The Finance Bill 2015 (due to be enacted this month) includes a number of changes to existing anti-avoidance provisions which will be relevant for private clients with offshore structures. 

The most significant change is the extension of certain anti-avoidance rules to non-Irish domiciled tax resident individuals with offshore structures. We understand from the Department of Finance that this change has been introduced specifically to capture deliberate structuring by non-domiciled individuals tax resident in Ireland to avoid a liability to Irish income tax. Such individuals should review such structures and obtain up to date taxation advice.

The remittance basis of taxation for non-domiciled individuals with personally held income and capital gains are not affected by these changes. 

A summary of this change and other changes is set out below. 

Income tax attribution provisions – transfer of assets abroad

This anti-avoidance rule operates to counter Irish tax resident individuals avoiding income tax by structuring their assets abroad such that income becomes payable to a person resident outside of Ireland e.g. to a trustee of an offshore trust or to a foreign resident company.  Where the rules apply, the income derived from the assets abroad can be attributed to the Irish resident individual and/or his/her spouse where they have the power to enjoy the income. 

The Finance Bill 2015 has introduced two changes to this provision. 

The first change extends the application of this anti-avoidance provision to non-domiciled individuals with effect from 1 January 2016. This change provides that the remittance basis of taxation will no longer apply for non-domiciled individuals who have the power to enjoy income from assets which have been transferred abroad. 

The second change is that where income becomes payable to a person (for example, a trustee or a company) resident in an EU member state or in the EEA, the anti-avoidance provision will not apply where the Revenue Commissioners is satisfied that:

  • It would not be reasonable to conclude that the main purpose of the structuring was the avoidance of liability to tax
  • A genuine economic activity is being carried on in the relevant EU / EEA state

Capital gains tax attribution rules – gains accruing to non-resident companies

Under existing law, gains accruing to private companies tax resident outside of Ireland can be attributed to Irish tax resident participators (for example shareholders) in certain circumstances. 

The Finance Bill 2015 introduces a "bona fide" test and provides that the anti-avoidance rule will not apply in cases where the disposal giving rise to the capital gain is made for bona fide commercial reasons and is not part of an arrangement of which one of the main purposes is to avoid a liability to tax in Ireland.

The legislative changes will be effective from 1 January 2016.