Apple has been in Ireland since at least December 1980, when it opened its first Irish plant in Holyhill, in Cork. [7] In June 2018, tax academics showed Irish IP–based BEPS tools were artificially distorting aggregate EU GDP data,[115] and had artificially inflated the EU–U.S. 4th—largest U.S. tax inversion in history. [108][109], In January 2017, the EU Commissioner for Taxation, Pierre Moscovici, explicitly stated to an Irish State Oireachtas Finance Committee that "Ireland is not a tax haven";[301] however, in January 2018 Moscovi called Ireland and the Netherlands "tax black holes". They also indirectly, allowed US distressed debt funds to use the Irish Section 110 SPV to enable them to avoid Irish taxes on the circa €100bn of domestic Irish assets they bought from NAMA (and other financial institutions) from 2012 to 2016. It is generally regarded that Ireland's main TP–based BEPS tool users are the life sciences manufacturers. Shire plc). As of November 2018[update], there are only 6 remaining jurisdictions in the world who operate a "worldwide tax" system, of which Ireland is one (e.g. the Irish Section 110 SPV, and the Irish L-QIAIF). [251] Until April 2016, the US tax code would only consider the inverted company as foreign (i.e. Inverted to Bermuda (2002), Swiss (2008), Ireland (2014). 4.1 What is the headline rate of tax on corporate profits? Intangible assets – 80% cap reinstated. [291] In Q1 2018, Pfizer disclosed that post the TCJA its global tax rate for 2019 would be 17%, similar to the circa 15–16% 2019 tax rate of past U.S. corporate tax inversions to Ireland, Eaton, Allergan, and Medtronic. In keeping with many other decisions of the newly independent state the Provisional Government and later the Free State government continued with the same practices and policies of the Irish administration with regard to corporate taxation. During the years of W. T. Cosgrave's governments, the principal aim with regard to fiscal policy was to reduce expenditure and follow that with similar reductions in taxation. Independent studies show that Ireland's aggregate effective corporate tax rate is between 2.2% to 4.5% (depending on assumptions made). [u][97][161][162], Ireland created the first OECD–compliant 'Knowledge Development Box' ("KDB"), in the 2015 Finance Act, to further support its intellectual property BEPS toolkit. In September 2008, The New York Times reported that "Britain is facing a potential new problem: an exodus of British companies fleeing the tax system". [t] However, Ireland turns it into a BEPS tool by providing the allowances for the purchase of intangible assets, and particularly intellectual property assets; and critically, where the owner of the intangible assets is a "connected party" (e.g. This period from c.1956 to c.1975, is probably the most influential on the evolution of the Irish corporate tax system and marked the development of an 'Irish' corporate tax system, rather than continuing with a version of the British model. There is no precise definition of what constitutes a … Many of Ireland's corporation tax tools are OECD–whitelisted. In 2016–2017, foreign multinationals, being entirely U.S.–controlled: The main features regarding foreign multinationals in Ireland are: Ireland's corporate BEPS tools emphasise job creation (either of Irish employees or of foreign employees to Ireland). Inverted with a division of Elan Corporation, Elan Drug Technologies. A source of controversy is the effective tax rate of Ireland corporation tax system, of which the independent evidence is that it is less than 4%, and as low as 0.005% for major U.S. multinationals (see Irish effective corporate tax rate). The Irish IP regime is broad and applies to all types of IP. A Section 110 Special Purpose Vehicle ("SPV") is an Irish tax resident company, which qualifies under Section 110 of the 1997 Irish Taxes Consolidation Act ("TCA"), by virtue of restricting itself to only holding "qualifying assets", for a special tax regime that enables the SPV to attain full tax neutrality (i.e. [126] However the TCJA goes even further and the GILTI–FDII–BEAT tax regime are a more severe "carrot and stick" to encourage U.S. multinationals to re-locate their substantive operations (and IP), back to the U.S.