Budget 2010

October 2008

April 2009

December 2009

Budget Strategy -Objective -Rebuild Nations Self Confidence -Restore International Reputation -How -Bold – Decisive – Innovative Steps -Conclusion -Worst is Over -Return to Growth in 6 – 9 Months

€4 Billion Question ?

Signalled Changes Taxation of child benefitX Introduction of carbon tax Introduction of property tax2010 Review taxation exempt income / reliefs CAT/CGT Business Reliefs X Pension Contributions / Lump Sums? Reduce VAT/Excise Car Scrappage

Personal Tax

Income Tax Rates No Changes Reminder –Income Tax –PRSI – Health Levy – Income Levy

Simplify and Reform Tax System -Reform and Fairness -Social Contribution -Low Rate -Broad Base -Income Tax -Progressive Rates -2011

Employee >€75k€75k-€175k€175k+ Income Tax PRSI4-- Health Levy455 Income Levy246 51%50%52% IT, PRSI, Health Levy & Income Levy

Self-Employed >€75k€75k-€175k€175k+ IT PRSI333 Health Levy 455 Income Levy246 50%53%55% IT, PRSI, Health Levy & Income Levy

International Comparisons: Overall marginal tax rates for employees on €80,000

Why No Tax Increase? -Reached Limit of Taxation -Heaviest Burden on Higher Earners -Income Levy : Gross -High Earners Cap

High Earners Cap -Introduced Restricted Specified Reliefs -Aim - Effective Rate 20%

How It Worked % Effective Rate -Restricted Relief to Higher of: -€250,000 OR -50% of Income Now 30% Effective Rate -Entry Point €125,000 -Full Restriction if Income > €400,000 -Finance Bill Clarification

€’000€;000 Income Specified Reliefs Allowed Restricted Taxable % Effective Rate %30% High Earners Cap - Example

Tax Exiles

New Irish Domicile Levy -Non Resident Domiciled Individuals -Worldwide Income > €1m -Irish Located Capital > €5m -Annual Levy €200,000 -Details in Finance Bill

Mortgage Interest Relief Budget 2009 –Relief to cease for loans over 7 years Interest Relief now until 2017 – Home Owners in Negative Equity –New Loans before 1/7/2011 –Loans from 1/7/2011 to 31/12/2012 (Restricted)

Residential Rental Property Reminder – current position Tax deduction for interest reduced to 75%

Investments/Savings Existing 25%/28% Tax New National Savings Product –National Solidarity Bond –5/7 Years –2010 –Details to be announced

Pension -Overhaul Imminent -No Immediate Change -Frame Work Policy to Review -Likely Outcome -Max Tax Tree Lump Sum €200k -Excess Taxable? -SSIA Type Scheme -No Tax Relief

Child Benefits Children’s Allowance – 10% cut to allowance – Future Taxation / Means Test ? Incentive in 2009 –Preschool – Free Year –Effective 1/1/10

Business Taxation Ireland Inc

Business Taxation Corporation Tax –12.5% tax rate unchanged – International Brand Employers –Employers PRSI unchanged (8.5 – 10 ¾ %) –Employer Job Incentive Scheme –Details to be announced

New Company Set Up Introduced 2009 Profits < €320k per annum 3 Year Period Extended set up’s in 2010.

Smart Economy Irish Economic Focus Research & Development tax credits –Qualifying R & D –25% cash refund Intellectual Property Awaiting Innovation Taskforce Report

Support Motor Industry Car Scrappage Scheme – Car over 10 years old – €1,500 off VRT – Emissions band A or B Environmentally Friendly – Extension of VRT Relief to 2012 VAT Margin Scheme

Supporting Retail Sector VAT Rate – Reduced from 21 ½% to 21% from 1/1/10 Excise Reduction on Alcohol

Supporting Agriculture Waste Management Capital Allowances –No Income Levy Forestry & Bio Energy

Supporting Other Industries Construction –Retrofit Tourism –Railway Scheme Other – Energy Efficient – Extends to Catering/Hospitality

Supporting Financial Services Incentives to develop International Funds Industry Hub Changes expected in Finance Bill

Incentives to Protect Employment Training Fund Food Industry Employment Job Incentive Scheme

Employment Subsidy Scheme Enterprise stabilisation fund –Assist Irish export companies in difficulty Second round now open –Eligibility extended Non Export –Minimum of 10 full time employees –Jobs at risk / Commit to retain jobs –Tight Deadline/ Immediate Application

Getting Credit Flowing Review Committee NAMA – External Review Process Review Banking Policies – Particular Focus on Retail, Car, Tourism & Agriculture

New and Other Taxes

Carbon Tax €15 per Tonne on Fossil Fuels Effective Midnight 9/12/2009 – Petrol3.5% Increase – Diesel4.6% Increase Effective 1/5/2010 –Home Heating …. 8.7% Commencement Order –Coal & Briquettes

Other Taxes Site Valuation Tax –Residential Property –Establishing Ownership Register –Valuation Database Water Charges –Based on Usage

Capital Gains Tax (CGT) & Capital Acquisitions Tax (“CAT”) No changes currently Rate 25% Finance Bill?

Stamp Duty No changes currently

Anti Avoidance Clearly Signalled Tax Avoidance Schemes Strengthening Revenue Power

Conclusion

Tax Planning in the Current Environment

Current Environment Existing Legislation Finance Bill / Finance Act Maximise available remaining tax reliefs –Secure tax savings –Improve cashflow Window of Opportunity

Cashflow Saving Tax Tips Preliminary Tax –If profits decreasing – base on current year Move to a cash receipts basis for VAT Review direct debits for PAYE / VAT Directors loan v Salary Use of a Redundancy Rebate

Losses Ability to Use Losses Losses arising –Land write downs / restricted –Capital allowances claims – obsolete assets –Stock / Bad Debt provisions –Inter group loans – write off / down Use –Carried back to prior year (company) –Offset against other Income (Personal)

Tax Based Funding/Reliefs Pensions Seed Capital Relief –Start ups –Tax relief on investments up to €600k –Set against Income Tax bill in prior 6 years –Refund of income tax Business Expansion Scheme –Tax relief of €150,000 pa for individuals –Qualifying company can secure €2m –Lack of other tax incentives for individuals

Opportunities with Reduction in Asset Values Take assets out of company Re-organise company structure Transfer assets to children

Opportunities for Family Businesses / Companies Low valuations – opportunity to transfer CAT threshold for children €434k Significant tax reliefs remain at present Retirement Relief: extract €1.5m cash tax free (if husband & wife qualify) Commission on Taxation Report

Company Pension Schemes Significant pension fund contribution –Based on age, years of work and salary 25% tax free lump-sum Changes Signalled

Conclusion Economy Worst is Over? Tax Watch this Space