The minister reaffirmed Ireland’s commitment to the 12.5% rate of corporation tax. He also confirmed that Ireland will continue to take the actions needed to meet the highest international standards in tax, whilst offering a competitive tax regime that assists in building the Irish economy.
In September, the Department of Finance released Ireland’s Corporation Tax Roadmap which set out the future of Ireland’s corporation tax regime. The roadmap reflected stakeholder feedback to recommendations that were made in the Review of Ireland’s Corporation Tax Code that was undertaken by independent expert Seamus Coffey (the Coffey Review).
The roadmap detailed Ireland’s adoption of measures that all EU member states are required to implement under the European Union Anti-Tax Avoidance Directive (ATAD) which was agreed by the member states in July 2016. The minister noted some of these proposals in his budget speech.
Under the ATAD provisions, member states are required to introduce an exit tax for corporates, or to bring existing exit taxes for corporates into alignment with the EU provisions, no later than 1 January 2020.
The minister confirmed that Budget 2019 would introduce a new ATAD compliant exit tax regime. Financial Resolutions passed by the Dáil on Budget Day brought this regime into effect from midnight on Budget night.
The minister considered that early introduction of this measure will provide certainty to businesses currently located in Ireland and to those considering investing in Ireland in the future.
The regime will tax unrealised capital gains on capital assets where:
The tax rate for the exit tax is set at 12.5% - which is equivalent to the Irish corporation tax rate on trading profits. There are some additional provisions relevant to this measure:
The minister confirmed that the Finance Bill will provide for the introduction of a Controlled Foreign Company (CFC) regime in Ireland for accounting periods commencing on or after 1 January 2019.
CFC rules are an anti-abuse measure for corporates that are designed to limit the artificial deferral of tax through the use of low-tax or no-tax offshore entities.
The roadmap confirmed that Ireland would introduce ATAD compliant CFC rules in Finance Bill 2018 to take effect for accounting periods beginning on or after 1 January 2019.
The Department of Finance issued a Feedback Statement in September 2018 which sets out some outline legislation for Ireland’s CFC rules. KPMG has made a comprehensive submission on the feedback statement which includes comments on the draft legislative measures and matters which we believe should be addressed in guidance in order that the implementation of the CFC rules can be as clear and unambiguous as possible for businesses.
The CFC rules will introduce an additional compliance burden on Irish headquartered groups and on international groups that have located their regional headquarters and holding structures in Ireland. However, it is hoped that the final legislation and related guidance will be drafted in a manner that ensures the regime is clear, unambiguous and operable in practice.