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    Business Tax Update Budget 2024

    Business Tax Update Budget 2024 – Introduction

    In a significant move to support the growth of UK businesses, the latest budget announcement introduced several business tax changes and incentives designed to foster innovation, investment, and economic development.

    Full Expensing Extended to Leased Assets

    In a continuation of the government’s commitment to bolster business investment, the Chancellor confirmed plans to extend the full expensing regime to leased assets.

    While this extension is contingent upon favourable fiscal conditions, the government intends to publish draft legislation soon.

    This expansion aims to bridge the current gap that excludes leased assets from full expensing benefits introduced in the previous Autumn Statement.

    VAT Registration Threshold Increase

    Addressing a long-standing threshold, the Chancellor announced an increase in the VAT registration limit from £85,000 to £90,000 starting from 1 April 2024.

    This adjustment, the first since 2017, aims to alleviate the administrative burden on growing businesses, although the modest increase prompts discussions on its sufficiency after a seven-year freeze.

    Boost for Creative Industries and Cultural Sector

    Aiming to reinforce the UK’s creative and cultural prowess, the budget introduced enhanced tax relief measures for the creative industries.

    Highlights include the introduction of a UK Independent Film Tax Credit and a 5% increase in tax relief for UK visual effects costs under the Audio-Visual Expenditure Credit (AVEC), effective from 1 April 2024 and 1 April 2025, respectively.

    Additionally, the cultural sector will benefit from permanently higher rates of tax reliefs for theatres, orchestras, museums, and galleries to sustain world-class productions.

    Introduction of British ISA

    In a bid to spur investments in UK companies, a new £5,000 tax-free allowance for investment in UK equities was announced.

    This allowance complements existing ISA limits, with a government consultation planned to finalise the details.

    Consultation on New Securities and Capital Exchange System

    The government is exploring the Private Intermittent Securities and Capital Exchange System (PISCES), a novel market designed to facilitate the growth and scaling of private companies.

    The consultation aims to assess the potential of PISCES as a platform for companies to engage in employee share plans and share transfers.

    Expansion of Investment Zones and Freeports

    The budget confirmed the extension of investment zones from five to ten years in Scotland and Wales, aligning with the extension for England announced in the Autumn Statement.

    Investment zones aim to catalyse innovation and growth in knowledge-intensive sectors. Similarly, tax reliefs available in freeport sites will also see an extension from five to ten years.

    Energy Profits Levy Extension

    Aligning with Labour’s tax strategy, the Conservative government announced the extension of the Energy Profits Levy until 31 March 2029.

    This temporary windfall tax on oil and gas companies aims to contribute additional revenue in light of the sector’s substantial profits.

    Business Tax Update Following UK Budget 2024 – Conclusion

    This budget, strategically announced in an election year, primarily targets workers and individuals.

    Although several business tax initiatives were outlined, their implementation largely hinges on future consultations and legislative developments.

    Notably absent were immediate cuts to income tax, which could potentially emerge in the Conservative general election manifesto or the next Autumn Statement.

    The absence of further announcements on tax-advantaged employee share schemes and reforms for Employee Ownership Trusts suggests that these areas may be addressed in the upcoming Tax Administration and Maintenance Day in April.

    For our private client update, please see here.

    Final thoughts

    If you have any queries about this article on Business Tax Update Following UK Budget 2024, or UK tax matters generally, then please get in touch.

    Private client update UK Budget 2024

    Private client update UK Budget 2024 – Introduction

    Wednesday’s budget announcement held few surprises due to prior leaks, but it did bring unexpected changes for private clients, notably a substantial overhaul of the “non-dom” tax regime and a reduction in capital gains tax (CGT) for certain residential property sales.

    Here’s a breakdown of the key points…

    National Insurance Contributions (NICs)

    The government announced a further 2p reduction in the main rates of NICs for employees and the self-employed, starting 6 April 2024.

    This cut, following reductions made in the 2023 Autumn Statement, lowers Class 1 employee NICs from 10% to 8%, and the main rate of Class 4 self-employed NICs to 6%.

