Impact of recent changes to Irish tax law on International business

The Irish Finance (No.2) Act, signed into law on December 18, 2023, enacts the tax reforms proposed in the 2024 Irish Budget.

Key changes affecting Irish and international stakeholders include several important actions.

EU Global Minimum Tax Directive Implementation

• Incorporates the OECD's GloBe rules (on minimum taxation) into Irish law, mandating an effective rate of corporate tax of at least 15% for companies with over EUR 750 million in consolidated revenue.
• Introduces three 'top-up' taxes:
  1. Income Inclusion Rule (IIR) levied on parent entities in respect of their own low-taxed income or the low-taxed income of their subsidiaries (effective from 31 December 2023);
  2. Undertaxed Profits Rule (UTPR) imposes tax on affiliate companies if the parent is not subject to an IIR in another jurisdiction (effective from 31 December 2024); and
  3. Qualified Domestic Top-up Tax (QDTT) which raises the effective rate of tax for the constituent entities in a group to at least 15% (effective from 31 December 2023).
• Exemptions for investment funds and certain investment entities are available but require careful case-by-case analysis.
• New reporting obligations for entities under the GloBE rules, necessitating registration and an annual information return to Irish Revenue.

Outbound Payments to Zero Tax Jurisdictions

• Introduces withholding taxes on dividends, royalties, and interest payments to zero tax or EU non-cooperative jurisdictions from April 1, 2024, with some exceptions.

Employers and Investors

• Employers must now handle payroll taxes for employee share options from January 1, 2024. The obligation previously lay with the employee.
• The Employment Investment Incentive Scheme (EIIS) is revamped to allow increased relief limits and variable rates ranging from 20% to 50%.
• A new capital gains tax relief for 'Angel Investors' is introduced, reducing the rate to 16% or 18% for unlisted innovative companies, capped at EUR 3 million.
• R&D Tax Credit rate increased from 25% to 30%, with enhanced cash flow support for smaller companies.

Leasing and Finance Companies

• Technical amendments aim to standardize the tax treatment of leasing activities, including a new calculation method for lease profits, capital allowances for lessees, and interest deductibility for 'qualifying finance companies'.

Property Related Changes / Real Estate

• If an Irish collection agent has been appointed by the non resident lessor, the collection agent is either liable for tax on the rent or, since 1 July 2023, can withhold 20% of the rent and pay it to Revenue. Where a lessor has appointed an Irish collection agent, the lessee has no withholding obligations in respect of the rent.
• Increase in Vacant Homes Tax from three to five times the local property tax rate.
• Deferral of the Residential Zoned Land Tax charge.
• Land sales attracting capital gains tax exemption under section 604A of the Taxes Consolidation Act, 1997, amended to clarify this relief can only be attained where the land was sold for market value. This appears to intend to prevent certain intra group or family transactions benefitting.

VAT and Stamp Duty

• Slight increase in VAT registration thresholds to assist smaller businesses to remain out of the VAT administration net..
• Legislation on stamp duty for electronic transfers of shares on US and Canadian markets, reflecting previous Revenue practice.

EU Directives on Administrative Co-operation

• Changes to DAC6 rules, clarifying Revenue's investigative powers in relation to the accuracy of tax returns.
• Introduction of section 891L in the Taxes Consolidation Act, 1997 to enable joint audits by Member State tax authorities.

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Disclaimer

This client briefing has been prepared for clients and professional associates of Ogier. The information and expressions of opinion which it contains are not intended to be a comprehensive study or to provide legal advice and should not be treated as a substitute for specific advice concerning individual situations.

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