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Taxation

IMPORTANT NOTICE (issued by Forest Service February 2010):
Tax Clearance Certificates are required for all forest owners in receipt of annual forestry premium payments exceeding €10,000. Tax clearance certificates should be forwarded to the Forest Service, Johnstown Castle Estate, Co. Wexford. Certificates are also required for grants.

Income Tax Exemption*
Profits or gains, including premium income, arising from the occupation (having the use) of woodlands in the State are normally not taken into account for the purpose of the Tax Acts*, provided that woodlands are managed on a commercial basis and with a view to the realisation of profits. [S.232 Taxes Consolidation Act, 1997].

The income levy which came into effect on 1 January, 2009 is generally applicable to income from woodlands in the hands of individuals. See Income Levy below.

*Changes introduced in Section 17 of the 2006 Finance Act, and modified in the 2007 Finance Act, and being further modified improved the 2010 Finance Act, limit the amount of reliefs, including woodland exemptions, used by certain high income individuals. These are deemed to be those with income of €125,000 or more annually from all sources and also having specified reliefs (such as capital allowances) and exempted income, such as profits from woodlands, of €80,000 or more. This could give rise to additional tax in some circumstances even where woodland profits are less than the threshold of €80,000. In all cases where the woodland profits for an individual exceed €125,000 in a year a tax charge could arise so even an average sized clearfell needs to be planned not just to maximise return but also to eliminate or minimise tax. Owners are advised to keep accounts of costs and expenses every year and to discuss the implications with Woodland from whom a more detailed note is available. Contact John Phelan

The Social Welfare (Miscellaneous Provisions) Act 2008 (S. 8) which came into effect on 1 January 2010 provides that income from dividends arising from stallion fees, stud greyhound fees and profits from the occupation of certain woodlands will be taken into account in estimating reckonable income for PRSI purposes.

There is no Capital Gains Tax (CGT) on trees
Capital Gains arising on the sale of woods are exempt from CGT in the hands of the individual. Any gain attributable to the land is included in the computation of CGT; indexation relief may eliminate any chargeable gain. [S. 564 Taxes Consolidation Act, 1997]

Capital Acquisitions Tax - significant relief
Gifts or inheritances of woodlands within the Republic of Ireland can qualify for Agricultural Relief under CAT. This is a complex area of taxation requiring careful assessment of individual circumstances.

Value Added Tax (VAT) may be reclaimable
Forestry, for VAT purposes, is similar to farming activities. Non registered farmers may, in some cases, be able to claim VAT on expenditure on ground preparation and fencing. Claims by Unregistered Farmers for Refund of Value Added Tax should be sent to: Revenue Commissioners, River House, 3rd Floor, Charlottes Quay, Limerick (Lo-Call 1890 252449) or look up the Revenue website [Value Added Tax (Refund of Tax) (No. 25) Order, 1993]

Stamp Duty
The 1990 Finance Act exempted from stamp duty the value attributable to growing trees, managed commercially, on conveyances or transfers of forestry land by sale or lease. Conditions apply.

Property Tax
The Local Government (Charges) Act, 2009 was signed into law in July 2009.
It introduced a €200 charge applicable to any residential property which is not the principle private residence of the owner, with certain exemptions.

For 2009, the charge applied to properties owned on 31 July, 2009 and payment was due by 30 September, 2009. The €200 charge is not deductable when calculating taxable income.

It is unlikely that any forest property will have a chargeable residential property but if there is any doubt whatsoever e.g. where a farm was purchased with the intention of selling off a residential property but that residential property remained in ownership on 31 July advice should be taken from your tax advisor as to whether a liability might exist.

In the Act a residential property means a building suitable for use as a dwelling and a dwelling includes a building used, or suitable for use, by an individual as a seperate dwelling.

PRSI
Profits from the occupation of woodlands managed on a commercial basis with a view to profit are taken into account when estimating reckonable income for PRSI purposes the relevant Section 8 of the Social Welfare (Miscellaneous Provisions) Act 2008 came into effect on 1 January 2010). This overwrites the provisions of Section 140, TCA 1997

Income Levy - Individuals
An Income Levy of 1% (2% on income over €100,100 per annum up to €250,120, 3% on income in excess of €250,120) came into effect on 1 January, 2009. It will apply, if the individual's gross income exceeds €18,304 p.a. or €20,000 for an individual aged 65 or over, to income, including premium income, from the occupation of certain woodlands. Gross income is determined after the deduction of legitimate expenses directly associated with the performance of the business in accordance with, according to Revenue guidance, the normal principles of commercial accounting. There are some exemptions.
The onus is on the owner to make a payment of income levy along with preliminary tax.

WOODLAND can guide you on forestry taxation matters. As individual circumstances can affect your tax position, we recommend that you refer to your tax advisor, if in doubt, before finalising an investment or disposal or family settlement decision.

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