Budget 2025 Implementation Bill

 

Income Tax Act 

Transfers of Immovable Property

Article 5A (4) (c) of the Income Tax Act excludes from the property transfer tax, transfers of property, not forming part of a project, consisting of a dwelling house owned and occupied for at least 3 years as residence, provided that the property is disposed of within 12 months of vacating the premises. A proviso will be added to this article which provides that in instances whereby one of the spouses ceases to occupy the property as consequence of a divorce or (de jure or de facto) separation, the property shall only be regarded as vacant, for the purposes of this article, when the other spouse also ceases to occupy the property. 

Deduction in relation to Business Permits / Leases of Immovable Property 

Article 14 of the Income Tax Act will be amended to provide for a deduction with respect to expenditure of a capital nature (incurred as from 1st January 2025) for the acquisition of a business permit, or by way of a premium on lease of immovable property. This deduction applies subject to the following conditions:

1. The capital expenditure is incurred by a person carrying on a trade, business, profession or vocation;
2. Business permit or leased property is used or employed in the production of income, being derived by way of trade, business, profession or vocation; 
3. Business permit shall deemed to be a permit to carry on or operate a business that is issued by a public authority in terms of any applicable law and it shall be deemed to have been acquired by a person if and when such person is registered as the holder thereof with the relevant public authority;
4. The deduction  does not include any sums paid or attributable to the acquisition of a business, or a business goodwill, or a concession issued by the Government or a public authority or any intellectual property rights to which Article 14(1)(m) ITA applies;
5. Any premium towards lease of immovable property under an emphyteutical grant is not an allowable deduction;
6. Acquisition of business permit / lease needs to be evidenced by means of a public deed;
7. Deduction is to be spread equally over 15 years, or over period for which the permit or the lease was acquired, if shorter;
8. If there is the option to extend or renew the permit or lease, the permissible extension/renewal shall be deeded to be part of its duration. If permit/lease is acquired for an indefinite period, or with the option to extend or renew indefinitely, the deemed duration period shall be at least 15 years;
9. Right of deduction ceases if;
   • Permit is subsequently transferred, or lease assigned;
   • Property is sublet;
   •  Permit or property is no longer used or employed in the production of income relation to trade, business, profession or vocation.
10. If permit is transferred, or lease is assigned or sublet, the cost of acquisition used in the capital gains computation shall be reduced by the deductions claimed under this Article in determining the gains or profits on such transfer, assignment or sublease. However, the deduction shall not exceed the cost of acquisition deduction. 
11. This article does not apply if the business permit is acquired or the property is leased from a related party (as defined).

Definition of ‘Endangered Tax’

The Schedule to the Income Tax Act defines ‘endangered tax’ as (subject to the provisions of item 12), the difference between the tax declared to be chargeable by the taxpayer after taking into account any exemption, relief, allowance or tax credits to which he may be entitled and the tax actually chargeable after considering the same, but shall not include any additional tax. A proviso is to be added to this definition which provides that where the Commission is satisfied that the tax actually chargeable or part thereof has been based under the FSS, the amount so paid shall not be regarded as ‘endangered tax’. 

Income Tax Management Act 

Article 51 of the Income Tax Management Act deems taxpayers guilty of an offence and due to penalties ranging from €58 to €465 (+ double the tax undercharged), in the following instances:

• Taxpayer makes incorrect return by omitting or understating declarable income;
• Taxpayer gives any incorrect information in relation to any matter affecting his own tax liability or that of any other person or partnership. 

The Budget Measures Bill proposes a third instance which would trigger the above-mentioned penalties, in the event that the taxpayer fails to furnish a return which he is required to furnish in accordance with the Income Tax Acts. 
 

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