Ireland considers changes to transfer pricing regime, move to territorial system, tax roadmap says

by Julie Martin, MNE Tax

Ireland’s government today published its Corporation Tax Roadmap, announcing plans to consider significant changes to Ireland’s international tax and transfer pricing regime and incorporate aspects of the EU Anti-Tax Avoidance Directive (ATAD) into its laws.

“This roadmap demonstrates . . . the government’s commitment to continuing the significant progress already made to strengthen Ireland’s corporation tax system now and in the years to come,” said Minister for Finance and Public Expenditure & Reform, Paschal Donohoe, introducing the plan.

Ireland transfer pricing update

Ireland intends to update its transfer pricing rules, introducing new provisions in Finance Bill 2019 that would take effect from January 1, 2020, the roadmap states. This timeline is earlier than the year-end 2020 timeline proposed in an influential 2017 consultation undertaken by commissioned expert, Seamus Coffey.

The government will launch a public consultation on the transfer pricing changes in early 2019, the roadmap said.

The roadmap notes that the Coffey report recommends that Ireland’s transfer pricing rules reflect changes made in the 2017 OECD transfer pricing guidelines and be extended to grandfathered arrangements agreed before July 1, 2010; to small and medium-sized entities; to non-trading income; and to capital transactions.

Territorial system

A public consultation will be launched in early 2019 seeking input on whether Ireland should move to a territorial tax regime or otherwise simplify the rules for computation of double tax relief, the roadmap states.

While little tax is collected on foreign earnings on account of the Irish worldwide taxation system, the current system is extremely complex, the roadmap said.

CFC rules

The Irish government roadmap also said that legislation would be introduced in Finance Bill 2018 to add controlled foreign company (CFC) rules with effect from January 1, 2019, to comply with the ATAD.

A majority of stakeholder responses to the Coffey consultation indicated a preference for the CFC rule’s Option B methodology, which would attribute income arising from non-genuine arrangements put in place for the essential purpose of obtaining a tax advantage to the parent company, the roadmap said.

“A feedback statement will be published in Q3 to respond to views expressed in responses to the Coffey/ATAD consultation on CFC rules and to set out possible approaches for the implementation of an Option B methodology,” the roadmap said.

Finance Bill 2018 will also include legislative provisions that allowing Ireland to ratify the BEPS Multilateral Instrument.

Anti-hybrid rules, no GAAR

Anti-hybrid legislation will be introduced in Finance Bill 2019, the roadmap announced. A consultation paper on these rules will be issued in the 3rd quarter of 2018. Anti-reverse hybrid legislation will be introduced in a later finance bill.

The government said it did not expect to make any significant amendments to the Irish GAAR to comply with the ATAD.

Legislation will be introduced in Finance Bill 2019 to ensure that Ireland fully implements obligations for mandatory disclosure of tax planning arrangements.

Interest limitations

Ireland believes that its interest limitation rules are as effective to those required by the ATAD and will thus seek a derogation to defer implementation of the ATAD interest limitation rules until either 2024 or until such rules become a BEPS minimum standard.

The likelihood of such a derogation being secured is unclear, though, the roadmap states, and so a public consultation is planned for the 3rd quarter of 2018 to seek views on interest limitation rules.

Transposition could potentially advance as early as Finance Bill 2019, the roadmap states.

Legislation will also be introduced no later than Finance Bill 2019 to replace Ireland’s current provisions with an ATAD-compliant exit tax. These provisions would take effect no later than January 1, 2020

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Julie Martin

Founder & Editor at MNE Tax

Julie Martin is the founder of MNE Tax. She edits the publication and regularly contributes articles on new developments in cross-border business taxation.

Julie has worked as a tax journalist and editor for more than 13 years. Prior to that, she worked as an in-house tax attorney in New York. She also holds an LLM in taxation from New York University School of Law.

Julie can be reached at [email protected].

@mnetax

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