The Bill had some good news for non-resident directors of Irish companies, including investment funds, with the introduction of a tax exemption on vouched travel and accommodation expenses incurred by non-resident, non-executive directors travelling to attend meetings in their capacity as a director (meetings should therefore be broader than merely board meetings and should include other director/committee meetings together with meetings with service providers etc). This follows strong lobbying from industry after Revenue issued a statement in July 2014 that such expenses should be taxable. The new exemption will apply with effect from 1 January 2016. Although a welcome development, it leaves Irish resident non-executive directors in a discriminatory position over their non-resident counterparts. For example, an Irish resident non-executive director travelling to Dublin for a board meeting from Cork will not be exempt from tax on travel and accommodation expenses under this new provision. More clarity and common sense legislation is needed is this area and more generally on where one’s ‘normal place of work’ should be regarded as being located.
A new double taxation treaty with Ethiopia is ratified in the Bill together with new treaties with Zambia and Pakistan to replace existing tax treaties and a new protocol to the existing German treaty. Interestingly, the Bill also provides that Ireland can, in addition to entering in to double tax agreements with governments of other countries, now also enter in to such agreements with non-governmental authorities. This may be relevant to concluding new Irish tax treaties with certain jurisdictions such as Taiwan.
The Bill updates Irish tax legislation in respect of the EU Parent Subsidiary Directive (“PSD”), inserting a widening the anti-avoidance measures to exclude arrangements which are not genuine. This change comes following an EU Directive which EU Member States agreed to enact into domestic law by 31 December 2015. The amendment provides that the benefits of the PSD will not apply to a company where “an arrangement or a series of arrangements… has been put in place for the main purpose of, or one of the main purposes of which is, obtaining a tax advantage that defeats the object or purpose of the Directive”. The implementation of the PSD into Irish tax law, almost 25 years ago, ensures there is no withholding tax on dividends from an Irish resident company to its EU parent and for relief from Irish corporation tax on foreign dividends received by an Irish company for certain foreign tax suffered.
The Finance Bill provides for a new section in respect of the tax treatment of Additional Tier 1 (“AT 1”) capital instruments issued by banks in order to meet their Tier 1 capital requirements under Capital Requirements Regulation. AT 1 instruments have features of both debt and equity and so it was deemed necessary to confirm that from a tax perspective they will be treated as debt instruments. The coupon on these instruments will be regarded as interest and so should be deductible for tax purposes. The Bill also provides that, in practice, interest on AT 1 instruments should be exempt from interest withholding tax.
A number of relatively minor amendments relevant to the asset management sector were also included in the Bill. A technical amendment inserted the Irish Collective Asset-management vehicle (“ICAV”) into the definition of “collective investment undertaking” which is potentially relevant to the application of the US-Ireland Double Taxation Treaty. Other amendments seek to extend the denial of certain reconstruction and group reliefs to Irish capital gains tax to ICAVs. The commencement date for the latter being 1 January 2016. The Bill also confirms the extension of Ireland’s investment management exemption to non-resident Alternative Investment Funds (“AIFs”) which are managed by an Irish AIF Manager (“AIFM”). Such AIFs will not be brought within the charge to Irish tax only by reason of having an Irish AIFM.