The Minister for Finance Michael Noonan T.D. today published the Finance (No. 2) Bill 2011 which gives effect to the taxation measures announced in the Jobs Initiative on May 10th.
On the publication of the Finance Bill, the
Minister said: “The central objective of this Finance Bill and the Jobs
Initiative is to assist in the creation of jobs. The Bill will achieve this
objective through fostering confidence that will stimulate economic growth
across the domestic sectors and especially the tourism sector. The tourism
sector has the ability to achieve strong growth given the significant tourism
infrastructure already in place. The Bill also provides the resources to
finance these measures that are so important to those seeking work.”
The value of the assets subject to the levy will be based on the market value on May 19th for 2011, and on January 1st for 2012, 2013 and 2014, or on the last date of the previous 12 month accounting period.
The schemes affected are Retirement Benefit Schemes (i.e., Occupational Pension Schemes), Retirement Annuity Contracts and Personal Retirement Savings Accounts (other than what are known as vested PRSAs). The levy will apply for a period of 4 years (2011 to 2014) and is payable twice yearly at the rate of 0.3% on each due date.
Chargeable persons will be required to deliver a statement on each payment date setting out the chargeable amount and the stamp duty payable. The levy will not apply to the assets of occupational pension schemes in respect of employees whose employment is or was wholly exercised outside the State.
The research and development (R&D) tax credit
rules are being changed through giving flexibility to companies in how they
account for the credit.
Finance (No.2) Bill 2011 (pdf)
Patrick Cosgrave, Director, Deloitte
Total Reward and Benefits, commented: “The issues
around the pension levy are well publicised. However, the reality is that there
may be even greater challenges in the pipeline. In particular, the EU/IMF Four
Year Plan anticipates that there will be a further reduction in pension related
tax relief equivalent to €680 million per annum by 2015. This may be achieved
through significant reduction in tax relief on contributions, reduced caps on
overall pension funds and perhaps an increased levy.
Cosgrave highlighted however that there are at least two anticipated positive developments in relation to VAT and pension fund management charges: “Firstly, there are hopeful signs that the EU Member States will agree to a change in EU VAT law to extend the existing management exemption for investment funds to occupational pension funds, potentially from January 2013. Furthermore, pending an ECJ judgment expected in late 2012, there is a possibility that the management of pension funds could become exempt from VAT before that date and possibly result in VAT benefits back-dated by up to four years, but only if they act now.”
Cosgrave concluded: “While changes domestically will present challenges for the pension scheme sponsors, some of the costs may be balanced out by VAT changes at EU level. For a typical pension scheme, obtaining a four year VAT rebate on management charges may well be sufficient to cover the cost of the levy for a year. Our advise to all those impacted by the changes is to keep a close eye on these emerging developments to ensure that they are best placed to avail of them.”
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