    Additionally, the government plans to abolish Class 2 NICs.

    Reforming the “Non-Dom” Tax Regime

    In a move more drastic than anticipated, the Chancellor plans to replace the current “remittance basis” of taxation for non-UK domiciled individuals with an “exemption regime” based on residence from April 2025. U

    Under the new system, non-doms non-tax resident for the last ten years will enjoy a four-year exemption from UK tax on foreign income and gains, after which they’ll be taxed like other UK residents.

    Transitional Arrangements for Non-Doms

    Transitional measures will allow existing non-doms using the remittance basis to rebase the value of capital assets to April 5, 2019, figures.

    They’ll also benefit from a temporary 50% exemption for foreign income taxation in the first year of the new regime and a two-year “temporary repatriation facility” to bring foreign income and gains into the UK at a reduced tax rate.

    Inheritance Tax (IHT)

    Despite speculation, there were no changes to IHT announced.

    The government did mention a move to a residence-based regime for IHT and will consult on the best approach, with no changes expected before 6 April  2025.

    Capital Gains Tax (CGT)

    Unexpectedly, the Chancellor announced a reduction in CGT on residential property sales from 28% to 24% starting April 6, 2024.

    This aims to incentivize the sale of second homes and rental properties, potentially increasing housing availability.

    Property Taxes

    The abolition of both the “furnished holiday lettings” tax regime and the SDLT “multiple dwellings relief” were announced as measures to make the property tax system fairer and more efficient.

    The FHL regime will be removed from April 2025, and the MDR abolition will be effective from June 1, 2024, with certain grandfathering provisions.

    Private client update following UK Budget 2024 – Looking Ahead

    With a general election on the horizon, the focus shifts to the potential response and policies of the Labour party, especially regarding the proposed non-dom tax changes set for April 2025.

    Preparing for possible legislative changes after the election is crucial for those who may be impacted by tax increases.

    Seeking professional advice now can provide clarity and prepare individuals for any future tax changes.

    Final thoughts

    If you have any queries regarding this article on ‘Private client update following UK Budget 2024’, or UK tax matters generally, then please get in touch.

     

    Abolition of SDLT MDR at UK’s Budget 2024

    Abolition of SDLT MDR – Introduction

    In a surprising move, Wednesday’s budget revealed the abolition of the Stamp Duty Land Tax (SDLT) Multiple Dwellings Relief (MDR) effective from 1 June 2024.

    This announcement marks a significant shift in tax policy affecting buyers of residential property in England and Northern Ireland.

    Understanding SDLT MDR

    SDLT MDR offers relief to purchasers acquiring two or more residential dwellings in a single or linked transaction.

    Although the relief’s rules can be complex, especially when combined with the higher rates for additional dwellings (HRAD), its essence lies in allowing tax calculation on the average value of the properties, rather than the total combined value, subject to a minimum 1% tax rate.

    This relief has enabled buyers to significantly save on tax, leveraging lower SDLT rates more effectively.

    Rationale Behind the Abolition

    Following a consultation in November 2021 on SDLT mixed property rules and MDR, the government found that MDR did not significantly influence institutional property investors’ decisions, mainly because most new built-to-rent properties are developed through forward funding, which MDR does not affect.

    The Impact on Property Transactions

    The discontinuation of SDLT MDR introduces changes in how property transactions are taxed.

    For instance, contracts signed before the announcement but completing after 1 June will still benefit from MDR.

    However, future transactions, especially those involving second-hand assets between institutional investors, will see altered tax implications.

    Examples Illustrating the Impact of the Changes

    Buying a Block of Flats

    Consider a transaction where a company sells a block of 50 flats for £10 million.

    With MDR, the tax charge could be reduced by not too far shy of £200k.

    Without MDR, the transaction will revert to the higher tax amount.

    Demolishing Houses for Development

    In another scenario, buying properties to demolish and redevelop would see a shift from a potentially lower tax charge, thanks to MDR, to a significantly higher amount without the relief.

