Strictly Private and Confidential

21 / 22 October 2014

Budget 2015

21st / 22nd October 2014

PwC

21/22 October 2014

Speakers

Budget 2015

Nicola QuinnTax Director(021) 425 4011nicola.quinn@ie.pwc.com

2

John MurphyTax Director(01) 792 6439john.x.murphy@ie.pwc.com

PwC

21/22 October 2014

Backdrop to Budget 2015

Budget 2015

3

PwC

21/22 October 2014

Current landscape

Budget 2015

Section 1 – Economic Backdrop to Budget 2015

Latest Exchequer returns are €1bn ahead of budget - Department of Finance

Irish economy predicted to grow by 3.4% - ESRI, 6 August 2014

Unemployment currently at 11.2% and falling

Continued expansion in manufacturing and services (Investec Manufacturing & Services Managers Indices)

12,000 companies set up in Ireland this year already (12% increase on prior year)

4

PwC

21/22 October 2014

Where are we at?

• PwC CEO pulse survey findings (September 2014):

- Economy is turning the corner

- Confidence is “somewhat” restored

- Funding remains a core challenge

- Most companies are going for growth (revenues, profits, employment)

- Exports on the increase/non-traditional markets

- But… concerns around talent and increasing cost base

- Ability to attract, retain and reward talent is critical for growth

Budget 2015

Section 1 – Economic Backdrop to Budget 2015

5

PwC

21/22 October 2014

Budget 2015 – what happened?

Business Taxes

Budget 2015

6

PwC

21/22 October 2014

International Ireland – “The Three R’s”

1. Rate

2. Reputation

3. Regime

Budget 2015

Section 2 – Budget 2015 – what happened? Business Taxes

7

PwC

21/22 October 2014

Rate and Reputation

• 12.5% rate – “settled policy”

• Double Irish – until 31 December 2020

Budget 2015

Section 2 – Budget 2015 – what happened? Business Taxes

8

PwC

21/22 October 2014

Rate and Reputation

• New residence rules in effect from 1 January 2015

• Grandfathering until 31 December 2020

• New IP can go through grandfathered structures

• Time to plan and adapt for international changes

Budget 2015

Section 2 – Budget 2015 – what happened? Business Taxes

9

PwC

21/22 October 2014

Regime

• R&D – base year

• Onshore IP regime

• Knowledge Development Box

Budget 2015

Section 2 – Budget 2015 – what happened? Business Taxes

10

PwC

21/22 October 2014

Regime

Budget 2015

Section 2 – Budget 2015 – what happened? Business Taxes

• R&D tax credit = 37.5% tax relief

• 2003 base year for R&D expenditureabolished from 1.1.2015

• New R&D guidelines due from Revenue

• Improved IP capital allowances regime

- Abolition of the 80% ringfence

- Definition extended to include customer lists

11

PwC

21/22 October 2014

Regime

• Knowledge Development Box

• Aligned with international tax policy developments

• Lots of consultation

Budget 2015

Section 2 – Budget 2015 – what happened? Business Taxes

12

PwC

21/22 October 2014

Business taxes

• Employment and Investment Incentive Scheme

- €5m annual

- €15m lifetime

- 4 year holding period

- New categories

• Seed Capital Scheme - Start Up Relief for Entrepreneurs “SURE”

• Strategic Banking Corporation of Ireland (“SBCI”) to finance SME growth

Budget 2015

Section 2 – Budget 2015 – what happened? Business Taxes

13

PwC

21/22 October 2014

Business taxes

• 3 year exemption from corporation tax for start-ups

• Capital allowances for energy efficient equipment

• FED improvements to support export initiatives

• Special Assignee Relief Programme

• 9% VAT rate for tourism secured

Budget 2015

Section 2 – Budget 2015 – what happened? Business Taxes

14

PwC

21/22 October 2014

Property related measures

• 7 year CGT exemption expires 31 December 2014

• Windfall tax (80%) abolished

• DIRT refund for first time buyers vs. Central Bank proposals

• Extension of home renovation incentive – includes rental properties

• Landbanks??

• Social Housing investment – €2.2bn

Budget 2015

Section 2 – Budget 2015 – what happened? Business Taxes

15

PwC

21/22 October 2014

Budget 2015 – what happened?

