Focus on Forestry

SOUND underlying economics of both the Irish and European forestry assure long-term growth for the sector.

There is a significant level of domestic and foreign investment flowing into the forestry.

The Irish forest industry supports 11,939 jobs – mainly in rural locations – and the total value to the economy is €2.3 billion. At the end of 2013, forests covered 10.6% of Ireland’s land area.

The Irish forest and forest products industry, comprising the growing, harvesting and processing of forest products, makes a significant and increasing contribution to the Irish economy.

In comparison to the rest of Europe, Ireland has a low level of forest cover. Just over 40% of the land within the European Union (EU) is classified as wooded land.

This presents Ireland with much room for supply chain growth within its forestry sector.

Ireland has a very favourable tax regime for profits relating to forestry across many tax heads. INCOME TAX

The best known tax break applies to the income tax treatment of grants and premiums. The Tax Acts state that:

The profits or gains arising from the occupation of woodlands in Ireland, managed on a commercial basis and with a view to the realisation of profits (shall be exempt from income tax and corporation tax). Section 232 of the Taxes Consolidation Act, 1997.

In effect, this means that: forestry grants; forestry premiums; sale of forest; thinnings; and sale of clearfell are all exempt from income tax. The exemption also applies to dividends paid by companies out of profits in respect of woodland income.

For the exemption to apply, the lands must be managed on a commercial basis, with a view to the realisation of profits. The individual in receipt of the income must include same in their annual Income Tax Return.

However, the exemption does not extend to PRSI and to the Universal Social Charge; any profits are liable to these charges.

CORPORATION TAX Generally, companies are liable to tax on profits, but profits from forestry – and forest companies – are exempt. CAPITAL GAINS TAX (CGT) The Tax Acts provide that, in the case of an individual, profits from the sale of standing timber are exempt from capital gains tax. The provisions do not apply to companies or other bodies or persons.

A disposal of woodlands – that are part of the consideration which relates to the value of the trees – is to be excluded from the capital gains tax computation.

The sale of the underlying lands continues to be liable to CGT.