: If you are present in Ireland for 280 days taking the current and preceding calendar years together, you will be regarded as a tax resident in that year. However, if you are present in Ireland for 30 days or less in the second of these years, you will not be regarded as a tax resident in Ireland for that particular tax year, even if you breach the 280 days over both years.  Based on different tax rules in different jurisdictions, individuals arriving in Ireland during the year may be regarded under domestic law as resident in two jurisdictions. If this is the case, the Double Tax Agreement provides a tie breaker test to determine where the individual is regarded as resident. One of the key features of the tie breaker test is where the individual intends to settle and where their permanent home is located. If you are resident in Ireland for 3 consecutive tax years, you will be considered an ordinarily tax resident on the 4th year. Domicile is a concept of general law. A person can only have one domicile at any particular time but cannot be without a domicile. Everyone is born with a domicile of origin, normally the domicile of their father. In most scenarios this does not change but you may have acquired a domicile of choice or domicile of dependence in some situations. Your domicile can have an impact on how you are taxed and is important to examine in detail when moving between countries.  Tax Consequences As mentioned, domicile can have an effect on the tax treatment of resident individuals. An individual who is Irish tax resident and Irish domiciled will be subject to tax on their worldwide income, however, if an individual is Irish tax resident and non-Irish domiciled, they will only be subject to tax on Irish source income and foreign income to the extent it is remitted to Ireland. This can allow individuals to plan around what income they may wish to remit to Ireland.  Employment Income  If an individual relocates to Ireland and is in receipt of employment income, there may be some reliefs available. 
  • Split Year
There is a possibility that split year relief may apply in the year of arrival if certain conditions are met. Split year relief applies where an individual who was not resident in Ireland in the preceding year, arrives with the intention and in such circumstances that he or she will be resident for the following year. The relief allows for employment income before arriving in Ireland to be excluded from the charge to Irish tax (despite the fact that the assignee might be resident in Ireland for the year of arrival). A key advantage of this is that you will still be able to benefit from a full year’s worth of Irish tax credits and tax bands in the year you return, even though you might only be returning halfway through the tax year
  • Special Assignee Relief Programme (SARP) 
SARP relief is available for individuals arriving in Ireland up to 2022. This also includes returning workers who have been outside Ireland for at least five tax years. SARP allows for income tax relief on a portion of income earned by certain employees assigned from abroad to work in Ireland by their relevant employer, or an Irish associated company. An employee who claims SARP is deemed to be a chargeable person for income tax purposes and is therefore required to file an income tax return.  SARP provides for relief from income tax on 30% of the employee’s income between €75,000 (lower threshold) and €1,000,000 (upper threshold).
  • Payroll Obligations
If a foreign employer sends an employee to work in Ireland, they would be required to register for payroll taxes in Ireland. There are special rules regarding whether a foreign company located in a jurisdiction with which Ireland has a Double Tax Agreement would have an Irish payroll obligation which is dependent on the length of time the employee is present. A general overview would be that if an employee is present in Ireland for less than 60 days, there would be no payroll obligation. If the employee is present for a minimum of 60 days and does not exceed 183 days in total, a PAYE registration would be required but a PAYE clearance may be granted by Revenue to ensure no Irish payroll tax arises.  If an employee is present in Ireland for more than 183 days, PAYE should be operated.  However, above is a high level overview and the Double Tax Treaty Ireland has with the country from which the employee is being sent should be examined in each case.  Corporation Tax Considerations If a foreign employer sends an employee to work in Ireland, as well as considering the payroll obligations mentioned above, they would also have to consider whether this employee creates a Permanent Establishment (PE) in Ireland.  A PE is defined as “fixed place of business through which the business of an enterprise is wholly or partly carried on ''. The PE article in the DTA would ensure no PE arises where the duties of the individual in Ireland are auxiliary and preparatory in nature. However, it would be important to investigate whether a PE arises based on the duties of the employee.  If it is determined that a PE arises based on the duties of the employee, the foreign company may have an Irish corporation tax exposure.  Conclusion As we see more people considering moving home to Ireland or being allowed to work from Ireland for a foreign employer, we remind them to consider the tax impact from an early stage. Your tax position should form part of your planning stage when considering such a move.  We have a team of experienced tax advisors in Roberts Nathan who would be happy to discuss your position with you.  Please use the link to contact Brendan Murphy for any questions on any part of the above:
https://www.robertsnathan.com/member/brendan-murphy/
August 10, 2021
  Brexit

