The Impact of Budget 2023 on Expats in Ireland | Expat Taxes

Consulting Expat Ireland Taxes
December 14th, 2022
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The Impact of Budget 2023 on Expats in Ireland | Expat Taxes

Budget 2023 And How It Impacts You As An Expat

Even though annual budgets don’t exactly creep up on us, it can still be difficult to get to grips with the impact they’ll have on our everyday lives. From differing tax bands to the announcement of new tax savings schemes, budget day can be a lot to take in. 

Especially for expats with unique circumstances, it can be easy for certain details of each budget to fall through the cracks. Because of this, this blog post aims to help you as an expat gain a better understanding of how Ireland’s most recent budget affects you.

With inflation and the cost of living a particular concern of many for many expats right now, we’re hoping to highlight how Budget 2023 might impact your quality of life and help you plan for the year ahead.

At Expat Taxes, we don’t just help expats save time and money by offering expert tax advice — we help you navigate the complexities of the Irish tax system.

Firstly, when was Budget 2023 announced?

Budget 2023 was announced on September 27, 2022. However, because many of the announcements made in Budget 2023 will only be coming into effect in the new year, the significance of the budget will only begin hitting home for people now.

If you haven’t already made your move to Ireland, this means there’s still time to evaluate the 2023 budget and weigh up your options.

Is Budget 2023 a good one for expats in Ireland?

If you’ve been considering a move to Ireland, you’ll likely have heard about the housing crisis and the rising cost of living. To combat these crises, the government has indeed announced funding across several different sectors that might directly impact you.

That said, despite Ireland’s largest ever allocation of funding for international development (€1.2 billion) and some positive announcements regarding support packages, the pros and cons of this year’s budget will largely depend on your personal circumstances.

This is why when moving to Ireland as an expat, it’s important to get your affairs in order as soon as possible to avail of any tax reliefs or savings that might be relevant to you.

Cost of living & housing measures in Ireland

With €6.2 billion being allocated to the Department of Housing, Local Government and Heritage, and €1.7 billion being invested in 9,100 social houses, it’s hoped that expats moving to Ireland will notice an improvement in the housing situation in the coming years. Unfortunately, only time will tell if this year’s fund allocation will make a difference.

The good news is that there have also been some shorter-term benefits you might be interested in as part of this year’s budget. Some of these include:

  • An increase of €75 in the Personal Tax Credit (from €1,700 to €1,775)
  • An electricity credit of €600 for all households (to be paid in three instalments)
  • Possible entitlement to a rent tax credit worth €500 per year (or €1,000 for a jointly assessed couple)(this can also be claimed for rent paid in 2022)
  • The ‘Help to Buy’ scheme has been extended until the end of 2024 (at current rates)
  • A double child benefit payment of €140 per child (to be paid on top of the normal monthly payment)
  • A working family payment of €500 (paid in November)
  • Persons living alone are to receive a €200 once-off payment before Christmas
  • The ‘means testing threshold’ for the Fuel Allowance will increase from €120 to €200 for those under 70 (in January 2023)

A ‘Vacant Homes Tax’ has also been introduced to tackle issues relating to empty properties around Ireland. This tax will apply to residential properties occupied for less than 30 days within a 12-month period. The tax will be charged at a rate equal to three times the property’s existing base Local LPT liability (i.e., the liability before the application of the Local Adjustment Factor). The VHT will be self-assessed and administered by Revenue.

The deduction available to landlords of residential property for qualifying pre-letting expenses has also been increased from €5,000 to €10,000 per premises. The minimum period of vacancy of the premises (before such deductions are permitted) is also being reduced from 12 months to 6 months.

Note: In Ireland, ‘means testing’ refers to a system to assess your need for social assistance payments. To qualify for means tested support, you will need to meet a strict criteria.

Employment and business as an expat

One of the biggest announcements made for Irish workers in the 2023 budget has been the decision to expand the lower rate band for income tax. Despite both income tax rates remaining the same (20% and 40%), income up to €40,000 will now be taxed at the lower rate of 20%. This is an increase of €3,200 to the previous standard rate cut-off point.

This increase to the standard rate cut-off also applies to married couples / civil partners with one earner, who can now earn up to €49,000 at the lower rate.

Note: The higher income tax band of 40% will apply for income that exceeds these amounts.

