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Tax in Focus Aidan Byrne
Lead tax Partner with Baker Tilly Ryan Glennon International Tax Changes in Ireland
Ireland has been in the international limelight for some time due to its attractive tax regime for corporates. Leaders of some countries have tried to force our Government to re-think its policy on taxation for corporates, in particular those operating on a multinational basis.
Aidan Byrne is Lead tax Partner with Baker Tilly Ryan Glennon in Ireland and was previously employed in the Revenue Commissioners, the Irish tax authorities. Aidan is currently responsible for the delivery of all tax services to the clients of the Firm and specialises in advising corporate clients on optimum tax structures, in particular, he advises companies considering FDI into Ireland to avail of its attractive tax regime.
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espite this pressure the Government has remained resolute and has not budged from its stated position of being
highly attractive for inward investment. Recently the support received from Pascal Saint-Amans, Director of Taxation Policy in the OECD, whereby he fully supported the right of Ireland’s Government to set its own corporate tax rate and where he debunked the myth that Ireland was a tax haven, is very welcome. The changes coming down the track following completion of BEPS will I believe have a positive effect on Ireland as companies seek to move operations to countries with a transparent and low tax rate.
Corporate Appeal Ireland’s appeal as a corporate destination first and foremost comes down to the key corporate tax rate of 12.5% for trading profits. If a company is moving overseas from its own home country and is seeking an attractive jurisdiction for entry in the EU then Ireland provides a convincing offering. This rate is set in stone and has the support of the full mainstream political system in Ireland. Despite difficult economic times the rate has remained unchanged and in the recent Budget speech, the Minister confirmed that this will remain the case.
Ireland also has an attractive Holding company regime with participation
exemption on disposal of trading entities, a credit system which means that tax is rarely paid on dividend income received from trading subsidiaries, an R&D tax credit system which allows for repayment of the credit in circumstances where corporate taxes have not been paid or for offset against payroll taxes and an intellectual property regime which compares well internationally.
As well as an excellent tax environment, most companies that invest here will also cite the highly educated workforce, the track record of Ireland that in dealing with multi-national companies, the ease of doing business here and the speed to market as being major drivers of their migration to Ireland.
Changes
While not a reform, the Government’s announcement that Ireland is still 100% committed to the 12.5% corporation tax rate and that it will remain a cornerstone of Ireland’s fiscal policy is welcomed. However, Ireland’s corporate tax strategy is not wholly about the rate of tax. Ireland’s commitment to acting with integrity in the conduct of its international tax policy was reaffirmed by the Minister announcing the publication of a new International Tax Strategy Statement. Some key points in the international Strategy were that Ireland will continue to take steps to enhance Ireland’s attractiveness through investment in our people,
investment in our infrastructure and our strong commitment to Europe. Also, Ireland will consider changes to improve the competitiveness of our tax regime in terms of impact on sustainable employment and economic growth. The Finance Bill also contained legislation which is to be introduced to circumvent this possibility of “stateless companies”. Such companies received press coverage recently whereby they are tax resident nowhere. However, the new rules should not adversely affect the existing operations of the majority of multinational companies in Ireland, many of whom incorporate Irish subsidiaries which are tax resident in zero or low tax jurisdictions. It will come into effect in 2015.
Final Thoughts
I have found that many companies are exploring their options in terms of tax policy. As the world becomes smaller and even relatively modest sized companies find that they are trading internationally they are seeking advice to ensure that their tax burden is managed and that they do not pay tax unnecessarily abroad or indeed in their home country. One matter which we have had to deal with is companies that find themselves with permanent establishments abroad, creating a taxable presence and an unforeseen liability. Early engagement with advisors is crucial and can avoid an unwelcome intervention from a foreign tax jurisdiction.