Ireland: International Aspects Of Ireland's Budget: 6.25% Knowledge Development Box And Country-By-Country Reporting

Following last week's publication of the various OECD/G20 reports on the Base Erosion and Profit Shifting ("BEPS") project, the Irish Budget delivered on 13 October 2015 contains the first Government initiative on implementing some of the recommendations. Key features are the introduction of the first of its kind knowledge development box with a tax rate of 6.25%, country-by-country reporting and an update on Ireland's International Tax Strategy. Details of the knowledge development box and country-by-country reporting remain sparse and are unlikely to emerge until the publication of the Finance Bill in the next six weeks or so.

BEPS, EU Law and the Irish Tax Regime

Some years ago, at an early stage of the OECD/G20 BEPS initiative, the Irish tax regime was targeted for its approach to Irish incorporated but non tax resident companies. The Irish Government listened to the BEPS representations and liaised with key industry players and tax professionals. Tax law was duly amended. Moreover, as the Irish tax code has developed, Ireland has taken steps ahead of any BEPS initiative to ensure that its code is at the forefront of best-in-class international tax practice. For example, having regard to the use of Ireland as a key base for big ticket asset finance, some years ago, Ireland made changes to its tax law so as to impose withholding tax on certain interest payments to countries that either do not have a double tax treaty with Ireland and/or do not generally tax such foreign source interest.

Ireland's latest Budget merely further cements the strong platform of using the Irish fiscal base to attract investment that has continued for more than half a century. Key long-term features of the Irish tax regime in light of the various BEPS final reports include:

  1. acceptance by the OECD/G20 that each country has a sovereign right to determine its own tax rate and by extension, Ireland's 12.5% tax rate is beyond international challenge;
  2. acceptance by the OECD/G20 that there should be no ring-fencing of the digital economy within a separate international tax regime. Hence, acceptance that digital businesses can continue to establish and grow from an Irish incorporated base;
  3. acceptance by the OECD/G20 that there is no requirement for Ireland to introduce a controlled foreign company regime that imputes taxable profits to an Irish parent company. Hence, Ireland will continue to be a favourable holding company location for technology companies, pharmaceuticals and other groups;
  4. acceptance by the OECD/G20 that any future discussion on a multi-lateral treaty will need to address EU law concern. Ireland's EU membership should be a key factor on the extent to which any multi-lateral treaty might otherwise have limited the attractiveness of Ireland's growing network of double tax treaties and information exchange agreements; and
  5. having regard to the OECD/G20 action plan on harmful tax competition, Ireland proposes a 6.25% tax rate on a modified nexus knowledge development box.

Knowledge Development Box

Under the modified nexus model advocated by the OECD, Ireland's knowledge development box will apply to income arising from certain patents and copyrighted software which result from R&D carried on in Ireland. A tax rate of 6.25% will apply to such income. Where R&D is carried on outside of Ireland or arises from bought-in intellectual property, the preferential rate of tax is unlikely to apply. We await the publication of the Finance Bill to ascertain the exact details of the new regime, the treatment of gains and its interaction with Ireland's 25% tax credit regime for R&D and IP amortisation tax regime.

Country-by-Country Reporting

Where a Multi-National Enterprise ("MNE") with consolidated group turnover of €750m+ has an ultimate parent incorporated and tax resident in Ireland, the new country-by-country reporting is likely to apply. Suffice as to note that under Action 13 of the OECD BEPS –

"... large MNEs will be required to file a Country-by-Country Report that will provide annually and for each tax jurisdiction in which they do business the amount of revenue, profit before income tax and income tax paid and accrued. It also requires MNEs to report their number of employees, stated capital, retained earnings and tangible assets in each tax jurisdiction. Finally, it requires MNEs to identify each entity within the group doing business in a particular tax jurisdictionand to provide an indication of the business activities each entity engages in."

We await the publication of the Irish Finance Bill for details of the compliance obligations that country-by-country reporting will bring.


Ireland's attraction as a key location from which to conduct business should be further enhanced in the post-BEPS world. Changes announced in the Irish Budget demonstrate Ireland's commitment to have its tax regime be one of the best in class and free from challenge under either OECD principles or indeed EU law. Whilst country-by-country reporting will create a further compliance burden for MNE's with an Irish holding company, it is merely part of the new world of accepting that a group's international tax affairs need to be capable of increased scrutiny in the new arena of openness.

Not alone is this a tax-driven initiative, the Irish Companies Act 2014 puts a requirement on directors to include an annual compliance statement on a company's Irish tax affairs. Such a statement will need to consider country-by-country reporting, maintenance of transfer pricing documentation and, by implication, a review on the overall tax strategy adopted by Irish incorporated companies.

Storm clouds may be growing in the EU with the European Commission's Action Plan for Fair and Efficient Corporate Taxation in the EU and a revised proposal on the Companies Consolidated Tax Base ("CCTB") awaited. For now, Ireland has once again dealt with the international agenda promoting openness and transparency of MNE's tax affairs whilst maintaining a stable tax environment to remain as one of the best location worldwide to conduct corporate activities.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
13 Sep 2017, Seminar, Dublin, Ireland

We will host our third Employment Law Top Tips seminar for 2017 on Wednesday 13 September in our offices at South Bank House, Barrow Street, Dublin 4.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.