The Minister for Finance Charlie McCreevy delivered his budget speech on 2nd December, 1998. The more important measures relevant to the business community to be introduced in the Finance Act early next year include:
Corporation tax
1. Rate of Tax
Following last years confirmation that the rate of Corporation Tax would be reduced to 12.5% from the year 2003 it has now been confirmed that the standard rate for trading income will be reduced by 4% per annum for the years 2000 to 2002 and by 3.5% for 2003. The rate in effect from 1st January 1999 will be 28%. Non trading income will be taxed at 25% from the year 2000.
The current initial rate of corporation tax of 25% will now apply for the first £100,000 of taxable profits whereas it previously only applied to the first £50,000.
2. Dividend withholding tax
A withholding tax at the standard rate of income tax (currently 24%) will apply to all dividend payments made after 6th April 1999 by an Irish resident company except where the shareholder receiving the dividend or distribution is:
3. Surcharge on closely held companies
It was also announced that the Government is examining extending the current surcharge on certain undistributed trading income of closely held companies as an anti-avoidance measure in conjunction with the reduction of the corporation tax rate.
4. Irish registered non resident companies
It should also be noted that the Minister for Finance also stated that both the company law and taxation position of Irish registered non resident companies is to be altered in forthcoming legislation.
5. Save as you earn share scheme
A new incentive to encourage employee share participation is being introduced which will grant tax relief to employees who save for a fixed period to purchase shares in their employer company on favourable terms.
Income Tax
In what was described as a move to a fairer basis of income taxation, the first phase of a transition to a tax credit system in lieu of the traditional tax allowance system will come into effect from 6th April, 1999.
This article was intended to provide general guidelines. Specialist advice should be sought about specific facts.
Corporation tax
1. Rate of Tax
Following last years confirmation that the rate of Corporation Tax would be reduced to 12.5% from the year 2003 it has now been confirmed that the standard rate for trading income will be reduced by 4% per annum for the years 2000 to 2002 and by 3.5% for 2003. The rate in effect from 1st January 1999 will be 28%. Non trading income will be taxed at 25% from the year 2000.
The current initial rate of corporation tax of 25% will now apply for the first £100,000 of taxable profits whereas it previously only applied to the first £50,000.
2. Dividend withholding tax
A withholding tax at the standard rate of income tax (currently 24%) will apply to all dividend payments made after 6th April 1999 by an Irish resident company except where the shareholder receiving the dividend or distribution is:
- An Irish resident company
- An Irish resident pension fund or charity
- An individual or company resident for tax purposes in an EU state or state with which Ireland has a double tax treaty or
- A company resident in a non treaty country outside the EU which is ultimately controlled by shareholders resident in any EU state or a treaty country.
3. Surcharge on closely held companies
It was also announced that the Government is examining extending the current surcharge on certain undistributed trading income of closely held companies as an anti-avoidance measure in conjunction with the reduction of the corporation tax rate.
4. Irish registered non resident companies
It should also be noted that the Minister for Finance also stated that both the company law and taxation position of Irish registered non resident companies is to be altered in forthcoming legislation.
5. Save as you earn share scheme
A new incentive to encourage employee share participation is being introduced which will grant tax relief to employees who save for a fixed period to purchase shares in their employer company on favourable terms.
Income Tax
In what was described as a move to a fairer basis of income taxation, the first phase of a transition to a tax credit system in lieu of the traditional tax allowance system will come into effect from 6th April, 1999.
This article was intended to provide general guidelines. Specialist advice should be sought about specific facts.
