The Irish government on October 23 published Finance Bill 2014, which gives effect to the taxation-related measures previously announced in the government’s 2015 budget.
Included are changes to Ireland’s company residence rules which slowly close the “double Irish” corporate tax loophole. Beginning January 1, 2015, all companies incorporated in Ireland are also considered tax residents.
Any MNE incorporated in Ireland before January 1, 2015, will be able to use the loophole until December 31, 2020, though.
The bill also extends the Special Assignee Relief Programme for three years, enhances the incentive, and makes it easier to qualify for. The program currently allows executives to exempt 30 percent of their income between €75,000 and €500,000. Under the bill, there would be no cap on qualifying salary. The bill also removes the requirement that the executive be tax resident only in Ireland, permits performance of work outside of Ireland, and reduces the time the employee must have been employed abroad to 6 months.
As previously announced, the bill enhances the existing s.291A capital allowances regime for expenditures on intangible assets. The bill removes a cap on the use of the allowances, currently set at 80% of the income from the relevant trade in which the acquired assets are used. The bill also removes restrictions on related interest expense deductions for borrowings incurred for such acquisitions. Further, the bill adds customer lists to the definition of specified intangible assets in this provision.
The bill also increases the R&D tax credit by removing the base year restriction for accounting periods commencing on or after January 1, 2015.
Further, the foreign earnings deduction is amended and extended until the end of 2017. The number of qualifying countries is being increased to include Japan, Singapore, South Korea, Saudi Arabia, UAE, Qatar, Bahrain, Oman, Kuwait, Indonesia, Vietnam, Thailand, Chile, Mexico and Malaysia.
Irish tax proposal will not eliminate “double Irish,” say attorneys: Even if Ireland eliminates the Irish incorporated non-resident company, as proposed in the 2015 Irish budget, the tax benefits of the “double Irish Dutch sandwich,” can still be achieved by setting up a Irish company managed and controlled in Malta or the UAE instead of a Caribbean nation because of provisions in Ireland’s existing tax treaties with those nations, write Jeffrey L. Rubinger and Summer Ayers LePree of Bilzin Sumberg Baena Price & Axelrod LLP in an October 23 website post. See, Bilzin Sumberg.
