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Ireland’s Corporation Tax Roadmap

AUTHOR(S): John Ryan
KEY CONTACT(S): Matthew Broadstock, Joe Duffy, Aidan Fahy, Catherine Galvin, Turlough Galvin, Shane Hogan, Alan Keating, John Kelly, Greg Lockhart, Barry McGettrick, Catherine O’Meara, Mark O’Sullivan, Liam Quirke, John Ryan, Kevin Smith, Gerry Thornton
PRACTICE AREA GROUP: Tax
DATE: 07.09.2018

On 5 September 2018, the Department of Finance issued Ireland’s Corporation Tax Roadmap (the “Roadmap”) setting out the next steps in implementing changes required at EU level under the Anti-Tax Avoidance Directives (“ATAD”) and the OECD’s Base Erosion and Profit Shifting project. The Roadmap confirms the timing of these key changes.

The key changes confirmed in the Roadmap are set out below. Our extended client briefing is available here and you can access the complete Roadmap here.

Key Changes - Implementation of ATAD

The implementation of ATAD comprises five elements:

1. Controlled foreign company rules

  • Effective date: 1 January 2019
  • Ireland will adopt an Option B approach
  • Consultation on text of draft rules expected before the end of September 2018

2. General anti-abuse rules

  • No change required under Irish law

3. Interest limitation rules

  • Effective date: may take effect earlier than 1 January 2024
  • Consultation on implementation of Irish interest limitation rule will commence during the third quarter of 2018

4. Anti-hybrid rules

  • Effective date: 1 January 2020 (reverse hybrid rule will take effect on 1 January 2022)
  • Consultation on implementation of Irish anti-hybrid rules will commence during the third quarter of 2018

5. Exit tax

  • Effective date: 1 January 2020
  • Rate to be confirmed

Key Changes - Transfer Pricing

The 2017 OECD Transfer Pricing Guidelines will be incorporated into Irish law and will apply from 1 January 2020. Further consultation is expected on broader changes to the Irish transfer pricing regime during 2019.

Key Changes - Moving to a Territorial Regime

The Roadmap confirms that there was overall support for moving to a territorial regime for foreign dividends and branch profits when the Government consulted earlier this year. Further consultation on this proposal will be expected during 2019.

Key Changes - Multilateral Instrument

The MLI is expected to update Ireland’s double tax treaties from 1 January 2020. Consideration is also being given to incorporating anti-avoidance rules into Ireland’s domestic withholding tax exemptions.

Comment

The Roadmap confirms the direction of Irish corporation tax reform over the coming years. Although the Irish corporation tax system, similar to the tax systems in other EU jurisdictions, will undergo a period of change to reflect new international tax norms, the commitment to continue to consult with key stakeholders throughout this process is welcome. Matheson will continue to participate in this consultative process.

If you would like further details on any aspect of the Roadmap or how it applies to your transactions, please speak to your usual Matheson contact or to any member of our Tax Department.

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