Recent Changes in Director Residency Requirements for Irish Companies (BITA Article June 2021)

Brexit continues to cause issues for companies and especially UK based Directors of Irish companies. Roberts Nathan Partner, and Dublin Chair, Aidan Scollard, explains. While the EU and the UK finally reached agreement on a Free Trade and Cooperation Agreement (TCA), avoiding a hard Brexit in late December 2020 there were uncertainties created around the impact on UK resident Directors of Irish registered companies.   As the UK had left the EU and is therefore now regarded as a third country this created a significant impact where there was no other Irish or EEA resident Director on the Irish company board (even if this was a subsidiary of the UK parent company). While there are more than 60,000 Irish Directorships of UK registered companies there are also a significant number of UK based directors of Irish companies.  EEA Resident Director Requirement Companies Registration Office (the Irish equivalent of Companies House) had previously alerted that under Irish company law an Irish registered company must have at least one European Economic Area (EEA) resident Director on the board on an ongoing basis or put a bond in place to cover filing liabilities.  Where an existing Irish company had fulfilled this Director requirement by appointing a UK resident to the Director role up until 31st December 2020 this will no longer qualify.  They should now consider replacing that Director or adding an additional Director who is an EEA-resident unless exempted.  The CRO had initially muted that they would require a B10 for every UK Director stating a change in details from being an EEA resident to being a non-EEA resident but this is now confirmed as only requiring to be declared at the next annual return. The Director requirement is based on residency, not nationality and so, a company Director of Irish nationality who lives in the UK and has done so for a number of years is unlikely to satisfy the EEA requirement in the future.   Companies and their officers must self-assess their compliance with the requirements of company law Options There are a few options available for those companies now:
  • Appoint an EEA resident to your Irish company board
  • Put a bond in place - an insurance policy that CRO approves in replacement of having an EEA resident individual on the board
  • The Exception to the Rule – ‘Real and Continuous link’ -  It is possible for the Directors of an Irish Company who have no EEA-resident Directors to apply to the Irish Revenue Commissioners for a Statement under Section 140 of the Companies Act 2014
How will this be enforced? CRO have now confirmed that where a company has only UK resident directors and requires a bond to be put in place due to the UK no longer being part of the EEA, that a form B10 will be required to be filed noting the change in particulars for the directors and attaching the bond.  The bonds are relatively easy to put in place but will have a premium cost to maintain for the two-year period and we have put these in place for a number of clients recently. Where no such bond is needed (under the exemptions) the company will not require the filing of a form B10 and companies can instead update the classification of the UK Directors from EEA to non-EEA resident Directors on the next filed form B1 annual return.   For most Irish companies the Annual Return Date is at end of September and so companies should now start to plan for these changes.   Final Word Company Directors need to consider the implications on their Irish companies since the UK has left the EU and consider their options.  As with any legal or accounting issue early advice is important as failure to deal with this is a company law offence. Contact us if you wish to discuss the impacts of any of these changes to your company structures here in Ireland or any planning or bond requirements. (aidan.scollard@robertsnathan.com / www.robertsnathan.com). To see the article in full, follow the link: BITA Article June 2021
August 4, 2021
  VAT

