Global Tax Alert | 15 October 2013

Ireland's Budget 2014 sets forth international tax proposals

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On 15 October 2013, Ireland's Minister for Finance announced his 2014 Budget proposals.

This Alert summarizes the main items set forth in an International Tax Strategy Statement which was published as part of the Budget supporting papers.

12.5% tax rate

The Minister has reiterated Ireland's commitment to the 12.5% tax rate applicable to trading profits.

The 12.5% rate will remain a cornerstone of Ireland's fiscal policy and the Government will continue to assert Ireland's sovereign right to set tax rates consistent with the EU Treaty. This merely restates Ireland's long-standing position on corporate tax policy.

It is important to consider that Mr Pascal Saint-Amans of the Organisation of Economic Cooperation and Development (OECD) recently confirmed that Ireland competes fairly for foreign direct investment and that it is anticipated that Ireland's regime will compare favorably in the context of the OECD's Base Erosion and Profit Sharing (BEPS) Action Plan.

Nonresident Irish companies

Companies which are managed and controlled outside Ireland are generally not subject to Irish corporate taxes unless they carry on a business in Ireland via a permanent establishment.

Ireland generally taxes companies in a manner which is consistent with double tax treaties.

With effect from 1 January 2015, Irish rules will apply to circumvent the possibility of a “stateless” company.

This may require certain companies to review their current policies and governance procedures to ensure alignment with the enhanced rules. Draft legislation will be released in the Finance Bill.

Ireland's International Tax Charter

The Minister has reiterated a number of key aspects of Ireland's policy and also sets out Ireland's International Tax Charter – a set of policy objectives and commitments for how Ireland views and will deal with a variety of international tax policy issues.

The key points are summarized below:

  • Ireland is open for business
  • The Government will continue to take steps to enhance Ireland's attractiveness through investment in its people, investment in its infrastructure and its strong commitment to Europe
  • Ireland will continue to compete fairly for foreign direct investment
  • Ireland will consider changes to improve the competitiveness of its tax regime in terms of impact on sustainable employment and economic growth (improvements to the Research and Development (R&D) credit regime were announced in the 2014 Budget)
  • The Irish system is open, transparent and statute based and this will not change
  • Ireland will continue to actively engage constructively and purposefully in relation to international tax matters at OECD (including BEPS and Forum on Harmful Tax Practices) and EU level (including Code of Conduct and Platform for Tax Good Governance) building on the work pushed forward during Ireland's Presidency of the EU in countering tax fraud and aggressive tax planning
  • Ireland welcomes the OECD/G20 coordinated effort to dealing with the challenges posed by BEPS and notes that the Irish regime already aligns profits with substantive operations here
  • A commitment to supporting developing countries to raise domestic revenues efficiently and allow them to exit from official development assistance
  • Ireland is committed to global automatic exchange of tax information in line with existing and emerging EU and OECD rules and will bring forward domestic law on completion of OECD's work
  • Ireland has a general anti-avoidance rule on the statute books since 1989 and calls on all EU Member States to introduce such domestic legislation
  • Ireland also has mandatory disclosure rules applicable to certain tax schemes

For additional information with respect to this Alert, please contact the following:

Ernst & Young (Ireland), Dublin
  • Joe Bollard
    +353 1 475 0555
  • Kevin McLoughlin
    +353 1 475 0555
Ernst & Young (Ireland), Cork
  • Frank O'Neill
    +353 21 480 5700
Ernst & Young (Ireland), Limerick
  • John Heffernan
    +353 61 319 988
Ernst & Young (Ireland), Waterford
  • Paul Fleming
    +353 51 872 094
Ernst & Young LLP, Irish Tax Desk, New York
  • Karl Doyle
    +1 212 773 8744

EYG no. CM3880