Budget 2022 was announced on the 12th October, 2021.
It is Minister for Finance, Paschal Donohoe’s fifth budget and the second of the coalition government between Fianna Fáil, Fine Gael and the Green Party.
Following the recent release of better-than-expected economic forecasts for Ireland a range of tax and expenditure measures worth €4.7bn were announced. Budget 2022 measures include capital expenditure of €4.2bn, tax-relieving measures of €500m and revenue-raising measures of €230m
The Minister announced a total budget package of €4.7bn. Expenditure measures will account for €4.2bn and tax relieving measures will account for the balance of €500m, including revenue raising measures of circa €230m.
The Government also published the National Development Plan 2021-2030 which outlines €165 billion of public investment in infrastructure projects between now and 2030. You can read the plan here.
Below we detail some of the more pertinent aspects of Budget 2022.
The corporation tax rate has been overhauled with the government’s recent decision to join the OECD International Tax Agreement (‘the Agreement’). Once the Agreement takes effect businesses that operate with an annual turnover of €750 million or more will be taxed at a minimum rate of a 15%. Notably the 12.5% rate will still apply to all businesses that fall below this threshold. This means that 160,000 business will continue to benefit from the lower corporate tax rate.
Amongst some of the highlights of this year’s Budget was a Digital Gaming Sector Credit which will provide a relief of up to 32% on eligible expenditure subject to a limit of €25m per project. The temporary VAT reduction that was applied to the Hospitality sector will be continued until the end of August 2022 providing a welcome relief for a hard struck sector. In addition, funding incentives will be enhanced for start-ups by the Innovation Equity fund which will provide €90 million of funding for seed stage Irish SMEs.
In terms of personal finance the 2022 Budget provides some relief via an increase in the lower 20% threshold of €1,500 for all earners. All tax credits have been increased by €50.
Welcome news to those who will continue to operate as remote workers next year is the introduction of a 30% tax deduction of the cost of vouched expenses for heat, electricity and broadband for those days spent working from home.
The Minister has introduced an extension of the Help to Buy (HTB) Scheme in its current “enhanced” form for 2022. The HTB scheme applies to first-time buyers of newly built homes or for those operating a self-buid. The HTB scheme gives a refund of income tax and Deposit Interest Retention Tax (DIRT) paid in Ireland over the previous 4 tax years. Under the enhanced HTB scheme, relief can be claimed on the lesser of: €30,000, 10% of the purchase price of a new home (for self-builds, 10% of the completion value of the property or the amount of income tax and DIRT paid in the four years before the purchase or self-build.
It was also announced that a Zoned Land Tax will be introduced which is aimed at encouraging the construction of homes on suitable, vacant sites. The tax will be 3% of the market value of the land.
About the Author: Nicola Walsh, Head of Property.