Budget 2017 and Employment Taxes

It was, of course, Budget week and our friends at Mazars have provided us with the following information on Budget 2017 and employment taxes:

Budget 2017 contained the following measures from an employment tax perspective:

• No changes to income tax rates and bands;
  
  
• USC rates and bands changes:

• The USC entry point remains at €13,000
• €0 - €12,012 – rate reduced from 1% to 0.5%
• €12,013 - €18,772 – band increased by €104 and rate reduced from 3% to 2.5%
• €18,773 - €70,044 – band decreased by €104 and rate reduced from 5.5% to 5%
• €70,045 - €100,000 – 8% (No change)
• PAYE income in excess of €100,000 – 8% (No change)
• Self-employed income in excess of €100,000 – 11% (No change)
  
  

• Personal tax credit changes:

• Home carer tax credit increased from €1,000 to €1,100
• Earned income tax credit self-employed individuals increased from €550 to €950
• A new Fishers tax credit at a maximum of €1,270 is being introduced for the years 2017 to 2021 inclusive
  
  

• PRSI – No changes to PRSI rates
  
  

• Social welfare changes:

• €5 increase in all maximum weekly benefits and allowances including Maternity/Paternity/Adoptive Benefits, Illness Benefit, Blind Pension, Carer’s Benefit, Carer’s Allowance, Disability Allowance, Invalidity Pension, One Parent Family Payment, Jobseeker’s Benefit, Jobseeker’s Allowance and Farm Assist with proportionate increases for people in receipt of reduced rate payments

• Dental Benefit will be expanded for all insured employees and the self-employed
  
  

• Minimum wage changes

• Statutory minimum wage will increase from €9.15 to €9.25 per hour from January 2017
  
  

• Pension changes:

• No changes to the tax treatment of pension contributions or benefits
  
  

• Special Assignee Relief Programme (SARP):

• SARP is being extended for a further 3 years until the end of 2020. SARP provides for Irish tax relief on a proportion of income earned by employees who are assigned by their employer to work in Ireland and who previously worked for that employer for a minimum period of 6 months in a country with which Ireland has a double taxation agreement or has a tax information exchange agreement. Other conditions also apply.
  
  

• Foreign Earnings Deduction (FED):

• The Foreign Earnings Deduction (FED) is a tax relief available to employees of Irish companies who spend time working overseas in certain qualifying countries (see table below). The minimum number of days for travel is being reduced from 40 to 30 per annum. FED is also being extended until the end of 2020 and the qualifying countries are being extended to include Colombia and Pakistan in order to help smaller businesses to identify and trade in such markets.
  
  

• The total list of qualifying countries are:

• Modernisation of the PAYE system

The Minister for Finance, Michael Noonan, in his Budget Statement announced the launch of Revenue’s consultation process regarding the modernisation of the Pay As You Earn (PAYE) system. A link to the consultation document can be found here => http://www.revenue.ie/en/spotlights/paye-modernisation.html

• Share-based remuneration

• There were no changes announced in relation to the taxation of share-based remuneration in Budget 2017; however, the Minister Noonan announced his intention to develop a new, SME-focused, share-based incentive scheme, to be introduced in Budget 2018. Such an incentive will require the approval of the European Commission and Minister Noonan stated that his officials will commence engagement with the Commission to ensure that the incentive will comply with State Aid rules in advance of the next Budget.

For more information on Budget 2017, please read the Mazars Budget Report.

The Finance Bill 2016 is due to be published on 20 October 2016 and it should contain greater detail on the measures announced in Budget 2017, including the possibility of changes being made to the measures already announced and perhaps new measures being introduced.