    Implications Beyond England and Northern Ireland

    While SDLT does not apply in Scotland (or Wales), both have equivalent reliefs as their corresponding legislation is largely copied and pasted from England and Northern Ireland.

    Either or both might decide to mirror the abolition in their own rules as a stealthy way of raising revenue. Alternatively, maintaining the difference might promote investment.

    Abolition of SDLT MDR – Conclusion

    The budget’s unexpected announcement to abolish SDLT MDR from June 2024 will be potentially a costly, and stealth, tax rise for those involved in relevant residential property transactions.

    Will the rest of the UK follow suit?

    Final thoughts

    If you have any queries about this article on the Abolition of SDLT MDR, or any UK tax matters in general, then please get in touch

    India’s Finance Act 2023: Royalties and FTS for Non-Residents

    India Finance Act 2023 – Introduction

    In a significant move to adjust its tax framework, the Finance Act 2023 introduced an amendment that impacts non-residents receiving royalty and fees for technical services (FTS) in India.

    Since its inception in 1974, the Income Tax Act 1961 has undergone numerous revisions, with the latest changes set to influence multinational corporations and their operations within India.

    Historical Context and Recent Amendments

    Previously, the tax rate for royalty and FTS received by non-residents was set at 10% (plus applicable surcharge and cess), as outlined in Section 115A of the Act.

    This rate was momentarily increased to 25% in 2013 before being restored to 10% in 2015.

    However, the Finance Act 2023 has now doubled this rate to 20% (plus surcharge and cess), effective from 1 April 2023.

    Implications for Non-Residents

    The increase in the tax rate to 20% presents a significant shift for non-residents deriving income from royalty and FTS in India.

    Given that many tax treaties with countries such as the United Kingdom, Canada, and the United States offer a lower tax rate of 15%, non-residents had previously opted for taxation under Section 115A of the Act due to its beneficial provisions, including specific exemptions from filing tax returns in India under certain conditions.

    With the amendment, non-residents are likely to pivot towards claiming benefits under applicable tax treaties, which, while potentially offering lower tax rates, also necessitate additional compliance measures, including tax registrations in India and filing of income tax returns.

    Get Professional international Tax Advice

    Increased Compliance and Documentation Requirements

    The requirement to file tax returns in India, necessitated by claiming treaty benefits, introduces a new layer of compliance for non-residents.

    This includes the need for obtaining tax registrations and electronically filing Form 10F, a declaration form used by non-residents to claim treaty benefits.

    Although there has been a temporary relief allowing manual submission of Form 10F until 30 September 2023, electronic filing will become mandatory thereafter, adding to the compliance burden for non-residents without a tax registration number.

    Moreover, Indian payers making royalty or FTS payments to non-residents must now ensure that they collect and maintain specific documents from the non-residents to apply the treaty rates of withholding tax.

    These documents include the Tax Residency Certificate, No Permanent Establishment Declaration, and the electronically filed Form 10F.

    Failure to comply with these documentation requirements may result in withholding tax being applied at the higher domestic rate, along with potential penalties for the Indian payer.

    Potential Impact on Indian Payers

    The amendment could also have financial implications for Indian payers, especially in cases where royalty or FTS payments are grossed-up to cover the tax liability of the non-resident recipient.

    The increased tax rate may lead to higher cash outflows for Indian payers, emphasizing the importance of efficient tax planning and compliance.

    India Finance Act 2023 – Conclusion

    The Finance Act 2023’s decision to double the tax rate on royalty and FTS for non-residents marks an important change in India’s tax regime, aiming to align with global taxation practices.

    While this may increase the tax burden and compliance requirements for non-residents, leveraging tax treaty benefits could mitigate some of these challenges.

    Final thoughts

    As India continues to refine its tax laws, it is crucial for non-residents and Indian payers alike to stay informed and compliant with the evolving legal landscape.

    If you have any thoughts on this article then please get in touch.

    Angola amends VAT System: Reintroduces the Special CEOC

    Angola amends VAT System – Introductions

    Angola’s legislative body has taken significant steps to refine its tax framework, enacting Law no. 14/23 on 28 December, which revises the VAT Code, and Law no. 15/23, reintroducing the Special Contribution for Foreign Exchange Operations (CEOC).

