On 5 September 2018, the Department of Finance issued Ireland's Corporation Tax Roadmap (the "Roadmap") setting out the next steps in implementing changes required at EU level under the Anti-Tax Avoidance Directives ("ATAD") and the OECD's Base Erosion and Profit Shifting project. The Roadmap confirms the timing of these key changes.
Key Changes - Implementation of ATAD
The implementation of ATAD comprises five elements:
1. Controlled foreign company rules
- Effective date: 1 January 2019
- Ireland will adopt an Option B approach
- Consultation on text of draft rules expected before the end of September 2018
2. General anti-abuse rules
- No change required under Irish law
3. Interest limitation rules
- Effective date: may take effect earlier than 1 January 2024
- Consultation on implementation of Irish interest limitation rule will commence during the third quarter of 2018
4. Anti-hybrid rules
- Effective date: 1 January 2020 (reverse hybrid rule will take effect on 1 January 2022)
- Consultation on implementation of Irish anti-hybrid rules will commence during the third quarter of 2018
5. Exit tax
- Effective date: 1 January 2020
- Rate to be confirmed
Key Changes - Transfer Pricing
The 2017 OECD Transfer Pricing Guidelines will be incorporated into Irish law and will apply from 1 January 2020. Further consultation is expected on broader changes to the Irish transfer pricing regime during 2019.
Key Changes - Moving to a Territorial Regime
The Roadmap confirms that there was overall support for moving to a territorial regime for foreign dividends and branch profits when the Government consulted earlier this year. Further consultation on this proposal will be expected during 2019.
Key Changes - Multilateral Instrument
The MLI is expected to update Ireland's double tax treaties from 1 January 2020. Consideration is also being given to incorporating anti-avoidance rules into Ireland's domestic withholding tax exemptions.
The Roadmap confirms the direction of Irish corporation tax reform over the coming years. Although the Irish corporation tax system, similar to the tax systems in other EU jurisdictions, will undergo a period of change to reflect new international tax norms, the commitment to continue to consult with key stakeholders throughout this process is welcome. Matheson will continue to participate in this consultative process.
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