Personal Taxes

Budget 2015

16

PwC

21/22 October 2014

Income tax changes

Budget 2015

Section 3 – Budget 2015 – what happened? Personal Taxes

Marginal tax rate 41%

USC Thresholds up, rates down

Standard rate tax band €32,800

Increased to €33,800

Reduced to 40%

Water charges Tax credit, value €100 max

17

PwC

21/22 October 2014

The USC

Budget 2015

Section 3 – Budget 2015 – what happened? Personal Taxes

Income Range Rate

Income less than €12,012 0%

Income over €12,012:

€0 to €12,012 1.5%

€12,013 to €17,576 3.5%

€17,577 to €70,044 7%

€70,045 to €100,000 8%

PAYE income over €100,000 8%

Self-employed income over €100,000 11%

18

PwC

21 October 2014

The figure at which you are now officially

“rich”

Budget 2015

Section 3 – Budget 2015 – what happened? Personal Taxes

19

PwC

21 October 2014

€70,044

Budget 2015

Section 3 – Budget 2015 – what happened? Personal Taxes

20

PwC

21/22 October 2014

Employment incentivesSARP

• Extended to end of 2017

• Residency requirement amended

• 12 months with Group overseas before coming to Ireland – reduced to 6 months

Section 3 – Budget 2015 – what happened? Personal Taxes

Budget 2015

21

PwC

21/22 October 2014

Employment incentivesForeign Earnings Deduction (FED)

Up to a €35,000 deduction linked to overseas travel:

• BRICS & certain African countries

• Must be out for 60 days p.a.

• Spend at least 4 days in a country

Section 3 – Budget 2015 – what happened? Personal Taxes

Budget 2015

22

PwC

21/22 October 2014

Employment incentivesFED ‘15

Up to a €35,000 deduction linked to overseas travel:

• Approved Countries extended (some in Asia, Middle East, Chile, Mexico)

• Must be out for 40 days p.a.

• Spend at least 3 days in a country

• Travelling time now counts

Section 3 – Budget 2015 – what happened? Personal Taxes

Budget 2015

23

PwC

21/22 October 2014

Non-executive DirectorsExpenses

Revenue statement - 22 July 2014

• Expenses taxable if travelling from home to board mtgs

• Interpreting this as within legislation

• Mixed signals re effective date

We disagree

• Substantial PwC work behind the scenes to push this issue

• Legislative change possible –Minister considering it

• Finance Bill 23 October

Section 3 – Budget 2015 – what happened? Personal Taxes

Budget 2015

24

PwC

21/22 October 2014

Other announcements

(a) Capital Gains Tax

• 33% rate remains

• Retirement relief – include land leased for up to 25 years in total

(b) Capital Acquisitions Tax

• 33% rate remains

• Agricultural relief – relief available only in respect of agricultural property gifted to or inherited by active farmers (include land leased out for agricultural use)

(c) Pension levy 0.6% ends in 2014 (0.15% rate in 2015)

Section 3 – Budget 2015 – what happened? Personal Taxes

Budget 2015

25

PwC

21/22 October 2014

Tax & Expanding Abroad

Budget 2015

26

PwC

21/22 October 2014

Expanding Abroad Brazil

South Africa

USA

India

Turkey

Russia

China

Indonesia

Kenya

Budget 2015

Section 4 – Tax & Expanding Abroad

27

PwC

21/22 October 2014

Expanding Abroad

“very

complicated

bureaucracy”

“tax system is

complex and

outdated”

“taxes upon

taxes which

vary from region

to region”

“heavy

bureaucracy”

“big hurdle to

overcome is

taxation”

“it’s a very

expensive place

to set up

business”

“the tax system

there is

complicated...”

Section 4 – Tax & Expanding Abroad

28

Budget 2015

PwC

21/22 October 2014

Expanding Abroad

• Corporate Tax P.E.

- Local Taxes / VAT

• Structuring

- Holding / Repatriation / Exit

• Financing

• Transfer Pricing

• Relocation of people

• Foreign Earnings Deduction

Section 4 – Tax & Expanding Abroad

29

Budget 2015

Thank you.

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