    These measures aim to optimize the VAT system, making it more adaptable, efficient, and equitable for both taxpayers and the Tax Administration, while also addressing specific foreign exchange transactions.

    Key VAT Code Amendments

    General

    The newly amended VAT Code introduces several critical changes designed to alleviate the tax burden on certain goods and transactions, improve the refund process for taxpayers, and enhance compliance and administrative efficiency:

    Diversified VAT Rates

    The general VAT rate remains at 14%, but new reduced rates have been incorporated, including 7% for the Simplified VAT Regime, 5% for the import and supply of widely consumed foodstuffs and agricultural inputs, and 1% for imports and supplies within the Special Regime applicable to Cabinda Province.

    Adjusted VAT Refund Threshold

    The threshold for VAT refund requests has been increased from AOA 299,992.00 to AOA 700,000.00, facilitating greater recovery of VAT credits for businesses.

    Penalties for Late VAT Return Submission

    The non-submission or late submission of VAT returns now incurs a penalty of AOA 600,00.00 per infringement, aiming to improve compliance rates.

    Simplified Registration for Non-Resident Taxpayers

    Non-resident entities engaging in taxable activities in Angola can now register in the General Taxpayers Register without appointing a tax representative, subject to forthcoming regulatory conditions and obligations.

    Mandatory Bank Reporting

    Banks are required to electronically report quarterly summaries of transactions processed through automatic payment terminals to the Tax Administration, enhancing transparency and oversight.

    Special Contribution for Foreign Exchange Operations (CEOC)

    Alongside the VAT modifications, Law no. 15/23 reintroduces the CEOC, targeting transfers in foreign currency outside Angola.

    This levy applies to transactions such as technical assistance, service provision, consultancy, management, or unilateral transactions, with rates set at 2.5% for individuals and 10% for legal entities.

    Exemptions from the CEOC include payments for health and education expenses (if paid directly to the institutions’ bank accounts), transfers of dividends, and repayments of loan capital and associated interest.

    The CEOC aims to regulate foreign exchange operations more tightly, ensuring a fair contribution from transactions impacting Angola’s financial reserves.

    Angola amends VAT System – Conclusion

    These legislative updates signify Angola’s commitment to refining its tax system to support economic growth, enhance tax compliance, and maintain a balanced approach to foreign exchange transactions.

    Businesses operating within Angola, particularly those involved in importation, supply of goods, and cross-border transactions, will need to adjust to these changes to ensure compliance and optimize their tax positions.

    Meanwhile, the reintroduction of the CEOC underscores the importance of careful planning for international payments and financial operations involving Angola.

    Final thoughts

    If you have any queries on this article titled ‘Angola amends VAT System’, or any Angolan tax matters, then please do get in touch

    Ghana Implements Significant Tax Law Amendments

    Ghana Implements Significant Tax Law Amendments – Introduction

    Ghana has embarked on a comprehensive overhaul of its tax regime with a series of amendments aimed at fostering economic development, supporting local industries, and promoting environmental sustainability.

    These changes, spanning from income tax adjustments to the introduction of an emissions levy, reflect the government’s commitment to creating a conducive environment for businesses and individuals alike.

    Changes in Income Tax

    An important change under the Income Tax, 2015 (Act 896) is the revision of the annual graduated tax scale for resident individuals.

    The tax-free threshold has been elevated from GH¢4,824.00 to GH¢5,880.00, providing a slight relief to the tax burden on individuals and potentially increasing disposable income for households.

    Value Added Tax (VAT) Act Enhancements

    The amendments to the VAT Act are particularly notable for their emphasis on supporting local manufacturing and sustainable transportation solutions. Key highlights include:

    Furthermore, the amendment has refined the scope of exempt supplies, notably excluding imported textbooks, exercise books, and non-life insurance from VAT exemptions.

