The Minister for Finance Michael Noonan T.D. announced a comprehensive national programme targeting offshore tax evasion in his budget speech in October 2016 to tackle the perceived abuse of offshore structures. One particular element of this programme is the change in the taxation approach to certain arrangements which have an offshore element.
The provisions are complex but in a nutshell mean that, from 1 May 2017, the benefits afforded to those who make a qualifying disclosure (prompted or unprompted) to the Revenue Commissioners will be withdrawn where the arrangement relates to either direct or indirect offshore matters in respect of which Irish tax is payable. The benefits of a qualifying disclosure will also be lost where the disclosure does not relate to offshore matters and offshore matters are subsequently discovered by the Revenue Commissioners.
"Offshore matters" include:
- A holiday property abroad;
- An overseas pension;
- A non-Irish bank account; or
- Any of the above held through offshore companies or offshore trusts
Where Irish tax has not been paid in relation to such matters, professional advice should be sought now.
Non-Irish domiciled individuals need to be aware that they may also be caught by this new legislation due to the recent amendments to Section 806 of the Taxes Consolidation Act 1997. This amendment expanded the remit of the anti-avoidance legislation to the transfer of assets abroad to non-Irish domiciled individuals chargeable to Irish income tax on the remittance basis.
There will be no basis on which you can make a qualifying disclosure for offshore matters from 1 May 2017. From this date, any offshore matters discovered will be subject to strict penalties, namely,
- Penalties of 100% of the tax liability;
- Possible prosecution; and
- Definite publication on the list of tax defaulters.
The principles of equity do not apply in tax law, meaning that there is no opportunity for a court to mitigate the penalties. Intention to default or knowledge of the breach will have no bearing on the penalties applied. The Minister for Finance has stated that failure to disclosure offshore matters will be a strict liability penalty.
Clearly, this is a serious change in approach which could have material consequences for those coming within scope.
Anyone with offshore accounts or assets (even those held indirectly through an offshore company or offshore trust) should take this opportunity to review their offshore tax filing affairs and write to the Revenue Commissioners before 1 May 2017 to disclose their position.