Government receives EU approval for major Business Tax Incentives and Reliefs which are now available under the Rural Renewal Scheme, the New Urban Renewal Scheme and the Cork Airport Enterprise Area.
The Minister for Finance, Mr. Charlie McCreevy TD, announced today (23 June, 1999) the commencement of important business tax incentives for three Irish development schemes following EU Commission clearance. These are the business reliefs under the Rural Renewal Scheme, the New Urban Renewal Scheme and the Cork Airport Enterprise Area. The tax incentives in question are accelerated capital allowances for the construction or refurbishment of commercial or industrial buildings.
The tax incentives for the Rural Renewal Scheme and the New Urban Renewal Scheme were legislated for in the 1998 Finance Act. The residential incentives in the rural renewal scheme were commenced on 1 June 1998 in the case of rented accommodation and on 6 April 1999 in the case of owner-occupied accommodation. The residential elements in the New Urban Renewal Scheme were commenced on 1 March 1999. The delay in bringing the business tax incentives for both schemes into operation until now was due to the need to clear these under the State Aid rules with the European Commission. Because of the longer than expected negotiations and the resultant delay in commencement it is proposed to extend the termination date for both schemes to 31 December 2002 for both the residential and business tax incentives.
As regards the business tax incentives for the two renewal schemes, the capital allowances will apply for qualifying expenditure incurred in the period from 1 July 1999 to 31 December 2002. The Year I capital allowances will be 50% for both owner-occupiers and lessors of the buildings constructed or refurbished under the two schemes, with the remaining 50% being written off at 4% per annum over the next 13 years. The necessary Commencement Orders will be made as soon as possible and the other necessary legislative changes will be included in the next Finance Bill with retrospective effect to 1 July 1999.
The capital allowances for the qualifying commercial buildings in the Cork Airport Enterprise Area will be on the same basis as outlined above for the other two schemes. The legislative provisions for the airport enterprise areas were contained in the 1997 Finance Act but were amended in the 1998 and 1999 Finance Acts. The qualifying period for expenditure for capital allowances purposes for this scheme will run from 1 January 1998 to 31 December 1999.
As was indicated by the Minister for Finance in a press release of 24 June 1998, the EU Commission opposed the granting of double rent and rates reliefs for these schemes as originally intended. Consequently, the 1998 Urban Renewal Act has already provided for a doubling of the capital allowances for commercial buildings from 50% to 100% for both the Rural Renewal and the New Urban Renewal Schemes. The present position therefore is that neither double rent relief nor rates relief will apply under any of the three schemes.
However, it should be pointed out that the doubling of the capital allowances from 50% to 100% for commercial buildings will serve as a major replacement incentive and will be particularly important for owner-occupied businesses.
Finally, it should be mentioned that discussions are still continuing with the European Commission in regard to tax incentives for areas in the Dublin docklands, including the Custom House Docks Area.