    Stamp Duty and Excise Duty Revisions

    The government has revisited the Stamp Duty Act, 2005 (Act 689), adjusting stamp duty rates upwards for various instruments, signifying a move to increase revenue from transactions involving legal documents.

    In the area of excise duty, adjustments aim to harmonize the treatment of similar products and extend the duty’s coverage to include imported plastic packaging, reflecting an effort to address environmental concerns and promote local industries.

    Exemptions Act and Emissions Levy

    The Exemptions Act now includes provisions to exempt customs duties and taxes on fishing gear imported for agricultural purposes, pending certification by the minister responsible for Fisheries and Aquaculture Development.

    This measure is designed to support the fishing industry, a vital sector for Ghana’s economy.

    A groundbreaking introduction is the emissions levy, targeting sectors and activities contributing significantly to greenhouse gas emissions.

    This levy is part of Ghana’s broader strategy to mitigate environmental impact and promote sustainability.

    It applies to specified sectors and motor vehicle owners, with the rates varying according to the emissions’ carbon dioxide equivalent and the vehicle’s engine capacity.

    Implications for Ghana

    These tax law amendments reflect Ghana’s strategic approach to addressing contemporary economic challenges, promoting sustainable development, and enhancing the competitiveness of local industries.

    By incentivizing the adoption of environmentally friendly practices and providing tax relief in targeted areas, Ghana aims to stimulate growth, support local manufacturing, and encourage responsible environmental stewardship.

    Ghana Implements Significant Tax Law Amendments – Conclusion

    As these changes take effect, they are expected to have wide-ranging implications for businesses, individuals, and the economy at large, positioning Ghana for a more sustainable and prosperous future.

    Final thoughts

    If you have any queries about this article titled Ghana Implements Significant Tax Law Amendments, or Ghana tax matters in general, then please get in touch.

    Zambia’s 2024 Tax Reforms

    Zambia’s 2024 Tax Reforms – Introduction

    In its 2024 budget, Zambia sets forth a series of tax measures designed to stimulate economic growth, enhance policy consistency, and ensure equitable development across various sectors.

    With a projected growth increase from 4% in 2023 to 4.8% in 2024, and amid a backdrop of contained external debt and decreasing inflation, these reforms aim to unlock Zambia’s economic potential through both incentives and tightened tax administration.

    Empowering Individuals and Industries

    Direct Tax Measures

    Personal Tax Adjustments:

    Enhancements to the Pay-As-You-Earn (PAYE) system include raising the income tax exemption threshold from K4,800 to K5,100 and reducing the top monthly tax rate from 37.5% to 37%, effectively increasing disposable incomes and stimulating consumer spending.

    Rural Investment Incentive

    A reduction in income tax by 20% for five years for investments in rural areas, applicable to all sectors except mining, encourages businesses to contribute to rural economic development.

    Cotton Producers’ Incentives

    Tax exemptions for up to 10 years for profits derived from the cotton value chain promote the agriculture sector’s diversification and competitiveness.

     Multi-Facility Economic Zones (MFEZ) Incentives

    Immediate 100% tax write-offs for new equipment for both developers and investors in MFEZs aim to spur significant investment in these special economic zones.

    Value Addition Incentive for Sorghum and Millet

    Aligning with incentives for other crops, this measure encourages the production and processing of sorghum and millet, supporting agricultural diversification.

    Transfer Pricing Adjustments

    Clarification of Assessment Date

    The law now acknowledges the final ruling date in disputes as the official date for assessment, ensuring fairness in transfer pricing adjustments.

    Expanded Scope for Transfer Pricing Audits

    Removing the six-year limit on assessing transfer pricing issues enhances the tax authority’s flexibility in managing complex audits.

    Pre-approval for Non-OECD Methods

    This measure ensures that related-party transactions employing non-OECD methods meet the Commissioner’s standards, aligning Zambia with international best practices.

    OECD Alignment

    The redefinition of terms to match OECD standards demonstrates Zambia’s commitment to maintaining coherence with global tax norms.

    Strengthening Tax Administration

    Royalty Withholding Agents

    The introduction of agents to manage royalty withholding aims to improve compliance among small-scale miners, ensuring a level playing field in the mining sector.

