Most of yesterday's pre-election budget statement for 2016 (the "Budget") by Ireland's Minister for Finance (the "Minister") focused on personal taxation. In the portion of his statement covering corporation tax, two key announcements were made in line with expectations following on from the publication of the final reports under the OECD's base erosion and profit shifting ("BEPS") project:
Ireland will implement country by country reporting ("CBCR") as recommended under BEPS Action 13; and Ireland's knowledge development box ("KDB"), which will permit certain income from intellectual property to be taxed at 6.25%, will incorporate the nexus approach proposed under BEPS Action 5, making it the world's "first and only OECD-compliant box". The detail of these announcements will be available next week upon publication of the Finance Bill 2015. It is anticipated that the parameters set out in the final reports issued by the OECD under BEPS Actions 5 and 13 will be reflected in the draft legislation.
In addition, the Minister published an Update on Ireland's International Tax Strategy which outlines Ireland's position on the BEPS project and the emerging EU tax agenda.
Ireland's position on BEPS
Ireland has fully engaged in the BEPS project. Ireland recognises that continuation of the "remarkable international consensus" is vital to further implementation of the BEPS recommendations.
As a first step, Ireland will implement the changes announced yesterday (CBCR and an OECD-compliant KDB). The next steps for Ireland on BEPS are:
to update Irish transfer pricing legislation to incorporate the revisions made to the OECD Transfer Pricing Guidelines under Actions 8 to 10; to participate in the negotiation of the multilateral instrument ("MLI") proposed under BEPS Action 15. It is intended that the MLI will implement recommendations made under BEPS Action 6 to prevent treaty abuse and BEPS Action 7 to extend the definition of what constitutes a permanent establishment; and to participate in the ad hoc group of 20 countries that have agreed to...