The Irish government has refused to comment on the reasons for a decision by the US government to renegotiate its double tax treaty with Ireland. Negotiations between the two countries have yet to begin and it was not possible to forecast the impact on Irish businesses. Double tax treaties are critical in determining transfer pricing assessments.
An Irish government spokesman said it was too early to state if the renegotiation would have a positive or negative impact on economic relations between the two countries. Commentators in Dublin suggest that the the US government is likely to want a tougher regime.
In February, the US Treasury requested talks with the Irish government to renegotiate the US-Ireland double taxation agreement. The result of the discussions could mean a significant impact on the tax status of US multinational companies operating in Ireland, and for Irish residents who own property or assets in the US, say commentators.
The previous agreement, signed in 1997, was favourable to Ireland, as it was concluded before most of the country’s unprecedented economic growth. Dublin accountants said it was highly unlikely that the new agreement would be as generous to Ireland as its predecessor.
The 1997 agreement also sets out the treatment of dividends between subsidiaries and parent companies, and company royalties. This is especially significant for US multinationals with Irish holding firms, where large transactions between various jurisdictions are commonplace.
It could have implications for Irish residents who own property or shares in the US, as it covers Capital Acquisitions Tax between the two countries. US citizens working in Ireland could also be affected by any renegotiation.
