Dáil Éireann Debate, Thursday - 7 November 2024
50. Deputy Brendan Smith asked the Minister for Finance the taxation measures that will be introduced in 2025 to ease the pressures on small and medium enterprises; and if he will make a statement on the matter. [45430/24]
View answerSMEs are the foundation of the Irish economy, accounting for the majority of employment in the State. Their vital importance to our economy is reflected in our Programme for Government commitments. The tax system contains a number of incentives and reliefs designed to support SMEs. This Government has been proactive in both reviewing these measures and introducing targeted new supports, and I have progressed this work by enhancing existing schemes in Budget 2025.
Tax Incentives for investments in small and medium enterprises
One issue which is consistently raised by the SME community is difficulty in raising finance. Taxation measures which are available to help SMEs to access investment, scale-up and expand include the Employment Investment Incentive (EII), the Start-Up Relief for Entrepreneurs (SURE), the Start-Up Capital Incentive, and the new Investor Relief for business angels.
I announced enhancements to EII, SURE and SCI in Budget 2025. The reliefs will be extended for a further two years to the end of 2026. The investment limit on the amount that an investor can claim relief on under the reliefs will be doubled from €500,000 up to €1 million. For SURE, the maximum qualifying investment in respect of which an investor may claim relief on over a seven-year period is being increased to €980,000 (€140,000 per annum).
Recognising the Government’s commitment to cultivate a thriving business angel investment ecosystem in Ireland, I announced on Budget Day that the lifetime limit on gains that an investor may avail of the reduced Capital Gains Tax rate is being increased from €3 million to €10 million.
Section 486C Start Up Relief
Section 486C Start Up Relief provides a corporation tax relief for new small companies in the first 5 years of trading. In broad terms, it allows relief of up to €40,000 per year against Corporation Tax (CT) liabilities, which may be carried forward where not fully used in the five years.
The relief is currently calculated by reference to Employers’ PRSI, up to a maximum of €5,000 per employee. Budget 2025 will extend the qualifying criteria to allow up to €1,000 of Class S PRSI per individual to count towards the €40,000 cap. Company directors who are owner/managers are generally liable to Class S PRSI, which does not have an Employers’ PRSI component, therefore small owner-operated companies may not have qualified for this relief to date. This will provide much needed support for small, owner-managed start-up companies.
Research and Development Tax Credit
In order to support companies undertaking smaller Research and Development (R&D) projects, in Budget 2025 I have increased the first-year payment threshold of the R&D Tax Credit from €50,000 to €75,000. This means that the first €75,000 of an R&D corporation tax credit can be paid in full in the first year of the claim, rather than being spread over the normal three-year payment window. This will be a valuable cash-flow support to all companies engaged in R&D projects.
This change maintains the Government’s focus on enterprise supports for productive and innovative businesses in the State.
Deduction for stock exchange listing expenditure
I announced in Budget 2025 a new tax deduction for expenses relating to a first listing (IPO) on a stock exchange in Ireland or the wider EEA. An overall cap of €1 million of expenses per listing will apply, with the relief being claimable by a company in the year of first successful listing. This measure will support businesses in the scale-up phase of their growth and development. It is aimed at encouraging more stock exchange listings - thereby providing wider positive benefits for the Irish economy.
VAT Registration Thresholds
From 1 January 2025, the existing VAT Registration Thresholds will be increased from €40,000 for services and €80,000 for goods to €42,500 for services and €85,000 for goods. This will assist small businesses with recent rises in inflation.
Participation Exemption for Foreign Dividends
I am introducing a new Participation Exemption for Foreign Dividends to simplify the existing double taxation relief provisions. The participation exemption for foreign-sourced dividends will work by providing alternative double tax relief for dividends by exempting qualifying dividend income received from corporation tax. This will provide businesses, including SME companies with a foreign subsidiary, an alternative, much simplified mechanism for double tax relief by reducing the complexity and administrative burden of the current system of double tax relief.
Small Benefit Exemption
The Small Benefit Exemption allows an employer to provide limited non-cash benefits or rewards to their workers without the payment of income tax, PRSI and USC.
As announced on Budget Day, I am increasing the annual limit provided for in the exemption from €1,000 to €1,500 and will also permit five non-cash benefits to be granted by an employer in a single year under this exemption. This change will allow employers greater flexibility in giving non-tax rewards to their employees. This means that workers may receive up to three additional tax-free rewards or gifts, for instance to reward exceptional performance, or mark significant life events.
Further information on these incentives is available on the Revenue website at www.revenue.ie.
