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Ireland Signs Tax Treaty with Saudi Arabia

AUTHOR(S): Gerry Thornton
DATE: 01.12.2011

Ireland signed a double tax treaty with Saudi Arabia on 19 October 2011 bringing to 64 the number of tax treaties which Ireland has signed.
The signing of this treaty means that, by virtue of domestic Irish exemptions, an exemption from Irish dividend withholding tax may now be available for payments by Irish companies to Saudi Arabian shareholders and that Ireland’s substantial shareholder relief may now be claimed in respect of disposals of Saudi Arabian subsidiaries, subject in each case to satisfying certain conditions.

The treaty contains an expanded definition of permanent establishment to include ‘service’ permanent establishments, where services (including consultancy services) are provided in the source country for a period of more than six months in any 12 month period.  This is a recent trend for Irish tax treaties and reflects the request of treaty parties to widen the traditional definition of permanent establishment.  The definition has also been expanded to include ‘insurance’ permanent establishments, where an insurance company collects premiums or insures risks in the territory of the source country.  This is a relatively unusual provision for Irish tax treaties.

The treaty also specifically deals with branch withholding tax.  Where an Irish resident company has a permanent establishment in Saudi Arabia and receives remittances (including deemed remittances) of profits from such permanent establishment, Saudi Arabia is permitted to tax such remittances up to a maximum rate of 5%.  Again, this would not normally appear in Irish tax treaties.

Finally, there is a helpful exemption from capital gains on the disposal of non-listed shares where a person holds less than 25% of the share capital of the company.

This new treaty again highlights Ireland’s commitment to providing a first class environment for international trade and business and is a further indication of Ireland’s continued efforts to extend its treaty network in the Middle East.  

This article first appeared in International Tax Review (December 2011).



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