    Penalties for Non-Compliance in Mining

    Harmonizing penalties across the mining sector, including artisanal and small-scale activities, deters tax evasion and fosters fair competition.

    Expanded Commissioner Powers

    Enhancing the Commissioner General’s authority to request information from various professionals and regulators strengthens the tax administration’s capacity to enforce compliance.

    Zambia’s 2024 Tax Reforms – Conclusion

    By incentivizing investment in key sectors, adjusting direct tax measures for individuals and industries, and tightening tax administration, Zambia is poised to harness its full economic potential while ensuring fairness and transparency in its tax system.

    If you have any queries about this article on Zambia’s 2024 tax reforms, or other related tax matters, then please get in touch.

    Scottish Budget: Brigadoon or bust?

    Scottish Budget: Introduction

    The Scottish Government Budget 2024/25 was recently unveiled by Shona Robison.

    In this short article, we summarise some of the changes that are, to be honest, pretty bold

    The “Advanced” Tax Rate

    In a move that was more foreshadowed than a plot twist in a detective novel, a new Scottish income tax rate has emerged.

    It targets income between £75,001 and £125,140 at a 45% rate. Named “Advanced” – because, just like in school, “Advanced” here means “Higher.”

    Top Rate Takes a Tiny Jump

    Catching us slightly off guard, the Scottish Top rate of tax has nudged up a notch to 48%. It’s edging ever closer to the half-century mark – that’s 50% for those who skipped math class.

    Reminder: these rates are exclusively for Scottish taxpayers, focusing on income from jobs, self-employment, or property.

    A Sextet of Tax Rates

    Scotland says “why stop at three?” and introduces a sixth income tax rate, making it a half-dozen compared to the rest of the UK’s trio.

    Scottish taxpayers, brace yourselves for a marginal rate of 67.5% on incomes between £100,000 and £125,140.

    Inflation-Proofing the Starter and Basic Bands

    Inflation’s not just for balloon animals. The Starter and Scottish Basic rate bands are inflating by 6.7%. The Starter band now encompasses income up to £14,876, and the Basic band stretches from £14,877 to £26,561.

    Council Tax: Freeze Frame!

    The Council Tax freeze is more solid than a Scotsman’s resolve. It’s not only confirmed but also fully funded, giving councils a financial boost equivalent to a 5% tax increase.

    Non-Domestic Rates: Frozen in Time

    The Basic Property Rate (poundage) is frozen faster at 49.8p per £1 of rateable value, mirroring the UK Government’s recent move.

    Hospitality Sector: A Mixed Bag

    Despite numerous pleas, the wider hospitality sector won’t see an extension in current reliefs.

    However, island-based hospitality gets a 100% break, capped at £110,000.

    The Scottish Government is also cooking up some targeted solutions and a new valuation method for the sector.

    LBTT and ADS: No News is Good News

    In the Land and Buildings Transaction Tax (LBTT) and Additional Dwelling Supplement (ADS) world, it’s status quo for both residential and non-residential dealings.

    Landfill Tax: Up and Up We Go

    In sync with UK landfill tax increases, from April 2024, the Scottish Landfill Tax will see the standard rate climb to £103.70/tonne and the lower rate to £3.30/tonne.

    Talk about trashy tax rates going up!

    A New Scottish Aggregates Tax on the Horizon

    The Scottish Aggregates Tax (SAT) is set to make its grand debut in April 2026, replacing the UK-wide aggregates levy.

    This new kid on the block was introduced to the Scottish Parliament back in November 2023.

    Scottish Budget – Final thoughts

    If you have any queries about this article on the Scottish Budget, then please do get in touch

    Ireland Finance Bill 2023: An Overview

    Ireland Finance Bill 2023 – Introduction

     

    The Finance Bill for 2023, published on 19 October, brings forth significant changes and updates in the Irish financial landscape. 

     

    This bill primarily focuses on implementing the Pillar 2 regime, setting a minimum effective tax rate of 15% into Irish law, among other noteworthy provisions.

