Double taxation risk for Irish incorporated UK tax resident companies

Double taxation risk for Irish incorporated UK tax

Irish domestic law change from January 2021 means many Irish-incorporated, UK resident companies will become dual-resident for tax.


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A number of Irish incorporated companies are treated as UK resident for UK tax purposes by virtue of having their central management and control (CMC) in the UK. Historically, Ireland has treated Irish-incorporated companies managed outside Ireland as non-Irish tax resident under certain conditions. The position changes from 1 January 2021, when certain transitional rules introduced from 1 January 2015 expire and all Irish-incorporated companies will become Irish tax resident under Irish domestic law, unless they are tax resident in another country under the residence tie-break in a treaty. This will generally mean the company becomes dual resident for tax purposes in Ireland and the UK, potentially leading to double taxation as well as triggering anti-avoidance rules, for example under the UK's Hybrid Mismatches legislation. Affected companies should take action now to address this.

The Ireland/UK treaty is a covered tax agreement under the multilateral instrument (MLI) and, in light of the choices made by the two countries, the residence tie-break is therefore now based on competent authority resolution through the mutual agreement procedure (MAP), rather than place of effective management (POEM).

If such competent authority resolution can be obtained before 1 January 2021, and the competent authorities agree to treat the company as resident in the UK, then the company will continue to be solely resident in the UK.

If instead resolution is delayed until after 31 December 2020, then the company will first become a dual resident (with potentially adverse tax consequences in both countries) and then will exit Irish residence (with exit taxation in Ireland).

It follows that most Irish-incorporated, UK resident companies will be in urgent need of applying under the MAP process. Clearly, there is time pressure and therefore the application should be made as soon as possible. Please speak to your usual KPMG contact should you wish to discuss this further.

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