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Anti-avoidance framework

Regulation

What legislative and regulatory initiatives has the government taken to combat tax avoidance in your jurisdiction?

Ireland is committed to address tax avoidance through:

  • a long-standing statutory general anti-avoidance rule (GAAR) and considerable specific anti-avoidance legislation;
  • Irish Revenue's wide ranging powers of investigation;
  • a mandatory disclosure regime for ‘tax promoters’;
  • the recent introduction of the Tax Appeals Commission, which is an independent statutory body responsible for dealing with appeals against assessments and decisions of the Irish Revenue;
  •  wide-ranging exchange of information arrangements with other jurisdictions; and
  • significant monetary penalties for tax avoidance transactions.

To what extent does your jurisdiction follow the OECD Action Plan on Base Erosion and Profit Shifting?

Ireland has committed to adopt minimum standard measures to counteract base erosion and profit shifting as recommended by the Organisation for Economic Cooperation and Development (OECD).  The measures being taken by Ireland include:

  • Implementation of the EU Anti-tax Avoidance Directives I and II including the following measures:
  • Adoption of a controlled foreign company (CFC) regime from January 1 2019;
  • Undertaking a consultation process to establish whether Ireland's current GAAR meets the minimum standard required by the EU Anti-tax Avoidance Directives I and II;
  • Implementing a revised exit tax regime from January 1 2020; and
  • Becoming a signatory to the OECD Multilateral Convention to Implement Tax Treaty Measures to Prevent Base Erosion and Profit Shifting (MLI) and taking the first steps to implement the MLI in the Finance Act 2017.

Is there a legal distinction between aggressive tax planning and tax avoidance?

The Irish tax legislation does not provide for a specific distinction between aggressive tax planning and tax avoidance. However, the introduction of a mandatory disclosure regime in respect of certain transactions that give rise to a tax advantage (where the main or one of the main benefits expected from the transaction is a tax advantage) has provided guidance as to what transactions may be regarded as undesirable by Irish Revenue. 

A transaction is disclosable where:

  • there is an intention to keep the scheme confidential from other promoters or from Irish Revenue;
  • it would be reasonable to expect that a premium fee for the scheme be charged on the basis of how it secures the expected tax advantage;
  • the arrangement is a standardised tax product that does not require tailoring to the client's specific circumstances to any material extent;
  • schemes that create a tax loss that can be used by more than one individual client and the main outcome of the transaction, to an informed observer, is the provision of tax losses or creates a loss-buying scheme for corporates;
  • employment schemes that generate a tax advantage for an employer, employee or any other person, with the exclusion of routine schemes that already involve Irish Revenue oversight (eg, share ownership trusts); and
  • schemes that convert income into capital with a view to attract tax at a lower rate.

Irish Revenue has clarified that routine, day-to-day tax advice and the routine use of statutory exemptions and reliefs for good-faith purposes are not disclosable for these purposes.

Penalties

What penalties are imposed for non-compliance with anti-avoidance provisions?

Non-compliance with the GAAR triggers the application of penalties under the Taxes Consolidation Act. For example, a 30% surcharge will be payable on the tax avoided in respect of tax avoidance transactions (under Sections 811A and 811D of the Taxes Consolidation Act), with the additional possibility of fines or imprisonment for the most serious tax offences.

By making a protective notification to Irish Revenue in respect of a transaction within 90 days of beginning a transaction, a taxpayer can seek protection from the possibility of such interest or surcharge arising in the event of Irish Revenue successfully challenging the transaction under the GAAR.

Where serious tax evasion is suspected, criminal proceedings may be initiated against a taxpayer.  

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