Executive summary

On 9 October 2018, Ireland's Minister for Finance and Public Expenditure and Reform (the Minister) announced Budget 2019.

In his introductory comments the Minister noted:

• Ireland's public finances are balanced
• Employment numbers are at an all-time high
• Budgetary policy will continue to focus on further developing the underlying strength and resilience of the economy
• Significant additional capital investment is being provided to enhance growth potential
• Ireland will continue with a broad stable tax base in the context of increasing trade barriers, changes in the international tax landscape and preparing for Brexit

Detailed discussion

Corporation tax revenue

Ireland is projecting strong growth in corporation tax revenues in 2018.

A proportion of that growth has been identified as a one-off related to the changes in international accounting standards associated with revenue recognition (IFRS 15).

Year on year corporation tax revenues for 2019 are projected to fall marginally as a result.

12.5% corporation tax rate

The Minister has reiterated that Ireland's longstanding 12.5% rate will not change.

This repeats consistent statements by the Government on Ireland's tax rate policy.

CFC rules

In his speech, the Minister confirmed that the introduction of Controlled Foreign Company (CFC) rules, as required by the European Union Anti-Tax Avoidance Directive (ATAD) will be effective for accounting periods beginning on or after 1 January, 2019.

This will be a welcome clarification for multinational companies (MNCs) with non-calendar financial year ends.

It is interesting to note that the projected exchequer yield from CFC is nil.

Detailed CFC provisions will be introduced in the Finance Bill which is due to be published on 18 October. A further update will be provided following publication of those provisions.

ATAD exit charge

The Minister has also announced that Ireland is introducing a new ATAD-compliant exit charge effective from 10 October. Early introduction of this measure is designed to provide certainty to businesses currently located in Ireland and considering investing in Ireland in the future.

The exit tax will apply where a company migrates tax residence offshore of Ireland and to certain other offshore asset transfers.

The exit tax will apply at a rate of 12.5%.

A detailed tax alert will be issued on the ATAD exit charge.

Transfer pricing review

As signaled in the recent publication of Ireland's Corporation Tax Roadmap,¹ a consultation on updating Ireland's transfer pricing provisions will be launched in 2019.

Any proposed legislative amendments are expected to be brought forward in approximately 12 months' time.

Accelerated tax depreciation for employer-provided fitness and childcare facilities

This measure will allow accelerated tax depreciation on qualifying expenditure for this cost from 1 January 2019.

Film corporation tax credit

This regime is being extended to 2024. It was scheduled to expire at the end of 2020.

This scheme provides relief in the form of a corporation tax credit related to the cost of production of certain films. Currently a 32% credit is available on qualifying expenditure capped at €70m. Some other enhancements are also being introduced.

Employment

The employer's social security contribution is to increase by 0.1% in each of 2019 and 2020.

A series of changes were announced which reduce the tax burden on workers particularly those on lower and middle incomes.

The hourly minimum wage will be increased to €9.80 from 1 January 2019 with related changes to employer social security to ensure there is no consequential incentive to reduce working hours for a full-time minimum wage worker.

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ENDNOTE

¹ See EY Global Tax Alert, Irish Corporation Tax Roadmap – Implications for US MNCs, dated 6 September 2018.

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CONTACTS

For additional information with respect to this Alert, please contact the following:

Ernst & Young (Ireland), Dublin

• Joe Bollard
  joe.bollard@ie.ey.com
• Dan McSwiney
  dan.mcswiney@ie.ey.com
• Kevin McLoughlin
  kevin.mcloughlin@ie.ey.com

Ernst & Young (Ireland), Cork

• Frank O'Neill
  frank.oneill@ie.ey.com

Ernst & Young (Ireland), Limerick

• John Heffernan
  john.heffernan@ie.ey.com

Ernst & Young (Ireland), Waterford

• Paul Fleming
  paul.fleming@ie.ey.com

Ernst & Young (Ireland), Galway

• Paraic Waters
  paraic.waters@ie.ey.com

Ernst & Young LLP, Irish Tax Desk, New York

• Deirdre Fenton
  deirdre.fenton1@ey.com

Ernst & Young LLP, Irish Tax Desk, San Jose

• Karl Doyle
  karl.doyle@ey.com

Ernst & Young LLP, FSO Irish Tax Desk, New York

• Siobhan Dillon
  siobhan.dillon1@ey.com

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ATTACHMENT

PDF version of Tax Alert 2018-2001