Exemptions I

Charities

There are a range of exemptions from income tax which exist because of various social, economic  and other policies.  Some exist for historical reasons.

Charities are exempted from tax on most income. The exemption is available to the extent that the income is  applied for charitable purposes.

Where the income derives from a trade carried out by the charity, the exemption is available if

• the profits are applied for the purpose of the charity and
• the trade is exercised in the course of carrying out the primary purpose of the charity or
• the work in connection with the trade is mainly carried out by beneficiaries of the charity.

See separately the sections on the definitions of charity.

Finance Act 2023

Finance Act 2023 extends the charitable tax exemption which provides for an income tax exemption for certain income to charities, to include income arising to charities from the provision of professional services.

Finance Act 2023 amends the charitable tax exemption to provide that the Revenue Commissioners may revoke the exemption from charitable bodies where satisfied that a charity has ceased to be eligible. The charitable

income tax exemption from income arising to Irish charities and to foreign charities, provided that income is applied solely for charitable purposes.

The amendment also provides that the Revenue Commissioners may publish a list of all charitable bodies that have been granted the charitable tax exemption.

 

Friendly Society

A friendly society,  which may not assure more than €1,270 gross or €70 per annum annuity, to any person, is entitled to exemption from tax on its trading and investment income.  It must be established for purposes provided for under the Friendly Societies Act and not for a tax advantage.

It must be  engaged in activities directed at achieving the purpose for which it was established. It must not engage in trading activities, with a view to realisation of a profit.

Trade Union

A trade union which is precluded from issuing more than €10,160 gross or €2,540 per annum is similarly exempt, in respect of trading and investment income. This is provided  that interest and dividends are applied solely for the purpose of providing provident benefits and education training and retraining of members, and their children.

Benefits must be expressly authorised by the rules of the trade union to a member. The benefit must be such that it payable

• during unemployment, sickness, or incapacity,
• a result of personal injury,
• to an aged member by way of retirement superannuation or
• to a person who has met with an accident or lost tools by fire or theft.

Various Statutory Bodies

Various bodies are exempted by statute from income tax. They include certain state bodies including local authorities and the HSE.  Certain non-commercial state-sponsored bodies are also exempted from income tax.

Certain bodies, which have their objective the  observance and  promotion of human rights and which have consultative  status with the UN or Council of Europe may be allowed charity exemption. They must be precluded from transferring assets to their members.

Exemption may be allowed in respect of the income of associations established for the sole purpose of promoting athletic or amateur sports.  The Revenue must be satisfied the income is applied solely for that purpose and not for the purpose of securing a tax advantage.

Industrial and Employment Grants

A range of industrial and employment grants are exempt from taxation as income.  These include the following:

• certain grants by Udaras Na Gaeltachta for international services or for certain small-scale industries;
• employment grants for small industrial undertakings;
• certain employment grants to industrial undertakings by the IDA, Enterprise Ireland and related entities;
• employment grants or recruitment subsidies provided out of the back-to-work allowance scheme stablished by the Minister, for promoting employment of individuals who have been unemployed for more than three years;
• certain sums under agreements with the County Enterprise Board, now the Local Enterprise Offices ;
• certain grants and subsidies made by the National Rehabilitation Board and the Rehab group;
• certain sums paid under EU programs for development in the sphere of agriculture and under local, urban, and rural development schemes;
• special European program for peace and reconciliation in the border counties.

Former Stallion Exemptions

Prior to 2008, income from stallion services was exempt.  Certain conditions applied.  Stud Greyhound services were similarly exempt until that time.

Woodlands

Profits and gains from woodlands, which are  managed on a commercial basis are exempt from income tax. USC and PRSI  usually apply This exemption is subject to the limitation on reliefs in respect of high earners.

Patent Income

Patent royalty income from a patent, in relation to which the research, planning, processing, experimenting, testing, devising or designing resulting in the invention, was carried out in an EEA state is a qualifying patent. The exemption still applies, notwithstanding that ancillary works were undertaken elsewhere.   Income to a resident of Ireland from a qualifying patent is exempt.

The main research must be undertaken in [ Ireland].  The income must be income in respect of the use of the invention, to which the relevant patent relates.  The relief is subject to the limitations on reliefs in relation to high income individuals.

Artists’ Exemption

The artists’ exemption applied to writers, composers, painters and sculptors resident in Ireland.  It applies to income derived from the qualifying artistic activity.  An artistic work includes plays, books, musical compositions, paintings and sculpture.

The work must be original and creative. Guidelines have been prepared by the Department of Arts in relation to whether certain types of work qualify or not. There is a right of appeal against the Revenue Commissioners decision as to whether the taxpayer qualifies.

The exemption must be claimed . This must be done after publication of a work. A refusal may be appealed in the usual way. The   A return of income is required. The relief was formerly unlimited.

Finance Act 2011 provided an upper limit of €40,000 per annum on the artist exemption for the year 2011 and subsequent years.  This was increased to €50,000 per annum in 2015.In addition income from the artist exemption is  included in  reliefs subject to the higher earners restriction.

Finance act 2014 extended the exemption to artists resident or ordinarily resident in another EU or EEA state.The exemption applies to income tax but not PRS I or USC.

Securities of State Bodies

The Minister for Finance may issue securities without obligation to deduct tax at source and /or   tax-free interest for persons who are not ordinarily resident and/or not domiciled in Ireland.  There may  be a tax  liability, if the securities are not on terms that they are exempt,  or if the the recipient does not qualify, irrespective of the absence of deduction at source.

