• The health levy rates also remain unchanged. A rate of 4% applies to those earning over €500 per week (annual equivalent of €26,000). A rate of 5% applies to incomes in excess of €1,443 per week (annual equivalent of €75,036).
• The income ceiling for Employee PRSI contribution remains at €75,036. No income ceiling for Self-Employed PRSI.
• Annual effect of PRSI, Health Levy and Income Levy for an Owner Manager:

Rates of personal tax, PRSI, health levy and income levy

In 2011 the Minister proposes to introduce a new system of just two charges on income:
 - A new universal social contribution will replace employee PRSI, the health levy and the income levy.
 - Income tax will apply on a progressive basis.

Taxation of all Irish nationals and domiciled individuals

It is proposed that individuals whose worldwide income exceeds €1m and whose Irish-located capital is greater than €5m will be required to pay an Irish domicile levy of €200,000 per annum regardless of where they are tax resident.

National Solidarity Bond

It is proposed to establish a new National Solidarity Bond to assist the financing of the capital investment programme set out in this Budget.

Pensions and tax-free lump sums

Pension lump sums over €200,000 may be taxed and the tax treatment of pensions will be considered in the Government’s National Pensions Framework to be published by the Minister for Social and Family Affairs.

Mortgage interest relief

It is intended to abolish mortgage interest relief entirely by the end of 2017. Qualifying loans taken out before 1 July 2011 will continue to receive tax relief at current levels for 7 years and transitional arrangements will apply to loans taken out in the subsequent 18 months at a reduced level and duration.

Business Taxation

Corporation tax

The 12.5% corporation tax rate will not change.

Extension of Exemption for Start-up Companies

The scheme whereby new qualifying companies starting in 2009 are exempt from tax is extended to new companies starting up in 2010.

Capital Allowances

The scheme of 100% capital allowances for energy efficient equipment is expanded to include refrigeration and cooling systems, electro-mechanical systems and catering and hospitality equipment.

Incentive Measures

The Minister indicated that a number of incentive measures will be introduced to boost the economy and create jobs:

• A range of measures aimed at boosting employment are to be introduced in addition to the existing supports provided to employers through the Stabilisation Fund and the Temporary Employment Subsidy Scheme. These include a scheme exempting employers from PRSI for workers hired off the Live Register.
• Additional expenditure will be incurred with a view to boosting the tourism sector.
• Additional incentives for R&D and Intellectual Property as a result of the report of the Innovation Taskforce.
• Finance Bill 2010 will include measures to increase Ireland’s competitiveness in the international financial services sector with particular focus on the international funds industry.
• Additional funds will be allocated for energy efficient measures which will include a multi-annual National Retrofit Programme including additional funding to retrofit the social housing stock.
• Other measures to boost the economy include a five year agri-environmental scheme and additional funds for the Forestry and Bio-energy sectors.

Credit Review System on Business Lending

A credit review system is being established to provide Small and Medium Enterprises (SMEs), farm enterprises and sole traders with a right of appeal where an application for credit is refused by a bank participating in NAMA.

In addition to reviewing individual business decisions, the credit review system will also entail a review of the credit policies and practices of the banks, in relation to all SME sectors, paying particular attention to sectors, such as retail, car dealerships, tourism, and agriculture.

VAT

From 1 January 2010 the standard rate of VAT will reduce from 21.5% to 21%. The margin scheme for dealers in motor vehicles and agricultural equipment is amended to provide for a restricted VAT credit for cars and agricultural equipment acquired between 1 January 2010 and 30 June 2010.

Carbon tax

A charge of €15 per tonne of carbon will be levied as follows:

• From midnight 9 December 2009 a carbon charge of 4.2 cent per litre for petrol and 4.9 cent per litre for diesel will apply.
• From 1 May 2010 the carbon charge will be levied on home heating oils and gas. The carbon charge will increase the cost of those fuels by at least 6%.
• Coal and commercial peat will also be subject to the charge but at a later date. The effect will be to increase the cost of those fuels by at least 10.1%.
• Biofuels are excluded from the charge.

Excise Duty and VRT

From midnight 9 December 2009 the rates of excise duty on alcohol products are reduced.

A vehicle scrappage scheme will apply from 1 January 2010 until 31 December 2010. The scheme will apply to all cars which are over 10 years old where the new vehicle acquired has CO2 emissions of 140g/km or less. Relief will be given by means of a reduction in VRT of up to €1,500.

Existing reliefs and exemptions from VRT for hybrid and electric cars are being extended until 31 December 2012.

Back to News page