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EU Anti-Avoidance Directive and Irish Holding Companies – Taxation of Dividends

The hastily adopted EU Anti-Avoidance Directive ("Directive") requires European Union (EU) member states to introduce or amend their existing Controlled Foreign Companies ("CFC") legislation.

Unlike many EU countries, Ireland taxes dividends at either a 12.5% or 25% corporation tax rate and operates a wide-ranging credit system for double tax relief. Ireland taxes dividends as an alternative to having a CFC regime. With the BREXIT vote decided and the UK expected to highlight the benefit of the UK as a holding company location which exempts dividends, the Irish may change their tax regime.

Under the Directive, Ireland is required to introduce CFC law by December 31 2018, which is to take effect from January 1 2019. While Ireland has amended its tax code to ensure dividends can flow tax-free between EU companies by way of a deemed tax credit, the requirement to introduce a CFC regime increases the pressure on the Irish Department of Finance to introduce law to exempt dividends from tax.

With the new Irish coalition government beginning to get to grips with its work, it should be fair to expect the Irish Department of Finance to at least consider over the summer the possibility of introducing legislation to exempt foreign dividends received by Irish holding companies. Such a move would be welcome and could considerably enhance the attraction of Ireland as a holding company location.

This article was prepared by Mason Hayes & Curran, International Tax Review’s correspondents in Ireland. For further information, please contact:

John Gulliver 100

John Gulliver, tax partner.
T: +353 1 614 5007
E: jgulliver@mhc.ie

Robert Henson 100

Robert Henson, tax partner.
T: +353 1 614 2314
E: rhenson@mhc.ie

Maureeen 100

Maura Dineen, tax partner.
T: +353 1 614 2444
E: mdineen@mhc.ie

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