Interest on the securities of certain state sector bodies are exempt from income tax, where the recipients are neither ordinarily resident nor domiciled in Ireland. They include the securities of

• Airport authorities;
• RTE;
• ESB;
• certain local government stock;
• securities issued by local authorities outside the State;
• certain designated bodies;
• entities where the payment of interest and principal is guaranteed by the State;

If the beneficial owner of the securities is domiciled in Ireland but not ordinarily resident, interest on securities is exempt from tax above the capital is not liable to tax.

Dividend Income

Dividend income received from an Irish resident company

• by a person who is neither resident nor ordinarily resident in the State but resident in another EU state or tax treaty country;
• by a corporate which is resident another EU state or tax treaty country not controlled by Irish residents;
• by non-resident corporates owned by two or more listed companies; and

is exempt.

Receipts by non-resident persons outside the above categories are subject to income tax at the standard rate only, so that liability is limited to the tax withheld.

Receipt of dividends by Irish resident companies from other Irish resident companies are exempt from withholding and tax liability. See the sections on corporation tax.

Interest paid to persons who are not ordinarily resident in the State, by companies carrying on certain activities in the IFSC and elsewhere are exempt if received by persons who are not ordinarily resident but are resident in another EU State and in certain cases, a double tax treaty company.

State Savings

Interest on savings certificates issued by the Minister for Finance are exempt from income tax.  This recipient may not hold more than a specified number of certificates, €80,000 for an individual, €160,000 for a  married couple.

Interest or bonuses paid under An Post Savings Schemes are disregarded for tax purposes.  The maximum amount that may be held is  €80,000 per individual for savings bonds and €500 per month per individual for instalment savings.

Foreign pension awarded for past services in a foreign office or employment under the law of that country, corresponding to Irish social welfare / social protection pensions are exempt, if they would have been exempt from tax in the foreign country if received by a resident of that country.

Military Pensions

Certain military pensions are both exempt and ignored in a calculation of tax.  These include

• Army Pensions Act pensions arising from wounds and disability
• certain gratuities in respect of service in the Defence Forces
• deferred pay under the Defence legislation
• pensions arising from the “War of Independence” to widows and dependents.

Catastrophic Injuries Award

There is an exemption in respect of income and gains from the proceeds of compensation for certain catastrophic personal injuries. The award may be made for the court order by way of an out-of-court settlement. The person must be permanently incapacitated from looking after himself. The income and gains must be the sole or main source of income, ignoring social welfare.

Certain Farm Leases

A person over 40 permanently  incapacitated from carrying out farming who is receipt of income from leasing of  farmland, is exempt from income on the rental income under a qualifying lease.  Farmland use means land in the State, used mainly or wholly for husbandry and includes buildings other than dwelling houses.  The lease must be for at least five years, in writing and it must be made on arms-length terms.

There is a maximum exempt amount depending on the length of the lease and when entered.  Rent form a qualifying lease of up to €20,000 was exempt, in the case of leases of 10 years or more entered after 2007. The rent may include rent of Single Farm Payment entitlements.

Rent a Room

Rent a room relief exempts income on the licensing (lodger) or letting of a room in a residence, where the total amount received by way of all rent or  for other services, including meals, laundry etc. does not exceed €14,000 in year.  A residence will qualify if it is a residential premises occupied  the person concerned as his sole or main residence during the tax year.

In the case of joint owners, the limit is divided.  Income received does not displace entitlement to mortgage interest relief.  It does not affect the exemption from capital gains tax.  The gross income amount must be returned, although exempt, where the person is obliged to file a tax return. Losses are not allowed as deductions. It does not apply to rent paid by a child, an employee or officeholder of the recipient.

The receipts are entirely separate from other rental income. The relief does not apply to companies. There is exemption from USC and PRSI..

The room must be part of the property. It must be used for residential purposes. It can be a self-contained unit. Tenancies board registration is not required.

Student Lettings

The relief does not apply to lettings to a child that may apply to a letting to a student. The relief does not apply to employees of the person making the payment. It does not apply to guest accommodation. Something longer term is required.

There is an exemption for  income earned from schemes providing for summer accommodation of students in the Gaeltacht.  Subject to meeting terms of the scheme, the income from students is exempt.

2023 Exempt Bodies

Finance Act 2023 makes a number of amendments to certain tax exemption provisions

The details are as follows:

• to include Ennis 2040 (Strategic Development) Designated Activity Company, and Nature Partners Company Limited by Guarantee in the list of bodies corporate that are exempt from corporation tax.
• to include the Grangegorman Development Agency and the National Paediatric Hospital Development Board in the list of specified non-commercial state-sponsored bodies that qualify for exemption from certain tax provisions under section 227 of the Taxes Consolidation Act 1997. This section exempts income arising to specified bodies from income tax and corporation tax which would otherwise be chargeable to tax under cases III, IV and V of Schedule D.
• to include Ennis 2040 (Strategic Development) Designated Activity Company and the National Paediatric Hospital Development Board in the list of bodies that may avail of exemption from tax on chargeable gains which treats any gain accruing to such bodies as not being a chargeable gain.

These bodies are not-for-profit bodies and/or non-commercial state- sponsored bodies and exemption from taxation avoids circular payments in and out of the Exchequer. The exemptions are to take effect from the dates of establishment of the bodies.