Ireland: Reviewing the corporation tax regime
International Tax Review is part of the Delinian Group, Delinian Limited, 4 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2024

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Ireland: Reviewing the corporation tax regime

intl-updates-small.jpg
osullivan.jpg
ryan.jpg

Mark

O’Sullivan

John

Ryan

Ireland's Minister for Finance (the finance minister) welcomed the results of the independent review of Ireland's corporation tax regime (the review) issued on September 12 2017.

"I welcome the emphasis given in the review to the importance of certainty, which is core to our corporate tax offering. Our 12.5% corporation tax rate remains the bedrock of our competitive corporation tax regime and that is not going to change," the finance minister said.

In addition to recognising the importance of certainty in the Irish tax code, a number of recommendations were made on foot of the review:

  • Reintroduce an 80% cap on the level of tax amortisation that may be claimed in respect of intellectual property (IP) acquired by Irish taxpayers – currently under Irish law, the cost of IP acquired by a company may be written off against taxable profits either in accordance with the IP amortisation in the financial statements or on a straight line basis over 15 years. Under the recommendation, taxpayers claiming the relief would be permitted to relieve a maximum of 80% of annual taxable profits. If the measure is introduced, certain companies whose tax amortisation equals or exceeds their taxable income would become subject to tax. The change would also result in the relief being spread-out over a longer period. It is possible that this change could be included in this year's Finance Bill (expected in October) and applied from January 1 2018.

  • Update Ireland's transfer pricing rules and incorporate the 2017 OECD guidelines – this recommendation was not surprising following Ireland's active participation in the OECD's BEPS project. Currently, Irish transfer pricing rules apply to arrangements entered into on or after July 1 2010. It has been recommended that arrangements entered into before that date and that are still in place should become subject to transfer pricing. Other recommendations made on transfer pricing included extending the rules to non-trading transactions (such as IFLs). It has also been proposed that in advance of making any changes to Ireland's transfer pricing rules, the matter should be opened for public consultation. Finally, it is recommended that transfer pricing changes are made no later than the end of 2020.

  • Ireland should consider moving to a territorial tax system – Ireland is one of the few OECD countries that taxes companies on a worldwide basis. While a comprehensive unilateral credit mechanism is provided for under Irish law, it is more necessarily complex to apply than an exemption system. The implementation of the Anti-Tax Avoidance Directive (ATAD) in 2019 will require Ireland to adopt controlled foreign company rules by January 1 2019. It is against this background that the recommendation to move to a territorial system (for dividends and foreign branch income) is made. As an alternative, it is suggested that Ireland should simplify the existing rules for calculating foreign tax credits. A public consultation on both options has been recommended.

  • Ireland should hold a public consultation on the implementation of the ATAD – as mentioned above, one of the broad themes of the review is the importance of certainty in the tax system. In light of this, one of the outcomes of the review is that Ireland should engage in pro-active consultation on tax changes. The ATAD is due to be implemented in part by January 1 2019 and will make substantial changes to the Irish tax system. In his statement on the publication of the review, the finance minister agreed that the "consultation process recommended in the review is important if we are to reduce uncertainty and have better-informed policy making". All recommended consultations are due to be launched when the annual budget is announced on October 10 2017 (budget day).

  • Ireland should ensure an adequately resourced competent authority – in light of the increased level of international tax disputes it was recommended that Ireland should ensure its competent authority is adequately resourced.

Next steps

On budget day, we should expect a number of consultations on Irish corporate tax to be launched. It seems likely that we will see an updated version of Ireland's international tax strategy that should give firmer indications on the timing of some of the proposed changes. Over the next three years, a number of important changes will be made to the Irish corporate tax rules. These changes are expected to be broadly positive and reinforce Ireland's commitment to a transparent, robust and competitive tax system. It is clear from the review that those changes will only be made following consultation and at the latest by the end of 2020.

Mark O'Sullivan (mark.osullivan@matheson.com) and John Ryan (john.ryan@matheson.com)

Matheson

Website: www.matheson.com

more across site & bottom lb ros

More from across our site

Jeremy Brown arrives at the firm after a near 16-year career with Deloitte
PwC could elect a woman into the senior leadership position for the first time; in other news, KPMG Australia has extended its CEO’s term
The Senate report into PwC’s scandal is titled ‘The cover up worsens the crime’
Law firms that are conscious of their role in society are more likely to win work, according to a survey of over 23,000 in-house professionals
The firm’s tax business generated a quarter of HLB’s overall revenues in 2023
While successful pillar two implementation will require collaboration across all units, a combination of internal and external tax advice is at the centre of the effort
Binance has also been accused of manipulating foreign exchange rates via currency speculation and rate-fixing
Six individuals should have raised questions over information they received but did not breach professional standards, according to the firm
The partnership of KPMG UK has installed Holt for a second term as CEO and senior partner; in other news, a Baker McKenzie partner has sued the IRS
HSBC has settled a claim originally worth £240m relating to a failed film tax relief scheme without admitting liability or wrongdoing
Gift this article