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Ireland Updates its International Tax Strategy

AUTHOR(S): Joe Duffy, Shane Hogan
PRACTICE AREA GROUP: Tax
DATE: 26.10.2016

Ireland's annual budget statement was announced by the Minister of Finance on October 11 2016. The minister confirmed Ireland's commitment to the 12.5% corporation tax rate (a statement which has become a staple in recent budgets) and also confirmed that "nobody is asking for it to be changed".

In addition, an updated version of Ireland's International Tax Strategy (the Strategy Paper) was published. In the Strategy Paper, the minister said: "We need to defend the integrity of our tax system; taxpayers need certainty on what their responsibilities are; and we need to defend our sovereign competence in taxation."

The Strategy Paper recognised the changes that have been made by Ireland to reflect the "significant shifts in the international tax landscape" and it outlined what other changes Irish taxpayers should expect over the coming years:

  • Ireland's implementation of the recommendations made under the OECD BEPS Project will continue over the coming years. In this respect, Ireland must consider what changes are needed to the Irish transfer pricing rules to ensure they meet the standards agreed under the BEPS plan;
  • Ireland has been an active participant in the work on the BEPS Multilateral Instrument, which is due to be available for signature in 2017 – whether or when Ireland will sign the Multilateral Instrument, however, is not confirmed in the Strategy Paper;
  • The implementation of the EU Anti-Tax Avoidance Directive (ATAD) is regarded as a "significant step" towards the implementation of BEPS. The first implementation deadline for the ATAD is January 1 2019 (with later implementation deadlines for the exit tax and  potentially the interest deductibility rules). During 2017, it is expected that Ireland will hold a consultation on the implementation of the various strands of the ATAD;
  • Ireland has agreed to undertake a review of its corporation tax system during the first half of 2017 and an independent expert has been appointed for this purpose. One of the points to be considered is whether additional steps are required to implement the BEPS recommendations;
  • The Strategy Paper refers to the proposed relaunch of the EU common consolidated corporate tax base (CCCTB), stating that "Ireland will engage fully in discussions on this proposal while assessing whether it is in our best interest". In regards to other EU corporate tax developments, it robustly states its position: "Ireland continues to disagree with any harmonisation of tax rates, minimum levels of taxation, or the inappropriate encroachment of state aid rules into the core member state competence of taxation";
  • Ireland reaffirms its commitment to tax transparency in the Strategy Paper noting that Ireland has been a supporter of the changes made to the European Directive on Administrative Cooperation, providing for automatic exchange of information in relation to tax rulings issued by tax authorities in EU member states and the automatic exchange of country- by-country reports. Ireland is also a supporter of a further change that will give tax authorities in EU member states access to "know your customer" information held by financial institutions; and
  • The Strategy Paper recognises the potential impact that Brexit will have on Ireland and that the economic impact will ultimately depend on the future relationship between the EU and the UK. Ireland is in the process of becoming "Brexit Ready" and in this respect a further policy paper was published outlining Ireland's initial responses to Brexit.

The Finance Bill implementing the changes announced in the budget statement was published on October 20 and will likely be enacted before the end of 2016. The changes identified in the Strategy Paper will not be made until later years.

This article first appeared on International Tax Review (26 October 2016).

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