     

    Here’s a summary of some of the key changes and their implications.

     

    Transposition of the EU Minimum Effective Tax Directive

     

    As expected, the Finance Bill transposes the EU Directive on ensuring a global minimum level of taxation, often referred to as the “Pillar 2 Directive.” 

     

    This directive sets a minimum effective tax rate of 15% into Irish law.

     

    This change will have a significant impact on large multinationals with a global turnover exceeding €750 million and wholly domestic groups within the EU. 

     

    It involves the introduction of “GloBE” rules, consisting of an income inclusion rule (IIR) and an Under Taxed Payment Rule (UTPR).

     

    The IIR takes effect for fiscal years starting after 31 December 2023, and the UTPR will broadly apply for fiscal years starting after 31 December 2024.

     

    Safe Harbours

     

    The Finance Bill introduces transitional and indefinite safe harbors to alleviate the compliance burden. 

     

    The qualified domestic minimum top-up tax (QDMTT) is one such provision, which aims to allow Ireland to apply a domestic top-up tax for Irish constituent entities. 

     

    This will potentially reduce the tax calculation and payment obligations for in-scope groups.

     

    Ireland has also adopted other safe harbors following the OECD’s guidance.

     

    Additional Withholding Tax Measures

     

    To prevent double non-taxation of income, the bill introduces measures denying withholding tax exemptions in certain situations. 

     

    These measures primarily apply to payments of interest, royalties, and distributions to associated entities in jurisdictions that are not EU Member States and appear on the EU list of non-cooperative or zero-tax jurisdictions.

     

    Interest Deduction for Qualifying Finance Companies

     

    New rules are introduced for interest deductibility for “qualifying financing companies” with specific criteria. 

     

    These rules generally apply when such companies own 75% or more of the ordinary share capital of a “qualifying subsidiary” and borrow money to on-lend to the subsidiary.

     

    R&D Tax Credit

     

    The R&D tax credit is enhanced by increasing the rate from 25% to 30% of qualifying expenditure for accounting periods beginning on or after 1 January 2024. 

     

    This change aims to maintain the credit’s net value for companies under the new Pillar 2 regime while providing a real increase in the credit for SMEs.

     

    A pre-notification requirement and other information requirements for R&D claims are introduced as well.

     

    Digital Gaming Credit

     

    Adjustments are made to the operation of the digital gaming credit to align with the new Pillar 2 definition of a non-refundable tax credit. 

     

    These changes affect the manner and timeline for credit payments.

     

    Changes to Accountable Person for Share Options Taxation

     

    From 1 January 2024, the mechanism for taxing gains from share options shifts from self-assessment by employees to being the responsibility of employers through the Pay As You Earn (PAYE) system.

     

    Angel Investor Relief

     

    The bill introduces capital gains tax relief for angel investors in innovative SME start-ups. 

     

    Detailed wording for this relief is expected to be included later.

     

    Improvements to the Employment Investment Incentive Scheme

     

    The EIIS is amended to standardize the minimum holding period for relief at four years. 

     

    The limit on the amount that an investor can claim for such investments is increased from €250,000 to €500,000 per year of assessment within four years.

     

    Stamp Duty

     

    An exemption from Irish Stamp Duty for American depository receipts (ADRs) is extended to include transactions in DTC of US-listed shares. 

     

    This exemption streamlines the process and eliminates the need for Revenue clearance, making it more efficient.

     

    Tax Administration – Joint Audits

     

    The Finance Bill transposes EU Directive DAC 7, allowing for cross-border audits with other EU Member States. 

     

    It also clarifies Revenue’s authority to make inquiries under the Mandatory Disclosure Regime.

     

    Ireland Finance Bill 2023 – Conclusion

     

    The Finance Bill 2023 introduces numerous significant changes in Irish tax and financial regulations. 

     

    Businesses should carefully assess and adapt to these changes to ensure compliance and minimize tax implications effectively. 

     

    As always, consulting with financial experts is crucial to navigating these complex tax reforms.

