On 19 October 2017, Ireland’s Minister for Finance (the “Minister”) published Finance Bill 2017 (the “Bill”). The Bill legislates for changes announced during the budget statement made on 10 October 2017 (“Budget Day”) including:
- the introduction of an 80% cap on capital allowances claimed in respect of intellectual property (“IP”) acquired after 11 October 2017;
- the first step in the process to ratify the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting agreed at OECD level to update double tax treaties (the “Multilateral Instrument”);
- an increase in the rate of stamp duty on non-residential property from 2% to 6%;
- changes to the capital gains tax treatment of taxpayers who acquired real estate between 7 December 2011 and 31 December 2014; and
- the introduction of a sugar tax.
In addition, a number of previously unannounced changes are included in the Bill:
- certain amendments are made to the chargeable gains and stamp duty treatment of intra-group transactions;
- provision is made for the taxation of mergers and divisions effected under Irish law;
- changes are made to the taxation of non-residents holding shares or securities that derive their value from Irish real estate;
- some further technical amendments are made to the tax treatment of Irish investment funds and section 110 companies that invest in Irish real estate; and
- amendments are made to the provisions that permit companies to deduct interest on certain types of loans (known as the ‘interest as a charge provision’).
While the corporate tax changes proposed in the Bill are incremental, Irish taxpayers should be prepared for much broader changes in the coming years. Over the coming three years, a number of important changes will be made to the Irish corporate tax rules to fully implement the recommendations made under the base erosion and profit shifting (“BEPS”) project and to comply with Ireland’s EU obligations under the Anti-Tax Avoidance Directives.
In light of the anticipated changes, on Budget Day, the Minister launched a series of consultations on a range of international tax matters including:
- the operation of Ireland’s transfer pricing rules;
- the implementation of controlled foreign company rules, an exit tax and an EU general anti-abuse rule under the Anti-Tax Avoidance Directive;
- the implementation of anti-hybrid rules under the second Anti-Tax Avoidance Directive; and
- consideration of whether Ireland should adopt a territorial tax regime.
Those consultations are designed to elicit views on how Ireland’s post-BEPS tax regime should operate. The consultations will close on 30 January 2018. No consultation has been announced on the implementation of interest limitation rules included in the Anti-Tax Avoidance Directive. Ireland intends to avail of the derogation from the obligation to implement those provisions until 2024.
None of the changes announced or anticipated over the coming years will impact Ireland’s 12.5% corporate tax rate and, as has become tradition in Irish tax matters, on Budget Day the Minister confirmed this: “Our position is clear. The 12.5% rate is, and will remain, a core part of our offering.”
While change in the Irish system is anticipated, these changes are expected to be broadly positive and reinforce Ireland’s commitment to a transparent, robust and competitive tax system.
More details of the changes proposed under the Bill are available here.