Ireland's Finance Bill 2015 was published recently and includes a number of proposed changes relevant to Private Clients. It is expected to pass into law in December 2015.
Transfers of assets abroad
The first changes are in section 19 of Finance Bill 2015 which relates to section 806 and related sections of the Taxes Consolidation Act 1997 (“TCA 1997”). These provisions attribute income derived from assets transferred abroad, to a transferor, in circumstances where the transferor is regarded as having power to enjoy the income.
As a provision intended to bring Irish law into compliance with European Union (“EU”) law, a new section 806(11) is proposed. It applies where a source of income from a transfer abroad has become payable to a person resident in a member state of the EU, or the European Economic Area (“EEA”).
If the Revenue Commissioners can be satisfied that it would not be reasonable to conclude that the main purpose, or one main purposes of the transfer abroad, was the avoidance of a liability to tax, and a genuine economic activity is carried on in the relevant EU / EEA State, the provisions attributing income to an Irish resident transferor shall not apply.
Restriction on remittance basis for income of assets transferred abroad
Section 19 Finance Bill 2015 also states that for income arising from 1 January 2016, the remittance basis of taxation is no longer available to a non-domiciled transferor, who has power to enjoy income from assets which have been transferred abroad.
Where a non-domiciled person receives an income benefit on or after 1 January 2016 out of assets which have been transferred abroad by another person, the remittance basis of taxation is not available.
Impact of proposed changes
It is important to state that the remittance basis of taxation of personal income and capital gains for non-domiciled persons is not affected by these changes.
For non-domiciled transferors of assets abroad, or persons who have received income from such sources, it is important to consider options for the remainder of 2015, and plan for the new rules for 2016 and beyond.
Participators in capital gains of non-Irish companies – limiting application of section 590
This proposed change applies to any non-Irish company which meets the relevant criteria.
Section 36 of Finance Bill 2015 proposes changes to section 590 of TCA 1997, the provision which attributes capital gains that have arisen within certain non-Irish companies, to Irish resident participators in such companies. The term participator includes shareholders and offshore trustees holding shares in such companies. If a settlor of a trust is interested in the offshore trust, section 579 TCA 1997 attributes trust capital gains to the settlor.
The proposed section 590(7)(aa) states that a chargeable gain accruing on the disposal of assets by a non-Irish company shall not result in the provisions of section 590 being applicable where it is shown to the satisfaction of the Revenue Commissioners that the disposal was made for bona fide commercial purposes and was not part of any arrangement whose main purpose, or one of whose main purposes, was the avoidance of a liability to Capital Gains Tax (“CGT”) or corporation tax.