1. What is the most significant change to your region/jurisdiction's tax legislation in the past 12 months?
The Finance Act 2017 was diverse, from introducing targeted anti-avoidance legislation, to changes to the taxation of certain funds and securitisation companies, as well as introducing a sugar tax.
While there were welcome personal tax reforms to reduce the taxation of work, this was primarily focused on low and middle-income earners. However, the government did introduce changes to the taxation of share-based remuneration through the KEEP (Key Employee Engagement Programme) scheme.
A key policy development was the Seamus Coffey review of Ireland's Corporation Tax Code. Appointed as an independent expert by the government, the findings supported Ireland's commitment to a competitive, certain, fair and transparent corporate tax regime. However, it did recommend a range of corporate tax reforms and issues for consideration and consultation; some associated with the Organisation for Economic Co-operation and Development Base Erosion and Profit Shifting (OECD BEPS) Project and the EU Anti-Tax Avoidance Directive (ATAD), others specific to Ireland's corporate tax code.
Looking ahead, Ireland will see material changes to its corporate tax code with the introduction of Controlled Foreign Corporation rules due from January 1, 2019. Ireland will also need to focus on the legislation necessary to introduce the EU ATAD anti-hybrid rules and exit tax, and address other policy areas highlighted in the Coffey review, while ensuring that Ireland's 12.5% corporate tax regime and overall tax environment remains competitive, fair and transparent.
2. What has been the most significant impact of that change?
The impact of the Coffey review on the Irish corporate tax code really highlighted to business the future impact and need for consultation from a policy perspective in advance of the introduction of the mandatory ATAD provisions. Important decisions will need to be made against a commitment to a certain, stable and competitive corporate tax regime.
Clearly, for business, the impact is being felt in terms of the pace of international, EU and local country tax reform; how to navigate in an environment where this is set to continue for some time. This highlights the need for government to engage with and consult with business to provide certainty and stability in an Irish context.
3. How do you anticipate that change impacting your work and the market moving forwards?
The EU ATAD changes that Ireland will adopt are mandatory changes, which will impact all EU Member States. Therefore, it should make Ireland no less competitive compared with other EU Member States, provided Ireland makes appropriate policy choices. However, the changes will impact on the complexity of the Irish corporate tax system, and businesses will need assistance in navigating these new rules.
The impact of US tax reform is also potentially significant, given the strength of the Ireland-US economic relationship, with many Irish-headquartered businesses invested into the US, and Ireland as a significant location for US foreign direct investment. Many groups are still getting to grips with the full impact of the US tax changes, and one is likely to see future restructuring of business and associated tax models.
4. How has this changed the way you offer tax advice?
From an ATAD perspective, there is no domestic legislation yet so carrying out impact assessments has been challenging and has involved providing scenario analyses depending on the routes chosen. For example, Modelling on M&A transactions needs to take account of future interest relief changes for debt financing. Future-proofing advice and considering the impact of future tax changes has become more critical than ever in advising business.
5. What potential other legislative changes are on the horizon that you think will have a big impact on your region/jurisdiction?
Potential changes to introduce a territorial tax regime, or recalibrate the transfer pricing rules in Ireland, would also be significant developments for businesses to address. We will also see Ireland's ratification of the Multilateral Instrument influencing relevant tax treaties in due course, and expect legislation to deal with the new EU Intermediaries Tax Directive, which will trigger mandatory reporting of certain cross-border transactions.
There are also ongoing calls for an overhaul of Ireland's personal tax system, to simplify it, and make it more competitive with a focus on reducing the tax burden on work.
6. What are the potential outcomes that might occur if those changes are implemented?
A potential move to a territorial regime, at least with respect to dividends (by introducing a foreign dividend participation exemption) would be a welcome development. This change would continue to strengthen Ireland as a holding company location.
7. Do you think that change will have a positive effect on both your practice and the wider regional/jurisdictional market?
Significant change in terms of international, EU and local country tax reforms, combined with increased compliance and reporting obligations, enhanced transparency (such as Country-by-Country Reporting), and tax authority interventions, should result in an enhanced business need for advice, support and resources in navigating these changes over the next few years.
8. How are issues surrounding the taxation of the digital economy affecting your jurisdiction?
As an EU Member State, Ireland is directly impacted by proposals at EU level to introduce its own digital tax measures. The EU digital tax proposals have triggered significant debate and concern within the business community, with strong support for the government's position that calls for an international solution on a global basis through an OECD process. There are strong concerns in relation to the negative impact, which a Digital Services Tax (even if it is just a short-term solution) could have within the EU, including risks associated with double taxation, and risks to competitiveness and investment.
Deloitte Ireland, Head of Tax Services
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