Irish Budget 2015 – Key International Tax Aspects

Author:Mr John Gulliver and Robert Henson
Profession:Mason Hayes & Curran
 
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Ireland Adopts First Mover Advantage Including Commitment to a Best-in-Class Knowledge Development Box - A Clear Roadmap for the Future

The prevalence of primarily US headquartered groups using non-Irish tax resident companies has caused an unnecessary focus on the underlying nature of the Irish tax system. In today's Irish Budget, the Minister for Finance outlined proposals to cause such companies to be regarded as Irish tax resident and liable to Irish tax at either a 12.5% rate on trading income or otherwise at 25%.  To maintain Ireland's competitiveness, the Minister also announced an intention to introduce an OECD-compliant internationally tax attractive knowledge development box and other fiscally attractive initiatives.

Background

For some years, leaders of the G20 group of economies have been focused on the international tax planning of multi-national groups.  Various high profile international groups have been targeted, probably unfairly, for taking advantage of countries' differing tax laws to maximise the returns available to shareholders. 

The cross-border political campaign has led to the establishment of the OECD Base Erosion and Profit Shifting ("BEPS") initiative which is seeking to develop an international framework for acceptable international tax norms.  In one of its earlier reports, the OECD highlighted that the colloquially known Double Irish and Double Dutch structures, whilst lawful, were unacceptable.  More recently, the EU Competition Commissioner has commenced various State Aid investigations to ascertain if any unfair advantage has been conferred on certain companies establishing within an EU State by reference to rulings given by Member States' tax authorities.

The colloquially known "Double Irish" is a structure that, in its simplest form, is driven by the interaction of the US and Irish tax codes.  It enables profits from non-US intellectual property to be paid by an Irish tax resident corporate to an Irish incorporated but non-Irish tax resident ("INIR").  Under the US tax code, and subject to various constraints, the US applies a 35% tax rate when income is repatriated to the US but not whilst such income is located in an INIR.  In Budget 2015 the Minister for Finance has introduced changes to the use of INIR's.

Finance Bill Proposals

It is proposed that the Finance Bill, when published, will contain provisions to;

cause, with effect from 1 January 2015, any newly Irish incorporated companies to be regarded as...

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