     

    If you have any queries about Ireland Finance Bill 2023, or Irish tax matters in general, then please do get in touch.

    The Netherlands’ Green Budget?

    Introduction

    In a bid to take substantial strides towards its climate goals, the Dutch government unveiled a series of legislative proposals and amendments concerning energy and environmental taxes on Budget Day.

    These measures are geared towards reducing the Netherlands’ greenhouse gas emissions by a commendable 55% by 2030, in alignment with the government’s climate ambitions.

    However, it’s essential to bear in mind that these proposals are subject to discussions, amendments, and adoption by the Dutch parliament.

    This article provides an in-depth look at some of those proposals covering:

    Corporate Income Tax

     

    From 1 January 2024, the energy investment deduction (EIA) rate will undergo a reduction, declining from 45.5% to 40%.

    Additionally, the sunset clause for energy and environmental deductions has been extended until 2028, implying that they will remain in effect, at least until that time.

     

    Energy Tax

     

    Energy tax exemption for metallurgical and mineralogical activities

    As of 1 January 2025, the energy tax exemption for electricity and gas used in metallurgical and mineralogical processes will be eliminated.

    The Dutch government views these exemptions as fossil subsidies, which no longer align with the nation’s climate objectives.

    New Specific Input Exemption for Hydrogen Production

    In addition, a new energy tax exemption will be introduced on 1 January 2025, for the supply of electricity used in hydrogen production via electrolysis.

    This exemption is confined to electricity utilized directly in the water-to-hydrogen conversion process, encompassing activities like demineralization, electrolysis, and the purification and compression of resulting hydrogen.

    Exemptions Related to Electricity Production

    Starting January 1, 2025, several changes are proposed regarding exemptions for electricity production, including cogeneration.

    Key changes include:

    Phase-Out of Special Energy Tax Rate for Greenhouse Horticulture Sector

    The reduced energy tax rate presently applicable to the greenhouse horticulture sector will be gradually phased out, commencing on 1 January 2025, and concluding in 2030.

    Changes to Energy Tax Brackets

    Effective from 1 January 2024, a new, lower bracket in the energy tax will be introduced for both electricity and gas.

    This bracket will cover the first 2,900 kWh of electricity and 1,000 m3 of gas.

    This adjustment is intended to provide the government with the flexibility to reduce energy tax for households when necessary, aligning with the current price cap for households.

    Amendments to Rules for Block Heating

    Various changes will be made to tax regulations for block heating, designed to accommodate the modifications in tax brackets mentioned above.

    Carbon Tax

    Increased Minimum Carbon Tax Price for Industrial and Electricity Generation Sector

    Starting January 1, 2024, the Dutch minimum carbon tax prices for the industrial and electricity generation sectors will rise. Despite these increases, the government anticipates no budgetary implications, given the existing EU ETS price. The new minimum prices are as follows:

    Introduction of a Carbon Tax for the Greenhouse Horticulture Sector

    Commencing January 1, 2025, a carbon tax will be introduced for CO2 emissions in the greenhouse horticulture sector, mirroring the current system in place for the industrial sector.

    This development coincides with the introduction of specific EU ETS obligations for the built environment.

    Coal Tax

    With effect from 1 January 2028, the coal tax exemptions for dual coal use and coal utilization for energy production will be discontinued.

    The current coal tax rate stands at EUR 16.47 per metric ton.

    Other proposals

    New information obligations will be incorporated into specific energy tax regulations to align with the European Commission’s guidelines on State Aid for climate, environmental protection, and energy.

    Commencing on 1 January 2024, these rules will encompass principles for providing data and information, upon request, to comply with EU obligations.

    Conclusion

    The Dutch government’s commitment to climate goals is evident in these proposed tax changes, which seek to incentivize eco-friendly practices while gradually phasing out less sustainable measures.

    These proposals will be closely monitored as they make their way through the legislative process, potentially reshaping the landscape of energy and environmental taxation in the Netherlands.

    If you have any queries about the Netherlands’ Green Budget, or Dutch tax in general, then please get in touch.