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Matheson Tax update: Finance (No.2) Bill 2013

AUTHOR(S): Joe Duffy, Aidan Fahy, Catherine Galvin, Turlough Galvin, Shane Hogan, Alan Keating, John Kelly, Greg Lockhart, Mark O’Sullivan, Liam Quirke, John Ryan, Gerry Thornton
PRACTICE AREA GROUP: Tax, VAT
DATE: 29.10.2013

The Irish Government published the Finance (No.2) Bill 2013 (the “Bill") on October 24, 2013. The Bill contains a number of measures which will be of interest to international companies.

Corporate Residence Rules

The Bill proposes measures to curb the existence of so-called “stateless” companies. The proposed legislation is along expected lines and has a narrow application to deal with mismatches which can arise as a result of the different tests for residence which exist in Ireland and in, for example, the United States. The proposed change to the residence rules would, if enacted, treat an Irish incorporated entity as being resident in Ireland in the following circumstances:

  • The entity is managed and controlled in a jurisdiction which has a treaty in place with Ireland and that entity would only be resident in that treaty jurisdiction if it were incorporated in that jurisdiction.
  • The entity is not otherwise treated as resident in Ireland under Irish domestic rules, but would be if it were also managed and controlled in Ireland.
  • The entity is not, apart from this amendment, regarded as resident in any territory.

The proposed changes to the residency rules will have effect from the following dates:

  • October 24, 2013 for companies which are formed on or after that date
  • January 1, 2015 for all companies incorporated prior to October 24, 2013

R&D Tax Credit

The Bill contains a number of amendments to the existing R&D tax credit regime, including:

  • An increase to the amount of expenditure which is eligible for the credit without reference to the 2003 base year from €200,000 to €300,000.
  • An increase to the proportion of expenditure which can be outsourced to third parties from 10% to 15%.
  • Certain amendments to the administration of the claw-back provisions in circumstances where relief has been surrendered to employees.

Stamp Duty – Exemption for Shares listed on ESM

The Bill introduces an exemption from Irish stamp duty on transfers of shares of companies which are listed on the Enterprise Securities Market (ESM) of the Irish Stock Exchange.

Interest Withholding Tax – Extension of Treasury Company Exemption

The Bill extends an existing exemption from interest withholding tax which is applicable to Irish treasury companies (companies that advance money in the course of a trade which includes lending of money). The new exemption will permit such treasury companies to pay interest free from withholding tax to other Irish resident companies which are part of the same 51% group.

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