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Ireland: Briefing Paper Gives Insight into Ireland’s International Tax Policy
The Irish Department of Finance published a briefing document in June 2017 that was prepared for the newly appointed Minister for Finance (the Brief). In addition to providing an overview of Ireland's business plan and economic priorities, the Brief provides an updated insight into Ireland's international tax policy.
Irish corporation tax regime
The Brief notes that Ireland's corporation tax regime is a core part of the country's economic policy as a long-standing anchor in attracting foreign direct investment. Ireland's competitive corporation tax policy offering is described as encompassing:
- A 12.5% rate which is "iconic";
- A best-in-class research and development (R&D) tax credit;
- A competitive regime for intellectual property (IP); and
- A knowledge development box offering an effective rate of 6.25%
Trends in Irish corporation tax
The Brief also outlines trends in Irish corporation tax, including the recent changes to the rules regarding company tax residency. The Brief confirms that, based on current projections, corporation tax receipts for 2017 will account for 15.2% of the total annual tax take.
The Brief highlights that recent changes in international tax have resulted in Ireland being increasingly viewed as the most suitable location globally to onshore IP, noting the increased claims for IP amortisation. The Brief also highlights Ireland's success in creating a R&D hub, noting that the R&D tax credit is responsible for attracting 60% of Ireland's R&D activities.
EU tax reform
The Brief acknowledges that significant work on international tax reform has been undertaken at EU level in recent years. The following points in the Brief are particularly noteworthy in this context:
- Ireland's interest limitation rules are at least "equally equivalent" to the rules proposed in the Anti-Tax Avoidance Directive (ATAD);
- Ireland intends to apply to the European Commission to extend the deadline for transposition of the ATAD interest limitation rules to January 1 2024 (we understand this application has since been made); and
- Significant progress on the common consolidated corporate tax base is unlikely.
OECD transfer pricing guidelines
Ireland is described in the Brief as an "early adopter" of OECD BEPS reforms, referring to the domestic measures already introduced to date to give effect to many BEPS proposals. The Brief notes that important decisions remain to be taken, in particular in the context of transfer pricing which is described as "a very hot issue internationally".
The Brief notes that the incorporation of the 2017 edition of the OECD transfer pricing guidelines (the updated guidelines) into domestic Irish law is a key part of the ongoing independent review of the Irish corporation tax system. In the meantime, the updated guidelines will therefore only apply in the context of double tax treaty disputes involving Ireland.
The Brief provides a useful insight into Ireland's international tax policy. The Brief is particularly timely in light of recent developments in tax policy internationally and given the ongoing review of Ireland's corporation tax system, the results of which are expected later this year. It is clear from the Brief that Ireland remains committed to ensuring its corporation tax offering remains competitive, robust and fully compliant with evolving international standards.
This article first appeared in the International Tax Review on Wednesday 23 August and was co-authored by Joe Duffy and Tomás Bailey.