Finance Bill 2009 - A Flavour of the Amendments
23rd July 2009
The increase in the Income Levy and the doubling of the Health Levy are by far the amendments with widest impact in Finance Bill 2009. The abolition of mortgage interest relief for individuals with mortgages for more than seven years will further reduce the finances of most households in Ireland from 1st May 2009.
So is it all doom and gloom you may well ask, Finance Bill 2009 did introduce some positive measures such as a relief for the Exchange of Houses, Intangible Assets and an extension to the Mid-Shannon Tourism Infrastructure Scheme.
The Finance Bill was enacted on 3rd June 2009, however the act has yet to be released. No changes are expected in the Act.
- Income Levy: From 1st May 2009 the Income Levy rates have been increased to 2% (on first €75,036), 4% (on €75,036 to €174,980) and 6% (on the excess over €174,980). Previously the rates were 1% (on first €100,100) and 2% (on the excess over €100,100). The exemption threshold for the income levy has also been decreased from €18,304 to €15,028 per annum.
- Health Levy: From 1st May 2009 the Health Levy has increased from 2% (on first €100,100) and 2.5% (on the excess over €100,100) to 4% (on the first €75,036) and 5% (on the excess over €75,036) respectively. Therefore not only have the rates increased but the entry level for the higher rate has also been decreased thereby significantly increasing the tax take for high earners.
- Mortgage Interest Relief: From 1st May 2009 mortgage interest relief will only be available for mortgages for seven years from the date the mortgage was first taken out.
- Rented Residential Property: Mortgage interest relief for rented residential properties has been curtailed to 75% from 1st May 2009. This measure will apply to both new and existing mortgages.
- Residential Development Land: The 20% special rate of tax which applied to trading profits from dealing in or development of residential development land has been abolished. For accounting periods ending on or after 1st January 2009 the profits will be subject to tax at the individual’s marginal rate of tax or in the case of a company at a rate of 25%.
- DIRT: The rate of retention tax on deposit interest has seen a further increase to 25%. The rate applicable to life assurance products has increased to 28%. The increased rates will apply on or after 8th April 2009.
- Capital Allowances: Capital allowance schemes for private hospitals and nursing homes have been terminated. However schemes for palliative care units and childcare facilities are still in force. The Mid-Shannon Tourism Infrastructure Scheme has been extended to 31st May 2013 and the 31st May 2009 deadline for submissions of applications has been extended to 31st May 2010.
- Intangible Assets: This scheme provides for capital allowances on capital expenditure incurred by companies after 7th May 2009 on the provision of intangible assets (goodwill, patents, trade marks, copyright, know-how) for the purposes of a trade.
- Motor VAT Scheme: In the Mini Budget 2009, the Minister announced a new VAT margin scheme to apply to second-hand cars. Following consultation with the Motor Industry this scheme has been scrapped.
- Participation Exemption: The exemption from Capital Gains Tax applicable to Irish Resident Companies disposing of shares in other companies will no longer be available where the value of the shares is derived from exploration activities.
- Exchange of Houses: Where a second-hand house is transferred in exchange for a new house, the stamp duty payable on the second-hand house will not be due until the earlier of the subsequent sale of the second-hand house or 31st December 2010.
Capital Gains Tax
- The rate of capital gains tax has been increased from 22% to 25% on all disposals made on or after 8th April 2009.
Capital Acquisitions Tax
- The rate of capital acquisitions tax has been increased from 22% to 25% on all gifts or inheritances made on or after 8th April 2009.
- The CAT thresholds have been reduced to €434,000 (Group A – Parent to Child), €43,400 (Group B – Between Related Persons) and €21,700 (Group C – Unrelated Persons). These thresholds will apply from 8th April 2009.
Revenue Interest Rates
- Interest on Overdue Tax: The statutory rate of interest applied by Revenue has been reduced to a daily rate of 0.0219% (All taxes except for VAT and PAYE) and a daily rate of 0.0274% (VAT and PAYE). These rates will apply from 1st July 2009.
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