In terms of tax credits for Irish workers, some of the highlights include:

  • An increase of €75 in the Employee Tax Credit from €1,700 to €1,775
  • An increase of €75 in the Earned Income Credit from €1,700 to €1,775
  • An increase of €100 in the Home Carer Tax Credit from €1,600 to €1,700

Other noteworthy announcements include:

  • The 9% VAT rate applying to certain activities in the hospitality and tourism sector will continue until February 2023
  • A new Temporary Business Energy Support Scheme (TBESS) will be set up (this is expected to cover 40% of the increase in electricity or gas bills, up to a maximum of €10,000 per month per business) 
  • A grant (provided through Local Enterprise Offices) has also been announced to help micro-enterprises reduce their carbon footprint and energy costs
  • The Small Benefit Exemption will increase from €500 to €1,000. This means that employers can now give employees up to two small benefits, tax free (these benefits cannot be in or redeemable for cash and the combined value of the two benefits cannot exceed €1,000)
  • The extension of Foreign Earnings Deduction (FED) relief until 2025. This relief has the potential to provide relief from income tax for Irish employees who spend time working abroad (in certain qualifying countries)
  • An extension to the Special Assignee Relief Program (SARP) — the relief now applies to those arriving in Ireland before 31 December 2025. We have an entire blog post on this topic if you’d like to know more!

Note on Universal Social Charge (USC): For USC, there has been an increase of €1,625 to the 2% rate band ceiling from €21,295 to €22,920. This means that the salary of a full-time worker on the minimum wage will remain outside the higher rates of USC.

Foreign pensions as an expat

For the first time, the Finance Bill 2022 has proposed to introduce definitive legislation to cover the taxation of retirement lump sums from foreign pensions. This change means that a lump sum pension payment taken by an Irish tax resident from a qualifying foreign pension will now be treated in the same way as a lump sum payment taken from an Irish pension. 

Tax residents in Ireland are entitled to receive a tax-free lump sum of up to €200,000 from a ‘relevant pension arrangement’, provided that certain age and work related conditions are met. This tax-free amount is a life-time limit and encompasses lump sum payments from all ‘relevant pension arrangements’ under Section 790AA TCA 1997.

Unfortunately, under Irish law, most overseas pension schemes do not fall into the definition of a ‘relevant pension arrangement’ and therefore any lump sum taken by Irish residents from such schemes are taxed as foreign income with no entitlement to benefits from Section 790AA TCA 1997 as outlined above.  

From 1 January 2023, under Section 19 of The Finance Bill 2022 an amendment to Part 7 of the Principal Act (lump sums from foreign pension arrangements) will take effect and a new Section 200A will be inserted in the Taxes Consolidation Act 1997. This amendment ensures that any lump sum received by Irish resident individuals from an overseas pension will be treated as if it came from an Irish pension i.e. eligible to a tax-free lump sum of up to €200,000. This amendment was proposed to ensure individuals who relocate to Ireland are not disadvantaged simply because they have an overseas pension rather than an Irish pension.

Transport

One big part of living in Ireland as an expat is being able to get around. Because of this, you might be interested to know that the reduced fares of 20% on public transport will continue until the end of 2023.

There have also been announcements made for additional funding for:

  • BusConnects, MetroLink and the DART expansion programme
  • Active Travel, cycling, walking and greenways
  • The aviation industry (including support for regional airports, Shannon, Ireland West, Donegal, and Kerry)
  • The Safe Routes to School Programme

If you drive a vehicle in Ireland as an expat, you should also know that a €5,000 relief towards the private purchase of certain electric vehicles (EVs) will continue. However, this grant will be gradually reduced from July 2023 onwards. 

Healthcare in Ireland

Moving to a new country can be overwhelming enough, but navigating the health system can complicate things further. This is why if you’re moving to Ireland for the first time (or are returning after some time abroad), it’s good to know that:

  • Public hospital in-patient fees will be removed for all patients (from 1 April 2023)
  • GP visit cards will be extended to children aged 6 and 7 (by the end of 2022)
  • GP visit cards will now be available to those on a median household income of €46,000 or less from April 2023 (this figure is net household income, after tax)
  • The Drug Payment Scheme threshold will remain at the lower rate of €80 in 2023

Note: Everyone who is ordinarily resident in Ireland is entitled to public healthcare services. You are considered to be ‘ordinarily resident’ in this context if you have been living in Ireland for at least a year or you intend to live here for at least one year. (N.B. The ordinary residency definition for tax purposes differs).

Looking to save time and money with expert tax advice?

At Expat Taxes, we help you save time and money by providing you with expert tax advice, tailored to you. Regardless of your personal circumstances, if you’re planning a move to or from Ireland, we can help ensure that your tax situation is clarified and that you can save money on your taxes wherever possible.

We specialise in a range of targeted areas, as well as more general tax matters. If you’d like to know more, you can book a consultation today at a time that’s convenient for you.

DISCLAIMER The material in this article is for general information purposes only and does not constitute legal or taxation advice. Specific legal and taxation advice should be sought before acting or refraining to act. All information and taxation rules are subject to change without notice. No liability whatsoever is accepted by Expats Taxes for any action taken in reliance on the information in this article or any of the articles in our blog series

Stephanie Wickham

Stephanie is an award-winning international and expatriate tax specialist with over a decade’s experience. She is a KPMG trained Chartered Tax Adviser and Chartered Accountant.

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