The Irish Finance Act 2013 was passed into law on 27 March 2013. The Act implements the proposals contained in the 2013 budget and outlined in the subsequent Finance Bill, as discussed in our last update. The Act also introduces and implements some additional measures. As previously reported, the Finance Act introduced legislation for real estate investment trusts (REITs), enhanced the IP amortisation regime and improved the regime for allocating R&D tax credits to certain employees.
Previously, we discussed the ECJ ruling in the FII Group Litigation case (C-35/11). In that case, the Court held that UK rules which differentiated between nationally-sourced and foreign-sourced dividends were contrary to EU law. Prior to the recent Finance Act amendments, Ireland's dividend rules were similar to the UK rules giving rise to the FII Group case. As a reaction to the ECJ decision, the Finance Act introduces an increased foreign tax credit relief when the credit calculated under Ireland's existing rules is less than the amount of credit that would be computed by reference to the nominal rate of tax in the source country. The total credit under the new regime cannot exceed the Irish corporation tax attributable to the dividend, and there are limitations on pooling and carry forward by reference to the additional credit. The amendment applies to all dividends paid on or after 1 January 2013.
The Finance Act also reduced the period in which capital allowances claimed on specified intellectual property will be clawed back in the event of a disposal of the relevant intellectual property. The Finance Act reduces the clawback period from ten years to five years. The Finance Act also allows for accelerated capital allowances over seven years for the construction or refurbishment of buildings or structures used in connection with the maintenance, repair or overhaul of commercial aircraft.