What’s new in the 2018 Finance Act

The single flat tax of 30% on capital income and capital gains, also known as the flat tax, is set to be applied to capital income from 2018. This rate consists of 12.8% for income tax and 17.2% for social security contributions.

However, taxpayers have the option to choose taxation on a progressive scale, without an income tax allowance, if it proves more beneficial than the Flat Tax.

For company managers, the deductions for length of ownership are removed, and the finance bill presents two options:

• The capital gain can be taxed at the single flat rate of 30%. (This is known as taxation at the fixed levy.)
• Alternatively, the capital gain can be taxed at the rate of the marginal tax bracket, without any deductions for the length of ownership. (This is known as taxation at the scale.)

The only deduction that remains is the €500,000 allowance for company directors who retire upon selling their company. This allowance will be maintained until 2022. If a director chooses taxation on the scale, they won’t be able to combine the fixed allowance benefit with the proportional allowance for length of ownership.

In conclusion, it’s important to remember that capital gains from the sale of a company will now be taxed at a single rate of 30%. This could be seen as unfortunate news for SME leaders who previously benefited from an 85% allowance for SMEs less than 10 years old.