2013 Finance Act – Part 6 – Irish Tax System

This is a ten-part Worldwide Tax Blog Series on a cross section of amendments in the Irish Tax System and a general overview:

Universal Social Charge – Part 1

The Remittance Basis for Income Tax – Part 2

The Remittance Basis for Capital Gains Tax – Part 3

Taxation of Certain Social Welfare Benefits – Part 4

Mortgage Interest Relief – Part 5

Donations To Approved Bodies – Part 6

Farm Restructuring Relief – Part 7

FATCA – The US Foreign Account Tax Compliance Act – Part 8

Close Company Surcharge – Part 9

Stamp Duty – Part 10



Prior to the Finance Act 2013, tax relief for donations was given in two ways:

1.  The self employed individuals and companies received a tax deduction for donations made to approved bodies subject to certain conditions.
2.  PAYE workers (employees paid through the PAYE system) did not obtain a tax deduction.  Instead the approved body applied to Revenue for a repayment as if the PAYE worker had made the donation net of tax at the individual’s marginal tax rate i.e. 41%.

The new provisions have resulted in:

1.  The distinction between self employed individuals and PAYE workers has been removed.
2.  The approved body (i.e. the Charity) can reclaim a specified amount of the donation rather than the self employed individual receiving a tax deduction for the donation through the self assessment system.
3.  The specified rate is 31% now instead of the individual’s marginal tax rate of 41%.
4.  There is a cap of €1,000,000 on the aggregate qualifying donations in any year of assessment from any individual donor to approved bodies.
5.  There is still a 10% restriction for donations to approved bodies with which the individual donor is associated.
6.  Certification by donors is being simplified.
7.  Donors no longer need to provide “appropriate certificates” instead they will provide annual or enduring certificates that can be renewed. 
8.  Enduring Certificates will apply for five consecutive years of assessment and can be renewed.

What does this mean?

1.  The net cost to a self-employed individual making the minimum donation of €250.00 has increased from €148.00 (i.e. €250 x 41%) to €250.00.
2.  Since self employed individuals with earnings taxed at the marginal rate are more likely to make donations of €250.00 than self employed individuals taxed at the standard rate then this is likely to result in a significant shortfall in donations for approved bodies.

Final Points

1.  Corporate donations are not affected by the new reclaim procedures for individuals or the annual cap of €1,000,000 on relevant donations.
2.  The relief is only available in respect of donations made by Irish resident individuals.
3.  Donations from non-resident individuals do not qualify regardless of the amount of tax paid by them in Ireland which doesn’t appear to make any sense especially since non resident companies can obtain a tax deduction for donations.

Since founding Accounts Advice Centre in Dublin in 1996, Claire McNamara has established a reputation for successfully advising businesses, corporate and personal tax clients. Her knowledge spans various sectors and her experience includes corporate transactions, inheritance tax planning, International Tax Treaties, personal tax as well as advising on issues affecting non domiciled individuals and offshore clients. She constantly delivers a value added service and efficient tax management solutions to high net worth private clients, property owners, executives, entrepreneurs, entertainers and members of various professions.

As a Chartered Tax Adviser, Claire has considerable experience in professional practice and will personally help you to deal with all your tax affairs competently, professionally and successfully. She has also lectured extensively in taxation on courses for the main professional accountancy qualifications including A.C.C.A., A.C.A. and C.P.A. and is actively involved in preparing students for the Irish Tax Institute’s CTA qualification.

Claire has effectively handled a number of Revenue Audits and Appeals on behalf of her diverse client base and has successfully negotiated solutions resulting in substantial differences to the eventual tax liability, surcharge and penalties.


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