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Ireland adopts prudent approach to MLI implementation

Ireland’s recent trend of swiftly implementing BEPS measures has been continued with the signing of the multilateral instrument (MLI) on June 7 2017.

Ireland’s position on MLI implementation is further evidence of a prudent commitment to the BEPS project and to securing greater certainty for taxpayers.

Covered agreements

Ireland has included 71 of its 73 double tax treaties (DTTs) as ‘Covered Tax Agreements’ for the purpose of the MLI. These DTTs will be impacted by MLI changes if the relevant DTT partner also opts to treat the Irish DTT as a ‘Covered Tax Agreement’. To date, 50 of Ireland’s DTT partner countries have signed the MLI and 47 have designated the Irish DTT as a ‘Covered Tax Agreement’. Most notably, the US has not signed and, as such, the MLI will not apply to the Ireland / US DTT.

It has been bilaterally agreed not to include the Ireland / Netherlands DTT as a ‘Covered Tax Agreement’ as this DTT is currently being renegotiated. Ireland will need to agree with Switzerland the precise wording on how the provisions of the existing DTT will be amended by the MLI. Norway’s position remains unclear pending the completion of national procedural requirements.

What’s in? – Key points

The key updates to Ireland’s DTTs effected by the MLI will be the: 

  • Adoption of a principal purpose test;
  • Adoption of a tie-breaker test based on mutual agreement to determine tax residence for dual resident entities; and
  • Adoption of a number of measures, including mandatory binding arbitration, to resolve DTT disputes more efficiently.

What’s out? – Reservations on PE changes

Ireland’s reservations to the MLI are particularly interesting. Ireland will not adopt the changes to the permanent establishment (PE) definition designed to treat commissionaires as PEs. This development should ensure that the certainty surrounding the existing Irish law and practice around commissionaires and similar arrangements is preserved.

In addition, Ireland will not adopt the narrower specific activities exemption to PE status proposed by the MLI. Therefore, the MLI will not impose a ‘preparatory or auxiliary’ requirement on the specific activities listed in Ireland’s DTTs as not constituting a PE. Ireland will however adopt the anti-fragmentation rule meaning that, where applicable, the application of the specific activities exemption will not be confined to the activities of the relevant non-resident taxpayer but will depend on the entire group’s activities in Ireland.


Ireland has adopted a prudent and positive approach to the MLI which is consistent with its position on recent international tax policy developments generally. Ireland’s position on the MLI indicates that it remains committed to maintaining an open, transparent, stable, and competitive corporate tax regime.

It is unclear whether the MLI will be ratified in the Finance Act 2017. The Department of Finance has indicated that a number of legal questions on the ratification of the MLI are currently being considered by the Irish Attorney General’s office. It is possible that this could delay Irish ratification until after 2017.

This article was compiled by Joe Duffy and Tomas Bailey from Matheson.

Joe DuffyJoe Duffy
Partner, Matheson
Tomas BaileyTomas Bailey
Solicitor, Matheson

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