1 Tax Treaties and Residence
1.1 How many income tax treaties are currently in force in your jurisdiction?
As at October 2022, 76 treaties have been signed, 73 of which are in force.
1.2 Do they generally follow the OECD Model Convention or another model?
Generally, they follow the OECD Model.
1.3 Has your jurisdiction signed the tax treaty MLI and deposited its instrument of ratification with the OECD?
Ireland deposited its instrument of ratification and final list of reservations and notifications with the OECD on 29 January 2019.
The MLI entered into force for Ireland on 1 May 2019. As a general rule, it began to have effect for Ireland's tax treaties:
- with respect to taxes withheld at source, from 1 January 2020; and
- with respect to all other taxes levied by Ireland, for taxes levied with respect to taxable periods beginning on or after 1 November 2019.
The date on which the MLI modifies each treaty depends on when Ireland's treaty partners deposit their own instruments of ratification.
1.4 Do they generally incorporate anti-abuse rules?
Irish double tax treaties ("DTTs") generally incorporate antiabuse rules.
With respect to Ireland's implementation of the MLI, Ireland has chosen to adopt the Principal Purpose Test ("PPT") in order to implement Article 7 of the MLI, which is aimed at prevention of treaty abuse. This will introduce this general anti-avoidance clause into any Irish DTT where the treaty partner also chooses the PPT option.
1.5 Are treaties overridden by any rules of domestic law (whether existing when the treaty takes effect or introduced subsequently)?
No, Irish DTTs prevail over domestic law. Certain domestic exemptions from withholding tax mirror the treaty relief, and indeed may be more favourable, and apply once a treaty is signed.
1.6 What is the test in domestic law for determining the residence of a company? Has the application of the test been modified in response to COVID-19?
A company is resident in Ireland if it is incorporated in Ireland or, if not Irish-incorporated, is centrally managed and controlled in Ireland. This latter test is based on case law and focuses on board control, but it is ultimately a question of fact based on how decisions of the company are made in practice.
If a company incorporated in Ireland is managed and controlled in a treaty state, it may be regarded as resident in that other state under the "tiebreaker" clause of Ireland's DTT with that state.
In response to COVID-19, the Irish Revenue Commissioners ("Revenue") published concessionary measures that modified the application of the corporate residence test. For example, if a director of a company would have been present in Ireland but for COVID-19 travel restrictions, Revenue disregarded their presence outside Ireland for corporation tax purposes. The director and the company were required to maintain a record of the facts and circumstances of the bona fide relevant presence outside Ireland. This treatment remained valid until 31 January 2022, at which time it was withdrawn.
1.7 Is your jurisdiction's tax authority expected to revisit the status of dual resident companies in cases where the MLI changes the treaty "tiebreaker"?
Ireland has adopted the best practice rule in Article 4 of the MLI on determining tax residence for dual-resident entities. This approach allows the competent authorities of the Contracting Jurisdictions to determine by mutual agreement the state of residence for tax treaty purposes having regard to various features comprising the entity's place of effective management, the place where it is incorporated or otherwise constituted and any other relevant factors.
Although Revenue has issued guidance with respect to the interpretation of Ireland's tax treaties that will be affected by the changes to the treaty tiebreaker, the guidance does not indicate whether Revenue will revisit the status of potentially affected dual-resident companies.
2 Transaction Taxes
2.1 Are there any documentary taxes in your jurisdiction?
Generally, a document is chargeable to stamp duty, unless exempt, where the document is both:
- listed in Schedule 1 to the Irish Stamp Duties Consolidation Act 1999 (the principal head of charge is a transfer of any Irish property); and
- executed in Ireland or, if executed outside Ireland, relates to property situated in Ireland or to any matter or thing done or to be done in Ireland.
The transferee is liable to pay stamp duty and a return must be filed, and stamp duty paid, within 44 days of the execution of the instrument.
Stamp duty on the transfer of assets is charged on the higher of the consideration paid for, or the market value of, the relevant asset at the following rates:
- Shares or marketable securities: 1%
- Non-residential property: 7.5%. The 7.5% rate applies for shares in certain companies deriving their value from Irish non-residential property where certain conditions are satisfied.
- Residential property: 1% on consideration up to €1 million and 2% on the excess. However, there is an increased stamp duty rate of 10%, where 10 or more residential houses or duplexes are purchased at a time, or cumulatively in a year.
The higher stamp duty rates can apply to shares and partnership interests deriving their value from Irish land
Ireland operates a "Residential Development Stamp Duty Refund Scheme", which will be extended to the end of 2025. This is a scheme whereby a portion of the stamp duty paid on the acquisition of non-residential land is refunded where that land is subsequently developed for residential purposes. The net minimum stamp duty payable after a refund is 2%, whereas the normal rate for non-residential property is 7.5%.
There are numerous other reliefs and exemptions, including:
- Associated companies relief on transfers between companies where the transferor and transferee are 90% associated at the time of execution and for two years afterwards.
