On 10 October, the Department of Finance released the first draft of Finance Bill 2024. This Bill sets out the proposed legislative changes required in order to implement the Budget Day announcements of October 1st. In addition to what was announced in the Budget, the Bill also proposes to introduce a number of new measures.
The Finance Bill contains a number of proposed legislative changes that may be of interest to businesses operating in the Financial Services sector.
Participation Exemption for Foreign Dividends
As announced on Budget Day, a new Participation Exemption for Foreign Dividends is being introduced to simplify existing double taxation relief provisions. It provides an alternative method of double tax relief for dividends received from subsidiaries in EU/EEA and double tax treaty partner jurisdictions, subject to conditions.
Under the new rules a company will have the option to claim the Participation Exemption or to continue to use existing tax-and-credit relief under Schedule 24, by way of an election in the company’s annual corporation tax return. Where a company elects to claim the Participation Exemption for a financial period, it must do so for all dividends potentially in scope of the exemption in that period.
The Participation Exemption will be available for relevant distributions received on or after 1 January 2025 from subsidiaries in EU/EEA and tax treaty partner source jurisdictions.
In his Budget Day speech, the Minister advised that work will continue in the coming year on the participation exemption, including further consideration of the geographic scope of the exemption, and the potential introduction of a foreign branch exemption.
Pillar Two
The Bill introduces substantive new Pillar Two legislation, of which two changes are of particular note for the Financial Services industry.
First, following guidance issued by the OECD in June 2024 as regards the options jurisdictions may adopt in the treatment of securitisation vehicles for Pillar Two, the Bill proposes that the domestic top-up tax liability in respect of a securitisation entity is to be imposed on another constituent entity of the multinational group in Ireland. Where there is no such entity, then the top-up tax is to be imposed on the securitisation entity itself.
The second change relates to the treatment of investment funds, and provides for a carve-out from Ireland’s domestic top-up tax for standalone investment undertakings. This includes Irish unit trusts, Irish collective asset-management vehicles (ICAVs), Common Contractual Funds (CCFs) and Investment Limited Partnerships (ILPs).
Taxation of Leases
As readers will be aware, substantive changes were introduced to the legislation governing the taxation of leases in last year’s Finance Act. This year’s Finance Bill contains further amendments to the legislation to ensure that it is fit for purpose.
The Bill amends section 299 as regards cross-border leases, ensuring that restrictions previously introduced are limited to related party transactions only. It also introduces new anti-avoidance provisions, clarifies the timing and value of balancing events, changes to the treatment of balloon leases, including the introduction of new reporting requirements.
VAT Changes
Finance Bill 2024 contains a proposed amendment to the VAT legislation to confirm that the VAT exemption for the management of EU Alternative Investments Funds (“AIFs”) can apply where managed by Irish and EU AIFMs.
The Bill also clarifies that in the case of liquidators, receivers and mortgagees in possession such parties (and only such parties) can recover the VAT they incur through the VAT registration established as a result of and under such a power exercisable by them.
Banking Levy
As announced on Budget Day, Finance Bill 2024 contains the legislation to provide that the revised bank levy, introduced last year, will also apply for 2025. The revised levy is payable by AIB, Bank of Ireland, EBS and PTSB. The levy applies at the rate of 0.112% of the value of deposits held by each bank on 31 December 2022, to the extent that such deposits are “eligible deposits” within the meaning of the European Union (Deposit Guarantee Schemes) Regulations 2015.
It is expected that the amount of levy collected in 2025 will again be in the region of €200 million.
Stamp Duty on Bulk Acquisition of Houses
As announced on Budget Day, Finance Bill 2024 contains the legislation to increase the rate of Stamp Duty applicable on the bulk purchase of residential property (other than apartments) from 10% to 15%.
The revised rate of Stamp Duty applies to instruments executed on or after 2 October 2024. However, the existing rate continues to apply to binding contracts in place prior to 2 October 2024 provided the executed instrument contains a statement to this effect and is executed before 1 January 2025.
Relief for Listing Expenses
As announced on Budget Day, Finance Bill 2024 contains the legislation for the introduction of a tax deduction for expenditure incurred by a company wholly and exclusively in respect of a first listing on a stock exchange in the EEA. The deduction is to be available as a trading expense or, where the company is an investment company, as an expense of management. An overall cap of €1 million is to apply to the amount of the deduction and it will be available in respect of listings that take place from 1 January 2025 to 31 December 2029.
Other
For more specific changes included in the Finance Bill 2024, read the following expert insights: