Ireland updates international tax strategy

Transcription

1 14 October 2016 Issue 06/2016 Tax alert Ireland Ireland updates international tax strategy Contacts If you require further information, please call your regular contact in EY or contact any of the following: Dublin Kevin McLoughlin (Partner) E: T: Joe Bollard (Partner) E: joe.bollard@ie.ey.com T: Cork Frank O Neill (Partner) E: frank.oneill@ie.ey.com T Limerick John Heffernan (Partner) E: john.heffernan@ie.ey.com T: Waterford Paul Fleming (Director) E: paul.fleming@ie.ey.com T: Executive summary As part of his 2017 Budget proposals (released 11 October 2016), the Irish Minister for Finance published a document entitled, Update on Ireland s International Tax Strategy (2016 Strategy Update). This Alert summarises the key items outlined in the 2016 Strategy Update. Detailed discussion 2016 Strategy Update The 2016 Strategy Update is the second annual update of Ireland s international tax strategy and outlines where Ireland stands and where it is headed from an international tax policy perspective. The 2016 Strategy Update also reaffirms the Irish Government s tax policy commitments in an international context and outlines how the country will balance changing demands arising from the OECD BEPS and parallel EU processes, against the value of constancy. Throughout the update, the Irish Government communicates its desire to provide certainty to businesses while maintaining Ireland s international competitiveness. New York (Irish Tax Desk) James Burrows (Director) E: james.burrows1@ey.com T: San Jose (Irish Tax Desk) Karl Doyle (Director) E: karl.doyle@ey.com T:

2 Foreword by the Minister for Finance The key comments noted by the Minister in his foreword are outlined below: The Minister noted that in the ever changing world of international tax reform, Ireland has been the voice of clarity. We have committed to meeting the best new international standards and have set about honouring that commitment without undue fuss or drama. The Minister reaffirmed Ireland s rock solid commitment to the 12.5% corporate tax rate, accompanying Ireland s core offering of a competitive, business-friendly regime. The Minister also highlighted that the Irish regime meets the highest standards in transparency. The Minster emphasized that Ireland competes fairly and plays by the rules, stating that Ireland s tax rules are written in law and apply to everybody. It has been well documented that the Irish Government is appealing the European Commission s decision on the State aid case against Ireland. Furthermore, the Minister cites the need to defend the sovereignty of Ireland s tax system and noted the importance for taxpayers of certainty. The Minister closes his foreword with the statement, while change is inevitable, uncertainty is avoidable. A clear theme of the update is Ireland s desire to provide certainty to businesses while maintaining its international competitiveness. A Brexit-ready tax system The Irish Government has pledged that this year s Budget would be Brexit-proofed and has previewed several Budget measures to get Ireland Brexit ready, including measures affecting small and medium enterprises, Irish exporters, entrepreneurship, tourism and the agri-food sector. The existing regimes designed to provide tax relief for overseas executives relocating to Ireland (SARP) and Irish-based executives working for periods in certain overseas markets (Foreign Earnings Deduction) have been extended through The requirements for claiming the Foreign Earnings Deduction have also been relaxed. This section of the 2016 Strategy Update notes the importance of a competitive corporate tax policy in terms of improving innovation and increasing capital investment. Budget 2017 launched a review of the Irish corporate tax code (see separate Tax Alert: Ireland independent expert to review Irish corporate tax code 04/2016), which will include consideration as to how Ireland can deliver tax certainty for business and maintain the competitiveness of Ireland s corporate tax offering. The 2016 Strategy Update reaffirmed that the 12.5% corporate tax rate remains the cornerstone of Ireland s competitive offering, supplemented by a very broad tax depreciation regime for intangibles, with a leading R&D tax credit regime and a BEPS Action 5 compliant Knowledge Development Box. In line with agreed international best practices, these incentives are designed to attract high quality jobs and substantive operations to Ireland. As part of Budget 2017, the Minister published an evaluation of the R&D tax credit highlighting how the credit encourages innovation and investment in Ireland. Ireland and BEPS implementation This section of the 2016 Strategy Update highlights Ireland s commitment to the BEPS process and the need for Ireland to keep pace with this international movement for change. The 2016 Strategy Update points out that Ireland has achieved further progress over the past 12 months on its commitments under BEPS, such as the implementation of Country-by-Country (CBC) reporting, as well as OECD exchange of information requirements for tax rulings. The 2016 Strategy Update notes that the Anti-Tax Avoidance Directive (ATAD or the Directive) will see three of the other key OECD BEPS recommendations implemented across Europe, targeting hybrid mismatches, interest deductibility and controlled foreign company rules. It also notes that Ireland will implement these changes in line with the agreed deadlines. In relation to the work underway in over 90 countries towards finalizing a multilateral instrument (MLI) to modify bilateral treaties, the 2016 Strategy Update states that Ireland has played an active part in this work and will continue to do so.