- Reconstruction relief on a share-for-share exchange or share-for-undertaking transaction, subject to meeting certain conditions.
- Exemptions for transfers of intellectual property, non-Irish shares and land, loan capital issued by companies, aircraft and ships.
2.2 Do you have Value-Added Tax (VAT), or a similar tax? If so, at what rate or rates? Please note any rate reduction in response to COVID-19.
VAT is a transaction tax based on EU directives as implemented into Irish law. It is chargeable on the supply of goods and services in Ireland and on goods imported into Ireland from outside the EU.
Persons in business in Ireland generally charge VAT on their supplies, depending on the nature of the supply.
The standard VAT rate is 23%. Lower rates apply to certain supplies of goods and services, such as, e.g. 13.5% on supplies of land and property, 0% on certain food and drink, books and children's clothing, and 9% on certain tourism- and hospitalityrelated supplies. This 9% rate, introduced in response to COVID19, will apply until 28 February 2023. No further extension to this measure is envisaged and therefore, the 13.5% rate will apply from 1 March 2023. The rate of VAT on newspapers (both print and digital) will be reduced to 0% from 1 January 2023.
2.3 Is VAT (or any similar tax) charged on all transactions or are there any relevant exclusions?
The application of VAT to a supply of goods or services depends on the place of supply of those goods or services. For example, business-to-business supplies of services take place where the recipient is established.
The supply of the following goods and services is exempt from VAT: most banking, insurance and financial services; medical services; education and training services; and passenger transport.
The transfer of certain assets of a business between accountable persons is not subject to VAT where the assets constitute an undertaking capable of being carried on independently.
2.4 Is it always fully recoverable by all businesses? If not, what are the relevant restrictions?
VAT incurred will generally be recoverable as long as it is incurred by a taxable person (a person who is, or is required to be, VAT-registered) for the purpose of making taxable supplies of goods and services. VAT incurred by a person who makes exempt supplies is not recoverable. Where a taxable person makes exempt, non-exempt or non-business supplies, VAT recovery will be allowed in respect of the non-exempt supplies only. However, if the VAT incurred cannot be attributed to either (for example, general overheads), the VAT must be apportioned between the taxable and exempt supplies.
2.5 Does your jurisdiction permit VAT grouping? If so, how does this apply where a company in one jurisdiction has an establishment in another?
Yes, Ireland does permit VAT grouping. Where a VAT group has been established, all transactions carried out by the individual group members are considered to have been carried out by the VAT group as a single accountable person. Each member of a VAT group is jointly and severally liable for the VAT liabilities of the group.
In order to become a member of a VAT group, a person must be established in Ireland. A person may have either a business or a fixed establishment within Ireland.
Under the Finance Act 2021, to form a VAT group, at least one of the persons seeking to form a group must be an "accountable" person. Previously, it was sufficient that this person (or another person seeking to form the group) was a "taxable" person. "Taxable" means that person is involved in economic activity but not necessarily registered for Irish VAT, whereas "accountable" refers to someone who is, or should be, registered for Irish VAT.
Not every member of the group has to be an accountable person; however, inclusion within a VAT group is on an all-ornothing basis for a legal entity, and once a branch is included within an Irish VAT group registration, the entire legal entity is included.
2.6 Are there any other noteworthy transaction taxes or indirect taxes that are payable by companies?
Certain taxes, including interest withholding tax, dividend withholding tax, professional services withholding tax, and relevant contract tax, may be payable depending on the nature of the transaction and the type of business carried on by the parties to the transaction.
2.7 Are there any other indirect taxes of which we should be aware?
Customs duties are payable on goods imported from outside the EU (including Great Britain).
Excise duty applies at varying rates to mineral oils, alcohol and alcoholic beverages, tobacco products and electricity, and also applies to certain premises and activities (e.g. betting and licences for retailing of liquor).
There is an insurance levy on the gross amount received by an insurer in respect of certain insurance premiums. The rate is 3% for non-life insurance where the risk is located in Ireland as defined in the legislation. There are exceptions for reinsurance, voluntary health insurance, marine insurance, aviation and transit insurance, export credit insurance and certain dental insurance contracts. There is a levy of 1% on life assurance premiums.
Section 126AA of the Stamp Duties Consolidation Act 1999 provides for a levy on certain financial institutions (known as the bank levy). This has been extended to the end of 2023.
There are a number of land-related indirect taxes, including:
- a vacant site levy, which applies to sites listed on the vacant site register;
- a residential zoned land tax ("RZLT") on land that has been and is zoned as being suitable for residential development; and
- a vacant homes tax ("VHT"), which will apply to residential properties that are occupied for less than 30 days in a 12-month period.
From 3 April 2023, a concrete products levy will apply to concrete blocks, pouring concrete and certain other concrete products at a rate of 10%.
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Originally Published by ICLG
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.