To implement Budget 2014 and deal with other matters, draft legislation will be released upon publication of the Finance Bill later this month.
As expected, Budget 2014 reaffirms the cornerstone 12.5% corporate tax rate for any trading activity by a corporate in Ireland. With Ireland's EU membership, its active participation in OECD matters including the OECD base erosion and profit shifting (BEPS) initiative, automatic exchange of information, FATCA agreement with the US and its network of 69 double tax treaties, the country remains one of the key EU locations from which to transact and establish investment platforms.
Key fiscal incentives in this year's budget include:
- Capital gains tax exemption for foreign and local property investors
For those looking to invest in Irish property, an exemption from Irish capital gains tax of currently 33% is available for properties purchased between December 7 2011 and December 31 2014 (previously December 31 2013). The exemption provides that if property purchased in this period is held for seven years, the gains accrued in that period will not attract Irish capital gains tax.
- Refinement of research and development credits
In 2013 Ireland reviewed its R&D credit regime. The regime remains with further enhancements. The current regime provides a tax credit of 25% of qualifying expenditure together with, in certain circumstances, a corporation tax deduction of 12.5%. The relief is targeted at incremental expenditure over that spent in base year 2003.
Budget 2014 provides:
· Incremental spend of €300,000 ($400,000) now qualifying for relief regardless of the 2003 base year amount;
· A commitment to abolish any reference to the 2003 base year in future budgets;
· Ability to claim R&D credits on 15% (previously 10%) of outsourced activity; and
· A non-specific commitment to make it easier for companies to transfer the tax-free benefit of the R&D tax credit to key employees.
International tax charter and Irish incorporated non-resident companies
Additionally, to further demonstrate Ireland's commitment to its low tax regime, whilst being one of the most open economies in the world, the Irish Department of Finance today published Ireland's International Tax Charter. In continuing Ireland's continued commitment to EU and OECD principles and its new International Tax Charter, the Finance Bill will contain measures to prevent the use of Irish incorporated companies that are "Stateless" in terms of the place of tax residence. Such measures are likely to prevent the establishment of new Irish incorporated companies that are not liable to tax anywhere in the world by means of tax arbitrage in certain tax treaty jurisdictions.
The text of the charter is set out below:
| Ireland’s International Tax Charter Ireland is committed to maintaining an open, transparent, stable, and competitive corporate tax regime. We achieve this by: - Maintaining a rate of 12.5% on active trading income and 25% on passive non-trading income for all domestic and international businesses - Considering any proposed changes to our tax legislation in terms of their impact on sustainable jobs and economic growth |
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| Ireland is committed to full exchange of tax information with our tax treaty partners We achieve this by: · Responding to requests for information in an efficient manner · Providing information in as comprehensive a manner as possible taking account of the nature of the request · Complying fully with our responsibilities and obligations set out in tax treaties and other bilateral and multilateral agreements |
Ireland is committed to global automatic exchange of tax information, in line with existing and emerging EU and OECD rules We promote this by: · Timely transposition of relevant EU legislation into Irish law · Full participation in OECD developments, making appropriate provision in Irish law as necessary · Promoting the use of automatic exchange of information with tax treaty partners |
| Ireland is committed to actively contribute to the OECD and EU efforts to tackle harmful tax competition We achieve this by: · Active participation in the EU’s Code of Conduct and the OECD’s Forum on Harmful Tax Practices · Rejecting introduction of measures in national legislation which could constitute harmful tax competition · Eliminating any measure in national legislation in the event that it were found to be harmful · Active participation in the OECD Base Erosion and Profit Shifting project |
Ireland is committed to engage constructively and respectfully with developing countries in relation to tax matters including by offering assistance wherever possible We achieve this by: · Supporting international efforts to build developing country capacity to benefit from enhanced global tax transparency. · Promoting the extension of Country-by-Country Reporting to areas beyond the “extractive” sector and greater international reporting to competent authorities · Offering financial support to regional initiatives to strengthen tax administrations in Africa. · Strengthening the Public Financial Management systems of developing countries." |
John Gulliver (jgulliver@mhc.ie; +353 1 614 5007) is head of tax, and Robert Henson (rhenson@mhc.ie; +353 1 614 2314) is a partner, at Mason Hayes & Curran, principal Corporate Tax correspondent for Ireland.