Debt Warehousing

Overview Revenue recently issued new guidance surrounding the debt warehousing of VAT, PAYE and Income Tax liabilities arising during a specified period of time and also the recovery of any overpayment of amounts received under the Temporary Wage Subsidy Scheme and Employee Wage Subsidy Scheme. We have set out a summary of the updated guidance below.  Details of the Scheme VAT and PAYE All VAT and PAYE liabilities arising during the pandemic can automatically be warehoused up until 31 December 2021 without the application of interest for businesses dealt with in the Personal and Business Division of Revenue. Businesses dealt with by the Large Corporates and Medium Enterprises Divisions of Revenue would need to apply to Revenue for inclusion in the scheme due to a reduction in trade.  There are 3 distinct periods outlined in the scheme;
  1. Period 1 - COVID-19 restricted trading phase
This period begins since the company first experienced cash flow trading difficulties due to the pandemic. For VAT this can apply as early as 1 January 2020 and for PAYE this can apply as early as 1 February 2020. This period ends on 31 December 2021.  Relevant tax debts incurred during this period can be warehoused. Relevant debts include the VAT and payroll liabilities arising when the business was restricted by the Covid pandemic (i.e. either stopped or significantly reduced).  During this period the interest rate being applied to unpaid liabilities is 0%. 
  • Period 2 – Zero interest period
This period runs from 1 January 2022 to 31 December 2022. During this period, the Interest rate being applied to unpaid liabilities is 0%.
  • Period 3 – Reduced interest period
This period begins in January 2023 and ends when the liabilities are paid. Interest at a rate of 3% is applied during this time.  Anyone availing of the debt warehousing scheme should contact Revenue with a repayment plan for warehoused debt before 31 December 2022. The repayment plan will be mutually agreed between Revenue and the taxpayer.  Returns should continue to be filed during this period. Income Tax Income Tax payments which fell due on 31 October 2020 and those falling due on 31 October 2021, subject to certain criteria, can avail of the debt warehousing scheme. The Income Tax liabilities affected are the 2019 Income Tax year balancing payment, Preliminary Tax and balancing payment for the 2020 Income Tax year and Preliminary Tax for 2021 Income Tax Year.  A declaration must be made to Revenue at the time of filing the return that total income for 2020 and 2021, as applicable, is expected to be at least 25% less than total income for 2019. The Income Tax Warehousing scheme contains 3 distinct periods, as follows;
  • Period 1 - COVID-19 restricted trading phase
This period runs from 31 October 2020 for paper returns or 10 December 2020 returns filed on ROS (in relation to their 2019 income tax returns) until 31 December 2021. This also applies for 2020 income tax returns that are due for filing on 31 October 2021 for paper returns and 17 November 2021 for returns filed on ROS.
  • Period 2 - Zero interest period
This period runs from 1 January 2022 to 31 December 2022. During this period, the Interest rate being applied to unpaid liabilities is 0%.
  • Period 3 - Reduced interest period
This period begins in January 2023 and ends when the liabilities are paid. Interest at a rate of 3% is applied during this time.  Anyone availing of the debt warehousing scheme should contact Revenue with a repayment plan for warehoused debt before 31 December 2022. The repayment plan will be mutually agreed between Revenue and the taxpayer. Income Tax Returns should still be filed before the filing deadlines of 31 October 2021 for paper returns or 17 November 2021 for returns filed on ROS. TWSS and EWSS The TWSS/EWSS warehouse scheme is available to employers who are obliged to refund amounts which are deemed to be overpayments of TWSS/EWSS following a reconciliation process undertaken by Revenue, and who are unable to refund these amounts because of the impact of COVID-19. The warehousing scheme for TWSS and EWSS is the same as the warehousing scheme put in place for PAYE & VAT. One of the most important aspects of the scheme for businesses is to ensure all tax returns are kept up to date while availing of the scheme. It is also important to monitor the interest free period as a payment arrangement would need to be put in place with Revenue in advance of the end of Period 2. Roberts Nathan tax team can help with all compliance requirements and liaising with Revenue while our corporate finance team can assist on cash flow management in order to assist on putting a payment schedule in place.
July 23, 2021
  Brexit

Six Months Since Brexit – Is the Dust Finally Settling?

