Overall comments on Finance Bill (No.2) 2023 from Partner, Head of Tax, Daryl Hanberry

Finance (No. 2) Bill 2023 (“the Bill”) published today provides the legislative basis for the tax measures announced by the Minister in Budget 2024 as well as the further details awaited on many of the measures. It also contains tax measures and amendments to the Irish tax code which were not previously announced, among these are amendments to provide that the taxation of a gain realised on the exercise, assignment or release of a right to acquire shares or other assets is moved from self-assessment to the Pay As You Earn (PAYE) system, changes to the charitable tax exemption, and several administrative changes to the tax code. 

The Bill has 98 sections, one schedule and runs to over 270 pages. This comprehensive body of legislation introduces significant changes to the Irish tax code. In terms of global tax reform, the Bill provides for the transposition of the EU Minimum Tax Directive which will introduce the OECD’s Pillar Two rules into Irish tax law from 31 December 2023.  Also, somewhat expected,
legislation providing for new tax measures applying to certain outbound payments of interest, royalties and distributions are included in the Bill.  

A further fundamental change to the Irish corporation tax
system is the proposed introduction of a participation exemption for dividends, which should, hopefully offer some welcome simplification when introduced. However, we must wait at least another year as the legislation providing for such is not expected until the Bill this time next year.   

The Bill contains positive provisions such as enhancements
to Ireland’s R&D tax credit regime and the Employment Investment Incentive
scheme as well measures to guard stability of workers’ take-home pay in the
face of stubbornly high inflation.  Details on the new angel investor capital gains tax relief are expected to feature in later stages of the Bill.

Despite all the positive changes, there is a still a need for a further comprehensive suite of tax measures to support entrepreneurship and to encourage founders to retain ownership and to scale their businesses.

While there was no reference to Special Assignee Relief Programme (SARP) made by the Minister in the Budget, we wanted to see some enhancements in the Bill, which disappointedly do not feature. The SARP is too
complex as it is currently structured and is less competitive than similar schemes in other neighbouring jurisdictions.  We hope to see some enhancing provisions in later stages of the Bill. 

Simplification of the tax code was a theme expected to feature in Budget 2024. While the Minister did mention the establishment of a dedicated forum to identify opportunities to simplify and modernise the administration of business supports, as well as a Revenue information campaign, there was little else to evidence such a theme.  It is disappointing that this was not addressed in the Bill, overall, the provisions will likely add to the complexity of an already cumbersome and overly complicated tax code.

The publication of the Bill today is the first significant step in the tax legislative process. The next significant milestone will be Committee Stage of the Bill which is scheduled for early November.  At this stage we expect the Bill to pass the Houses of the Oireachtas and move to the president for signature and enactment into Irish law before Christmas day.

We will provide further insights on the key stages of the Bill and any significant amendments as they arise. 

For further details on the above and other new measures included in Finance (No.2) Bill 2023, we invite you to view our articles and commentary analysing the Bill on our Budget hub.