Ireland - Taxation



To stimulate economic expansion and encourage investment in Irish industry, particularly in the area of industrial exports, tax adjustments have been made to give relief to export profits, expenditures for mineral development, shipping, plant and machinery, new industrial buildings, and investments in Irish securities. As of 1 January 2003, with Ireland's accession to the EU, the government had mostly completed the transition of the tax regime from an incentive regime to a low, single-tax regime with 12.5% as the country's rate for most corporate profits. Passive income, including that from interest, royalties, dividends and rents, is taxed at 25%, and capital gains at 20%. As of 2003, Ireland was party to double-taxation agreements with 42 countries the terms of which provide for the reduction or elimination of many capital income tax rates and related withholding taxes. The incentive 10% corporation tax rate, applied to industrial manufacturing, to projects licensed to operate in the Shannon Airport area, and to a various service operations, was still in effect in 2003, but, in an agreement with the European Commission, was scheduled to be phased out by 2010.

The personal income tax schedule consists of two rates: 20% for taxable income up to €28,000, and 42% on the balance. The standard individual tax credit was €800 in 2003. For those over 65 years old, tax exemptions were increased to €15,000 per person. Deductions were available for mortgage payments, and pension contributions. Since 1969, the government has encouraged artists and writers to live in Ireland by exempting from income tax their earnings from their works of art. Royalties and other income from patent rights are also tax-exempt. The gift and inheritance taxes are 20% above tax-free thresholds that vary according to the relationship of the beneficiary with the donor. Between a parent and child, the tax-free threshold in 2003 was €441,200; for any other lineal descendent, the tax-free threshold was one-tenth this amount, or €44,120; and for any other person, one-twentieth, or €22,060. Land taxes are assessed at variable rates by local governments, and there is a buildings transfer tax ranging from 0.5% to 9% according to the price of the transfer. Stamp duties range from 3% to 6%.

The major indirect tax is Ireland's value-added tax (VAT) instituted 1 January 1972 with a standard rate of 16.37% plus a number of reduced, intermediate, and increased rates. As of 1 March 2002, the standard rate was increased to 21% from 20%, and the reduced rate of 12.5% increased to 13.5% as of 1 January 2003. The reduced rate applies to domestic fuel and power, newspapers, hotels and new housing. Ireland also has an extensive list of goods and services to which a 0% VAT rate is applied including, in 2002, books and pamphlets, gold for the Central Bank, basic foodstuffs and beverages, agricultural supplies, medicines and medical equipment, and, more unusually, children's clothing and footwear, and wax candles. Excise duties are charged on tobacco products, alcohol, fuel, and motor vehicles. Per unit and/or annual stamp taxes are assessed on checks, credit cards, ATM cards, and Laser cards.

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