In October 2017 a public consultation was launched by the Minister for Finance on Ireland's corporation tax code. The consultation followed on from the recommendations of independent expert Seamus Coffey, which were detailed in the recently published 'Review of Ireland's Corporation Tax Code' (Coffey Report). The consultation sought views on the implementation of a number of measures into Irish tax law. Among the modernising measures within the scope of the consultation were:
- The transposition of the EU Anti-Tax Avoidance Directive (ATAD) into Irish law;
- The incorporation of the 2017 OECD transfer pricing guidelines (2017 Guidelines) into Irish domestic law; and
- The move to a territorial corporation tax base in respect of income from foreign branches and foreign source dividends.
The consultation period closed on January 30 2018 and the submissions made will now form part of the Minister for Finance's consideration of the recommendations in the Coffey Report. Given that the ATAD changes must be implemented by January 1 2019 it is expected that in the immediate term the consultation will influence Ireland's approach to the implementation of the ATAD. Of particular importance for Ireland in this respect will be the introduction of controlled foreign company (CFC) rules into Irish law for the first time.
What CFC regime is Ireland likely to adopt?
It is as yet unclear which option Ireland will adopt when implementing a CFC regime in accordance with the ATAD. Many stakeholders participating in the consultation argued that from a policy perspective it would be more appropriate for Ireland, in designing its CFC regime, to adopt the approach that treats income diverted from Ireland as CFC income. The alternative approach to defining CFC income could result in income that has no connection with Ireland falling within the Irish CFC charge.
Implementing the BEPS transfer pricing changes
The incorporation of the 2017 Guidelines into Irish law is something that taxpayers will require adequate lead-time to prepare for. The changes agreed under BEPS, particularly with respect to allocation of risk and the pricing of intangibles amount to material changes to the approach outlined in the 2010 OECD transfer pricing guidelines. Many companies are already in the process of reviewing their transfer pricing policies but need to be given time to understand how the 2017 Guidelines will apply to existing structures.
Comment on next steps
Draft legislation on the introduction of a CFC regime into Irish law will be published in October at the latest. Stakeholders advocated strongly in favour of being afforded adequate opportunity to review and comment on the draft legislation. This would result in fewer unintended consequences and in a regime that is workable, something that is in everyone's interests.
In addition to consulting on draft legislation, taxpayers would welcome draft guidance being published by the revenue commissioners as early on in the process as possible (and ideally at the same time draft legislation is made available) for comment.
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