News & Insights

Review of Ireland’s Corporation Tax Code

On Budget Day 2017, the Irish Finance Minister confirmed that Seamus Coffey had been appointed as the independent expert to carry out a review of Ireland’s corporate tax code. A public consultation period is now open for interested parties to express their views on matters within the terms of reference of the tax code review.

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Irish Budget 2017 – Financial Services Focus

The Irish Finance Minister announced Budget 2017 on 11 October 2016. Overall there was little of relevance to the financial services sector in Ireland. Disappointingly, no further information was provided on the already announced changes to Ireland’s Section 110 securitisation tax regime (for non-residents investing in SPVs holding assets linked to Irish real estate). In his speech the Minister also confirmed that changes to the taxation of Irish investment fund vehicles (e.g. a QIAIF in the form of an ICAV), where the fund was used to acquire Irish real estate assets, will also appear in the Finance Bill following a consultation process. The uncertainty in this area therefore drags on for a number of additional weeks.

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Proposed changes to Section 110 – Irish real estate assets

On 6 September 2016 the Irish Finance Minister announced proposed changes to Ireland’s Section 110 securitisation tax regime related to the holding of assets linked to Irish real estate. The vast majority of Section 110 companies will remain unaffected as the proposed changes do not impact upon non-Irish assets. The changes follow considerable Irish political and media attention on the use of Section 110 SPVs to acquire loan portfolios sold by Irish banks and NAMA which were backed by Irish land and commercial and residential property.

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Country by Country Reporting (CbCR)

Following the introduction of Country-by-Country Reporting (“CbCR”) legislation in The Irish Finance Act 2015 , the Irish Revenue has now published CbCR regulations for Irish parented multinational enterprises (“MNE”). The legislation and regulations require these Irish MNEs to file an annual report with the Irish Revenue Commissioners (“Revenue”). The legislation applies to Irish MNEs with a consolidated group revenue exceeding €750m per annum. The first reports will be in respect of fiscal years starting on or after 1 January 2016 with filing due during 2017.

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Ireland’s Knowledge Development Box

Ireland has introduced a new Knowledge Development Box (“KDB”) tax regime which provides for an effective corporation tax rate of only 6.25% on qualifying profits. The KDB is a positive development for Irish FDI and innovation and adds to Ireland’s existing Research & Development (“R&D”) tax credit regime, capital allowances for intangible assets regime and the cemented 12.5% low standard rate of corporation tax. Importantly in the current BEPS environment, the KDB is the world’s first OECD-compliant tax incentive regime. It’s application and the full benefits of the regime may be of most relevance to Irish domestic groups rather than multinationals with Irish operations as outlined below.

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Irish Finance Bill 2015 – international aspects

Following on from the release of Budget 2016, the Irish Finance Bill 2015 was published on 22 October 2015. The Bill outlines the underpinning legislation for measures announced in the Budget together with a number of unannounced provisions. A number of important measures relevant to the financial services sector and companies with international operations were included in the Bill as outlined below.

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EC infringement procedures – French DWT

On 24 September 2015, the European Commission (“EC”) released a statement on infringement procedures against France in respect of refunds of Dividend Withholding Tax (“DWT”) on French dividends due to European investors. The EC has asked France to comply with the procedural rules when it refunds DWT deducted at source to non-residents.

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VAT – Portfolio Management Services

On 4 September, over three years after the Court of Justice of the European Union (“CJEU”) ruling in the Deutsche Bank AG (Case C-44/11), the Irish Revenue Commissioners (“Revenue”) issued their view on the VAT treatment applicable to portfolio management services.

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Tax Treatment of Travel and Subsistence Expenses

The consultation process initiated by the Irish Finance Minister, Michael Noonan T.D., on the tax treatment of expenses of travel and subsistence (“travel expenses”) for employees and office holders (i.e. directors) closes on Friday, 21 August 2015.  The objective of the consultation is to facilitate a review of the current tax law and practice in this area.  Recent guidance from the Irish Revenue Commissioners (“Revenue”) has led to considerable uncertainty as to the appropriate tax treatment of certain travel expenses.  In response, interested parties, including the funds industry, lobbied for greater certainty and fairer application of the relevant provisions which resulted in this consultation process.  The outcome of this process will be of interest to investment fund directors, particularly non-Irish resident directors travelling to Ireland to attend board meetings.

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