Overview of corporate tax work over the past year
Ireland is a leading European jurisdiction for the establishment of special purpose vehicles to issue bonds (“SPVs“), Securitization companies. In 2019, the Irish share of the number of Eurozone” Financial and Vehicle Corporations “(“FVCs“) was 27.6%. FVCs are bondissuing companies that must report to the European Central Bank.
Ireland is also a leading seat for internationally distributed mutual funds. In 2019 total fund assets under management in Ireland were € 5.2 trillion with the number of Ireland resident funds being 7,707 and approximately € 2 trillion in these Irish resident funds.
Mergers and acquisitions
2019 was another strong year for M&A activity in Ireland, with deals totaling an Irish aspect totaling $ 44.5 billion while overseas M&A activity grew 51% to $ 16.3 billion.
Aircraft leasing and aviation finance
Ireland is a global aircraft leasing center with over 50 aircraft leasing companies in Ireland, including 14 of the world’s top 15 lessors. The commercial aviation industry has grown steadily over the past 10 years. However, 2020 is expected to be a challenging year for this industry globally as travel restrictions put in place as part of the response to COVID-19 have severely restricted operations.
Ireland is a leading location for the development, use and management of intellectual property (“IPAccording to IDA Ireland, the number of global companies centralizing their IP management in Ireland has made Ireland one of the largest exporters of IP in the world. Eight of the world’s top ten technology companies, eight of the world’s top ten pharmaceutical companies, and 15 of the world’s 25 leading medical device companies are located in Ireland In recent years Ireland has attracted a number of innovative social media companies including Google, Facebook, Twitter and LinkedIn, all of which have extensive offices in Ireland.
2019 was a significant year for Ireland in terms of tax litigation. The Tax Appeals Commission (the “TAC“), which was re-constituted in 2016, made progress in addressing a backlog of cases. The TAC closed 1,584 appeals in 2019 for an amount of around € 665 million. One hundred and twelve hearings are planned for 2020. More hearings will be added later this year. As such, this is an important area of work for Irish tax advisors.
Particularly noteworthy are the developments in the Perrigo tax case last year. This case arose from an estimate by the Irish Revenue Commissioners of 1.64 billion euros (“revenue“) in 2018 against Perrigo Company plc. In February 2019, Perrigo brought an action in the Irish Commercial Court for judicial review of Revenue’s decision to make this assessment. These judicial review proceedings were carried out during the COVID-19 restrictions and at the time of writing an assessment of the case is expected.
The EU court ruled on July 15, 2020 that Ireland did not grant Apple illegal state aid, reversing the European Commission’s decision. The European Commission can appeal this decision to the European Court of Justice.
Important developments in corporate tax law and corporate practice
COVID-19 Pandemic Response
At the time of writing, Revenue has issued guidance on many tax issues arising from the COVID-19 pandemic and restrictions on reducing the spread of the disease. Measures introduced by Revenue include:
- Suspension of the application of a late filing surcharge for corporate income tax returns for accounting periods through June 2019. Also, the late filing will not trigger any restriction on reliefs such as loss relief and group relief as would normally be required.
- The suspension of the collection of revenue and the formation of interest on late payments for VAT from January to June (“VAT“) Periods and February-June-Pay-Asyou-Earn (“PAID“) (Employer) liabilities 2020.
- The registration period for all returns for the 2019 Stock Plan has been extended from March 31, 2020 to June 30, 2020.
- The employer’s 90-day registration requirement for the Special Assignee Relief Program (“STEEP“) has been extended for a further 60 days.
- Cross-border employee relief will not be affected by the fact that employees have to work from home in Ireland due to COVID-19. Similarly, if an employee temporarily moves to Ireland and performs duties for their Irish employer during the COVID-19 period, Revenue will not enforce Irish wage and salary obligations.
- The revenue will not strictly enforce the 30-day notice requirement for PAYE exemptions for certain short-term business travelers.
- PAYE cut orders will not be affected by an employee working in Ireland for more than 30 days due to COVID-19.
- For the purposes of Irish tax residence rules preventing an exit from Ireland due to COVID-19, Revenue will take this Force Majeure into account to determine an individual’s tax residency.
- For corporate income tax purposes, Revenue ignores the presence of employees, directors, service providers or agents in Ireland or outside Ireland due to travel restrictions related to COVID-19. In these circumstances, Revenue has recommended that the person and company keep a record of the facts of the relevant bona fide presence in or outside of Ireland.
- Following the adoption of Council Directive (EU) 2020/876, which allowed the DAC2 exchange dates and the DAC6 registration and exchange dates to be postponed, Revenue has confirmed that the 2019 DAC2 filing deadline will now return postponed until September 30, 2020. This deadline also applies to filing tax returns under the Common Reporting Standard and the Foreign Account Tax Compliance Act. Finally, the reporting deadlines for DAC6 were postponed by six months.
- Importing goods to combat the effects of COVID-19 from outside the European Union (“EU”) without paying customs and VAT from January 20, 2020 to July 31, 2020.
OECD BEPS and national legislation
Irish corporate tax law has developed significantly internationally this year. These developments were motivated by the continued commitment of the Irish Government to implement the reforms set out in the Irish Corporate Tax Roadmap published in September 2018. This roadmap outlined the next steps in implementing Ireland’s various international tax reform commitments. Most significant is Ireland’s implementation of the reforms proposed under the OECD Erosion and Profit Shifting Process (“BEPS”), the EU Tax Avoidance Directive (“ATAD”) and the EU Administrative Cooperation Directive .
The main developments in Ireland’s implementation of these initiatives in 2019 and 2020 included:
- Transfer pricing rules.
- Anti-hybrid rules.
- DAC6 – Mandatory Disclosure Regime.
- Double taxation agreement.
- Expansion of the exit tax regime.
Transfer pricing rules
Formal transfer pricing legislation (the “Irish TP rules“) was first introduced in Ireland in 2010 for accounting periods beginning on or after January 1, 2011 for transactions whose terms were agreed on on or after July 1, 2010.
The 2019 Finance Act introduced a number of changes to the Irish TP rules that will apply from January 1, 2020. The changes bring Irish TP rules in line with OECD 2017 guidelines. The changes significantly expand the scope of the Irish TP rules and include an extension of the Irish TP rules to non-trade and capital transactions. In addition, agreements before July 1, 2010 will be included in the scope for the first time.
To be covered by the Irish TP Rules, an arrangement must be made between related parties for the supply and purchase of goods, services, money, intangible assets or taxable assets. The rules provide that in the event of a transaction in which the amount paid to the supplier exceeds the market price or the amount received from the customer is below the market price, the profit of the customer or seller is calculated as although the price is a market price Price was.
The Irish TP rules apply the arm’s length principle, which is to be interpreted in accordance with the OECD Transfer Pricing Guidelines for multinational corporations and tax administrators.OECD guidelines“).
The rules apply to both cross-border and domestic transactions. Irish legislation contains rules to eliminate double counting when only domestic transactions are concerned.
The rules apply even if both parties are subject to Irish tax to ensure that the rules are non-discriminatory from an EU perspective. However, if one party’s profits are adjusted in accordance with the law, the Rules provide that the other party, if it is also subject to Irish tax, may choose to use the market price for calculating its profits that the group will not is disadvantaged.
To view the full article, please click here.
This article first appeared in the guide Global Legal Insights: Corporate Tax 2020 published by Global Legal Group in August 2020.
The content of this article is intended to provide general guidance on the subject. A professional should be obtained about your particular circumstances.