News - Irish tax changes
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Corporate taxation 'road map' turns Irish system upside down 6 September 2018 Ireland's Finance Minister Paschal Donohoe has announced a dramatic reform of the country's corporate tax system, introducing new provisions for controlled foreign companies and transfer pricing. The reforms derive from a government-commissioned report, published last year by the economist Seamus Coffey. They partially implement the OECD's Base Erosion and Profit Shifting initiative, and the European Union's Anti-Tax Avoidance Directive (ATAD). They may even include moving from a worldwide to a territorial tax regime, so that corporation tax is charged only on profits made in the country, although this will be subject to a public consultation in early 2019. |  | |
Legislation will be introduced in Finance Bill 2018, to add controlled foreign company (CFC) rules with effect from 1 January 2019, to comply with the ATAD. Anti-hybrid and transfer pricing rules to reduce tax avoidance by multinationals will be legislated in Finance Bill 2019, to take effect from 1 January 2020. An ATAD-compliant exit tax will take effect on or before 1 January 2020. Details of the transfer pricing regime have not been revealed yet, but will also be consulted upon in early 2019. They will also have to be compatible with the OECD's and the EU's views of 'harmful' tax practices. Ireland is seeking a derogation to defer implementation of ATAD's interest limitation rules, believing that its own rules are just as effective. However, Ireland will retain its 12.5 per cent rate of corporation tax, despite the disapproval of other EU Member States and the EU Code of Conduct for Business Taxation. Donohoe insists that this will protect the high levels of foreign direct investment achieved by Ireland since the 12.5 per cent rate was introduced in May 1997. Ireland's public services are heavily dependent on corporation tax revenues, which vary significantly from year to year depending on the fortunes and policies of individual multinational companies. Donohoe said Ireland would maintain its strong opposition to European Commission proposals for a 3 per cent 'digital tax' on some of the largest online firms that have significant Irish presence. | ||
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