Finance Bill 2021

The Bill provides that the value of the gift or inheritance attributable to the free use of money will in future be determined by reference to the best price obtainable for borrowing the equivalent amount on the open market. This is a change from current Revenue practice which is to base it on the best rate of interest that the lender could obtain by placing the funds on deposit. In the current climate, therefore, this change is likely to increase the value of the gift where interest-free or low-interest loans are made between people.


Currently, a company that is not tax-resident in Ireland is subject to income tax at the standard rate of 20% on any profits derived from the rental of Irish property. The Finance Bill provides that in future they will instead be subject to corporation tax at a rate of 25%.


The BIK exemption on electric cars, which was to expire on 31 December 2022, is being extended to 31 December 2025. It is however also proposed to taper the relief so that the current cap of €50,000 (with BIK only applying to any excess) will be reduced to €35,000 in 2023, €20,000 in 2024 and €10,000 in 2025 before the exemption is then abolished.


The Bill proposes the introduction of a tax credit for the developers of digital games, along similar lines to the existing film credit. The credit will be at a rate of 32% on the lower of the eligible expenditure, 80% of the qualifying expenditure and €25m per project. This new credit is however subject to a commencement order, as EU state aid approval must first be obtained.


The Bill proposes a number of changes in the area of pensions.

It proposes to abolish the requirement that an individual who on retirement wishes to avail of the Approved Retirement Fund (ARF) option but who does not have guaranteed annual income of at least €12,700 must transfer at least €63,500 to an Approved Minimum Retirement Fund (AMRF) until age 75. With effect from 1 January 2022, existing AMRFs will become ARFs and be subject to the ARF regime.

The Bill also proposes to remove the rule which prohibits the transfer of an occupational pension scheme to a PRSA where the individual has more than 15 years’ service.

The Bill also proposes to allow tax relief in certain circumstances on pension contributions made by a company to a scheme set up for the benefit of current and former employees of another company – broadly on foot of a merger, reconstruction, division or joint venture.


A number of important changes are being introduced on foot of recent international tax agreements.

The Bill proposes that the Interest Limitation Rules of the EU Anti-Tax Avoidance Directive (ATAD) be transposed into Irish law effective from 1 January 2022. Broadly, these provisions place a limit of 30% of EBITDA on the amount of net borrowing costs that a company can deduct for corporation tax purposes. There will however be some exemptions, notably including where the entity’s net borrowing costs are less than €3m and for standalone entities that are not a member of a worldwide group, have no associated entities and no permanent establishments outside the State. They will also not apply to ‘legacy debt’, meaning any debt the terms of which were agreed before 17 June 2016.

The Bill also introduces the new anti-reverse hybrid rules in line with Article 9a of ATAD. In broad terms, this is designed to tax income in the State that would otherwise go untaxed because an Irish entity is regarded as tax-transparent in Ireland but tax-opaque in another country.

The Bill also introduces a new transfer pricing section which replaces the Section 835E, TCA 1997 that was introduced by Finance Act 2020, but which never became applicable as it was subject to a ministerial order. Broadly, the revised Section 835E will exclude from transfer pricing requirements any non-trading transactions (for example rental of properties between connected parties or inter-company loans) where both parties are subject to tax in Ireland on the transaction.


In an effort to improve the attractiveness of and accessibility to EIIS and SURE, the Bill proposes a number of changes to the schemes. 

The requirement that 30% of the funds be used by the company before an investment qualifies is being removed; on foot of this, however, a company raising funds under EIIS must issue the Statement of Qualification (SOQ) within four months of the end of the year in which the EIIS shares were issued.

There are also changes to the ‘capital redemption window’, broadly referring to the six-year period that runs from two years prior to four years subsequent to the issue of EIIS shares. The Bill provides that in future a redemption of shares from non-EIIS shareholders within this window will not cause a clawback of EIIS relief for the EIIS shareholders and, furthermore, the redemption of an earlier tranche of EIIS shares that is outside the capital redemption window will not give rise to a clawback of relief on another tranche that is still within the window.

The Bill also proposes to widen the scope for funds to invest in EIIS. Currently, only ‘Designated Investment Funds’ set up specifically for EIIS investments can do so, but it is now proposed to extend this to other investment funds, specifically investment limited partnerships and limited partnerships.

Should you have any taxation or business questions, our experienced tax team will be happy to share their insights with you.