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Independent review of Ireland's corporate tax code

An independent review of Ireland’s corporate tax regime highlighted some important considerations. John Gulliver and Niamh Keogh discuss the key points.

Niamh Keogh MCHNiamh Keogh, of counselT: +353 1 614 5000E: nkeogh@mhc.ieJohn Gulliver 90 x 100John Gulliver, tax partnerT: +353 1 614 5007E:

The Irish Department of Finance published Seamus Coffey’s ‘Review of Ireland’s Corporate Tax Code’ on September 12 2017. The terms of reference of the review excluded any consideration of changing the 12.5% corporation tax rate for Irish tax resident companies or non-resident companies carrying on a trade in Ireland from a branch or agency. This is in line with the pledge of successive Irish governments to international investors that the 12.5% rate will remain a permanent feature of the Irish corporate tax code, and Ireland will defend any attempt by the EU to remove Ireland’s exclusive right to determine the tax rate applying to companies trading in Ireland.

Whilst the review highlights that the Irish corporate tax code is transparent and competitive, the review highlights the consideration that needs to be given to some extension of Ireland’s transfer pricing code by 2020. For large groups operating across multiple jurisdictions the key areas are as follows:

  • Under current Irish transfer pricing law “any agreement or arrangement of any kind (whether or not it is, or is intended to be legally enforceable) the terms of which were agreed before July 1 2010 is outside the scope of Ireland’s transfer pricing regime. Coffey has suggested consideration be given to ending this grandfathering.
  • The current Irish transfer pricing regime applies only to arrangements involving the supply and acquisition of goods, services, money or intangible assets between certain associated persons where the consideration payable or receivable falls to be taken into account for tax as profits of a trade carried on in Ireland of large groups (i.e. transactions that are subject to tax at 12.5%). Coffey has suggested consideration be given to Ireland extending its transfer pricing regime to non-trading transactions and capital transactions. Whilst the Irish gains tax code already has deemed market value rules for disposals of assets, it does not extend tax to the disposal of liabilities or indeed corporates’ capital maintenance arrangements. Any changes could impact structures that use Irish interest free loans between associated companies, debt equity ratios on inward investment and back–to-back royalty arrangements.
  • The report recommends that Irish transfer pricing should be updated for the latest 2017 OECD Guidelines on transfer pricing. Currently, Irish transfer pricing takes guidance from the OECD transfer pricing guidelines dated July 13 1995 as supplemented by the OECD report dated April 11 1996 on intangible property and services and the OECD report dated July 24 1997 on cost contribution arrangements and as modified by the 2010 update.

The report recommends a consultation period in advance of the introduction of any changes.

This article was prepared by Mason Hayes & Curran, International Tax Review’s correspondents in Ireland. 

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