It’s been over six months since the UK left the EU single market. We now know that many small (and not so small) exporting businesses in the UK have experienced multiple issues that have affected their businesses arising from new customs and vat treatments. Operating an export business in the UK since Brexit has become a lot more challenging. It’s been widely reported that moving part or all of their business activities from Britain to the EU has been successful and that they are “benefitting from abundant skilled labour and the ability to continue to avail of the freedoms of movement of labour and goods within the EU’. As a result of Brexit, additional challenges have come into play for UK businesses to continue their trading activities with their old EU customers. Many owners have experienced severe delays in the shipping of goods into Europe, due to changes in customs and export documentation as a result of being a third country and in addition, resulting higher processing costs to continue supplying their European customers. Several UK clients have restricted their trading initially with their EU customers as their profit margins have diminished or have been reduced significantly or eliminated entirely.  Other UK clients have sought advice from us on the requirement involved in setting up an additional EU location for their business in Ireland, in order to remain within the EU trading block as they had before December 2020 and so effectively ‘turning back the clock’.  In this way they can also avail of deferred Vat accounting on bringing goods into the EU and no potential for double duty costs on moving goods via the UK. Meanwhile other clients have approached us to seek our advice to establish an Irish subsidiary company (of their UK parent company) that allows them to continue to effectively service their European client base by conducting operations from Ireland and remain as an EU trading entity.  The solution remaining inside the single market in this way benefits those businesses with a more extensive client base as it allows the company to transfer goods in bulk, avoiding customs processing costs and delays on individual items that have otherwise resulted in higher costs and lower profit margins and potentially defer the VAT cash flow cost of bringing goods into the EU until ultimately sold on.  The Financial Times did a recent survey which found that of those UK based companies that continue to trade within the EU, over a third of businesses have experienced significant negative impacts on their exports to EU customers. Now that the dust is settling somewhat, if you are an advisor to affected clients, or are a business owner, whose business has been impacted since Brexit, we at Roberts Nathan are here to provide any help and assistance you may require. We have already helped many UK businesses in this evolving situation. If you would like to explore further options around your business, please contact Peter Roberts or Tomas O’Leary in our Cork office or Aidan Scollard in our Dublin office who would be delighted to assist you. Peter Robertspeter.roberts@robertsnathan.com  or Tomas O’Learytomas.oleary@robertsnathan.com Tel: +353214217940 Aidan Scollardaidan.scollard@robertsnathan.com Tel:   +35318764550 +353 86 2523 026  
July 22, 2021
  Taxation

Updates to EWSS scheme

The Revenue Commissioners recently issued new guidelines in relation to the eligibility of EWSS from 1 July 2021. The main change announced by Revenue was extending the turnover reference checks to 12 months rather than a 6 month period. This means that businesses whose trade was severely impacted due to government restrictions in the first half of 2021 can trade at higher levels for the second half of 2021 and still avail of the scheme, subject to meeting the scheme conditions which were already in place.  This adjustment means that a business would be looking at their turnover for the calendar year 2021 in full rather than on a 6 monthly basis. Businesses will need to review their actual monthly turnover for January to June 2021 and projected turnover for the months July to December 2021. The business is expected to experience a 30% reduction in turnover or customer orders due to the pandemic in the period from 1 January to 31 December 2021 compared to 2019 for pay dates on or between 1 July and 31 December 2021.  Therefore, in order to avail of the EWSS, you will need to provide the following;
  1. Actual monthly turnover details for January to December 2019, 
  2. Actual monthly turnover details for Jan to June 2021 and 
  3. Monthly projections for July to December 2021.
In addition to this, you will be required to complete an online Employer Eligibility Review Form (ERF) through ROS on a monthly basis, by the 15th of the following month. The initial ERF for the June period which will be used to assess eligibility for pay dates from 1 July needs to be completed and submitted online between 21 and 30 July 2021. Through ROS, you will need to provide details of actual monthly vat exclusive turnover or customer order values for 2019, together with the same detail for the first six months of 2021. They will also need to provide details of monthly projections for the remainder of 2021. On a rolling basis the projections can be updated monthly for the actual turnover figures and a business will be obliged to stop claiming the EWSS at any point where the expected 2021 turnover will exceed 70% of 2019’s turnover.  Revenue have advised, failure to submit the EWSS Eligibility Review Form that confirms the requisite reduction in turnover of 30% and related declaration will result in suspension of payment of your EWSS claims. Our tax team are available to discuss EWSS eligibility and applications at any stage, please use the link for contact details:  
https://www.robertsnathan.com/member/brendan-murphy/
July 21, 2021