Following the announcement of the Irish Budget 2018 this week, the Maples and Calder Tax Group has prepared a commentary on Ireland's International Tax Strategy and Budget 2018.
International Tax Strategy - BEPS and Tax Reform
The Minister for Finance published an update this week on Ireland's International Tax Strategy. This restates Ireland's intentions published previously in relation to international tax reform. It also contains a consultation document on future changes to the Irish tax regime. This consultation is likely to inform the implementation of major EU and OECD initiatives by Ireland over the next decade including on issues such as interest restrictions, hybrid rules, tax avoidance and transfer pricing.
In relation to EU tax reform, including reform of digital taxation, the Minister notes that decisions on tax policy require the agreement of all EU Member States. The statement notes Ireland's desire for global consensus on how digital companies are taxed, perhaps in opposition to some standalone EU initiatives in this area.
The public consultation process on the implementation of the EU Anti-Tax Avoidance Directives (known as ATAD I and II) and the G20/OECD BEPS initiative is formally announced. The consultation will also deal with Irish transfer pricing law and the simplification of Ireland's dividend tax system.
Maples and Calder will be actively participating in the consultation process with the Irish authorities, including through Irish industry groups and welcome any input or suggestions from clients. The outcome of the consultation has the capacity to significantly reshape the Irish corporate tax sector and will be closely watched by investors and international business.
With regard to international investors, the statements and questions regarding the proposed interest limitation and hybrid rules will be of significant interest. Ireland's stated position is that interest limitation in ATAD I will not apply until 1 January 2024. The consultation requests feedback on the implementation of the anti-hybrid rules, a series of complex anti-avoidance rules intended to be implemented in 2020 and 2022. Given Ireland's status as an investment jurisdiction, the desire to carefully and thoughtfully implement these rules is welcome. Certain EU jurisdictions have already implemented these rules and it is hoped that Ireland will benefit from the experiences of others.
Irish transfer pricing provisions are also under consultation. Currently these do not apply to Small and Medium Sized Enterprises and the consultation seeks views on whether it should be extended. In light of some of the complexity of transfer pricing and the fact that these groups typically do not operate cross border, it is suggested that this would be an unwelcome move.
The application of transfer pricing to non-trading entities is also under consultation. The Coffey Report recommended that such an extension take place and the consultation is expected to examine capital transactions, as well as non-trading entities, such as property companies.
Finally, the consultation requests views on the simplification of Ireland's dividend taxation provisions. Currently Ireland operates a credit system for overseas dividends. The operation of these provisions is complex and there is a strong argument for a simplified, clear regime to...