3 Following agreement by the OECD of new transfer pricing rules, the 2016 Strategy Update adds, Ireland now needs to consider what changes are needed to ensure that it meets the standards set out in the OECD guidelines. The Finance Bill will be published on October 20 th and legislative proposals in this area are anticipated. All of foregoing must be viewed in light of the Irish Government s desire to provide certainty to businesses while maintaining Ireland s international competitiveness. Ireland s engagement with EU tax proposals This section of the 2016 Strategy Update highlights the ATAD as an important step in EU efforts to combat aggressive tax planning. The 2016 Strategy Update goes on to note that Ireland played a very active part in shaping the Directive, ensuring that Ireland s sovereignty on tax rates was fully protected in negotiating the Directive. In relation to the re-launch of the European Commission s proposal on the Common Consolidated Corporate Tax Base (CCCTB) Directive, the 2016 Strategy Update states that Ireland will continue to constructively engage in discussions on this proposal, but maintains its position that taxation remains an area for unanimous decision making as laid out in the EC Treaty. The final statement of this section states that Ireland continues to disagree with any harmonisation of tax rates, minimum levels of taxation or the inappropriate encroachment of State aid rules into the core Member State competence of taxation. Tax transparency & tax development The penultimate section of the 2016 Strategy Update highlights the Irish Government s support and commitment to the highest international standards in transparency and notes that the Directive on Administrative Cooperation (DAC) is the cornerstone of tax transparency between Member States. In relation to the DAC, the 2016 Strategy Update notes that the Irish Government has pledged to implement two transparency directives by the end of 2016; DAC3, dealing with the automatic exchange of tax rulings among Member States and DAC4, dealing with the automatic exchange of CBC reports among tax authorities. On the automatic exchange of information, a further iteration of the DAC is very close to reaching political agreement. DAC5 would ensure that tax authorities are given access to relevant information prepared by financial institutions as part of their anti-money laundering (AML) requirements. Ireland has strongly supported this proposal, which is consistent with the approach currently taken in Ireland s domestic tax legislation. This section also noted the need for the Irish tax authorities to have sufficient powers to access all relevant information. In this regard, the Minister stated that he would support the granting of any additional powers necessary. The 2016 Strategy Update goes on to point out that Ireland is an active participant in the EU Platform for Good Tax Governance, which examines approaches to targeting tax evasion and avoidance. Update on Ireland s international tax strategy Included in the first Strategy Statement Update released in 2013 was an International Tax Charter (Charter), which set out the principles and strategic objectives underlying Ireland s international tax policy. This Charter expressly noted Ireland s commitment to maintaining an open, transparent, stable and competitive corporate tax regime and how this commitment would be achieved. The Charter also outlined a number of specific commitments in relation to the exchange of tax information with tax treaty partners, active contribution to the OECD/EU efforts to counter harmful tax competition and engagement with developing countries in relation to tax matters. The 2016 Strategy Update sets out the further progress that has been achieved over the past 12 months on each of the stated commitments. Some of the notable developments include: CBC reporting was implemented in Finance Act 2015 and Ireland signed a multilateral competent authority agreement in January 2016 to share these reports with other tax authorities. Legislative changes made in Finance Act 2015 improved Irish tax authorities ability to access and exchange information. Approval was given to sign two new double tax agreements and a tax information exchange agreement. Tax treaties with two developing countries, which were re-negotiated for greater source country taxation, were ratified in Finance Act The second revision of the DAC enabling the automatic exchange of financial account information was implemented in Finance Act Ireland has actively supported work at the EU level on third, fourth and fifth iterations of the DAC to facilitate the automatic exchange of information on cross-border tax rulings and CBC reports and to ensure that tax authorities have access to AML information. Name of publication Month Year 3

4 Ireland agreed to the ATAD with fellow EU Member States to implement a number of BEPS Actions consistently across the EU. Ireland continues to engage constructively on other EU tax files. Ireland remains engaged in the OECD s BEPS project and the new BEPS Inclusive Framework as it moves into the implementation phase. The Knowledge Development Box was introduced in Finance Act 2015 in a manner that fully complies with the international best practice agreed in BEPS Action 5.

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