In Budget 2024, Finance Minister Michael McGrath announced a package of wide-ranging measures to support Irish enterprise, including increasing the Research and Development Tax Credit from 25% to 30%.
He described the tax credit as a crucial feature of Ireland's corporation tax offering and enables Ireland to remain competitive in attracting quality employment and investment in R&D.
He said: "I am doubling the first-year payment threshold from €25,000 to €50,000, to provide valuable cash-flow support to companies engaged in smaller R&D projects. I hope this will encourage more businesses to engage with the regime."
Ian Collins, Partner and Head of Innovation Incentives at EY Ireland, said the increase will be viewed very positively right across business, from the SME sector who can now avail of an additional benefit for performing R&D, through to the multinational sector where it will help to keep pace with forthcoming changes in the international tax environment for large corporations.
"Additionally, the doubling of the payment threshold to €50,000 to provide valuable cash-flow support to companies engaged in smaller R&D projects is very welcome."
Minister McGrath also announced a new targeted capital gains tax relief for angel investors in innovative start-up SMEs, to make Ireland a more attractive location for angel investment.
"It will allow angel investors to benefit from a reduced rate of CGT when they dispose of a qualifying investment, for gains up to twice the value of their investment," he added.
Alma O'Brien, Head of Tax, at Azets Ireland, said the targeted capital gains tax relief for angel investors will provide a welcome funding boost for Irish start-ups and scale-ups. "Although the devil will be in the detail, it could play a key role in boosting investment and providing an attractive source of finance for some entrepreneurs," she said.
Employment Investment Incentive
The Employment Investment Incentive scheme (EII), which provides SMEs and start-ups with an alternative source of funding, will be enhanced, Minister McGrath announced.
The scheme will be enhanced by standardising the investment period to four years for all investments, and by doubling the amount an investor can claim relief on for four year investments to €500,000.
The Minister said these enhancements will help unlock more equity investment in smaller, early stage, businesses which are typically most in need of funding.
The Small Firms Association said the budget recognised the changing economic outlook, but the Government missed an opportunity to respond to the rising cost of doing business.
"I am glad to see the Government have listened to business owners and have increased EII relief from €250,000 to €500,000, extended entrepreneur relief to angel investors and modified the R&D Tax Credit, which will benefit eligible entrepreneurs and growing small businesses," said SFA Director, David Broderick. "However, it is regrettable that the SFA's call to make investing in a business in Ireland more attractive through a reduction in Capital Gains Tax has again been ignored."
Meanwhile, the Minister also said that the upper age limit for the Retirement relief will be extended from 65 until the age of 70.
Retirement relief supports the intergenerational transfer of businesses and farms and works to ensure their smooth transition so that they continue to play their important role in the Irish economy.
These changes will come into effect from January 2025 so as to allow for an appropriate transitional period.
Meanwhile, the minister said he had secured EU State aid approval to start the outstanding 2022 amendments to the Key Employee Engagement Programme.
These amendments include the extension of the scheme to the end of 2025 and a doubling of limit for the total market value of issued but unexercised qualifying share options from €3m to €6m.
VAT registration thresholds
The Minister for Finance announced an increase in the VAT registration thresholds for businesses from €37,500 for services and €75,000 for goods to €40,000 for services and €80,000 for goods.
Minister McGrath told the Dáil that the changes would bring the thresholds broadly into line with upcoming EU VAT registration thresholds.
He said the changes would provide more latitude to small businesses whose turnover is close to the existing thresholds.
The Minister said Revenue would establish a dedicated Tax Administration Liaison Committee (TALC) subgroup to simplify the administration of business supports and ensure that businesses know what they are entitled to claim.
Minister McGrath also said he would consider if changes were needed to the funds sector when a review is completed next summer.
The minister said he will be publishing legislation to implement the 15% minimum effective tax rate for large companies as provided for under the OECD Pillar Two agreement.
"This is a once-in-a-generation reform to our corporation tax system, and marks the culmination of a ten-year, global project to reform the taxation of multi-national enterprises," he said.