[289][322][323], However, the TCJA is large and complex, and in 2018, tax experts have noted that errors and flaws in the TCJA,[324] could be a "boom for Ireland", over the next few years. [127] However, in December 2017, Eurostat reported that Modified GNI* did not remove all of the distortions from Irish economic data. [123][288] In particular, the TCJA moved the U.S to a hybrid–"territorial tax" system,[i] reduced the headline rate from 35% to 21% and introduced a new GILTI–FDII–BEAT regime designed to remove incentives for U.S. multinationals to execute corporate tax inversions to Ireland. without providing any Irish tax revenue). The Irish government has always tried to encourage and support incoming investment into Ireland, and indeed foster a strong start-up culture at home. Market capitalisation of Allergan, to which Activis was renamed post its 2015 merger with Irish—based, Allergan, Bought by Medtronic in a 2015 Irish corporate tax inversion, Bought by Eaton Corporation in a 2012 Irish corporate tax inversion, Bought by Johnson Controls in a 2016 Irish corporate tax inversion, Before 1996, the United States, like other high-income countries, had anti-avoidance rules—known as "controlled foreign corporations" provisions—designed to immediately tax in the United States some foreign income (such as royalties and interest) conducive of profit shifting. The impact of this can be seen in the increasing importance of CPT as a percentage of government revenue, rising from and less than 1% of tax revenue in the first decade of the Free State to 3.64% in the decade 1942–43 to 1951–52. By submitting your email address, you acknowledge that you have read the Privacy Statement and that you consent to our processing data in accordance with the Privacy Statement. 3rd—largest U.S. tax inversion in history. The gap between the Irish corporate headline rate of 12.5%, and the much lower Irish corporate effective rate of 2–4%, is a source of controversy: Many of the multinationals gathered at the Four Seasons [in Dublin, Ireland] that day pay far less than 12.5 percent tax, their accounts show. However, in June 2018, the former IMF mission-chief for Ireland Ashoka Mody, who oversaw Ireland's bailout during the 2009–2012 Irish financial crisis, warned that in relation to TCJA: He said the Irish economy won't cope with radical changes to international tax rules, which will dent our attractiveness to multinationals. "Without its low-tax regime, Ireland will find it hard to sustain economic momentum," he said. While Ireland's most important BEPS tools are all IP–based, Ireland has other BEPS tools including Transfer Pricing–based BEPS tools (e.g. Historically the corporate tax take represented 13pc to 15pc of the overall tax receipts. Low headline rate. Ireland's Corporate Tax System is a central component of Ireland's economy. At the same time, the regulation is available for trading companies with which Ireland has signed a double tax treaty or the Convention on Mutual Assistance in Tax Matters. [151], In November 2018, the Irish Government amended the Ireland–Malta tax treaty to prevent the Single Malt BEPS tool being used between Ireland and Malta (it can still be used with the UAE for example). [145][146] In August 2016, the EU Commission levied the largest corporate tax fine in history,[140] on Apple's Irish Double Irish BEPS tool from 2004 to 2014, using State-aid rules. General accruals and provisions are not tax-deductible. Seamus Coffey's 2016 Review of Ireland's Corporation Tax Code chronicled how the EU withdrew the exemption from State-aid rules for Ireland's special tax rate of 10% in 1996–1998, however, Ireland countered the EU withdrawal by lowering the entire Irish standard rate of corporate tax from 40% to 12.5% over 1996–2003 (see § Historical rates (1994–2018)). [105] The table also includes some known aborted U.S. tax inversions to Ireland. [122], In 2014, the U.S Tax Foundation, reported on how the UK had effectively stopped UK corporates inverting to Ireland, by switching the UK corporate tax-code to a "territorial system" over 2009–2012. The main categories of business taxes are as follows: Corporate and Business Tax. [w] However, since the Irish financial crisis, some Irish tax law firms in the IFSC produced CAIA brochures openly marketing that its ETR was 2.5%.[u][23][97][161][162]. For companies that were claiming this relief before 23 July 1998, it would still be available until 31 January 2010. Non-trading (passive) income includes dividends from companies tax resident outside Ireland (with some exceptions), interest, rents, and royalties. Attracted the first U.S. inversion in history. [108][237], In July 2020, the European General Court (EGC) ruled that the EU Commission "did not succeed in showing to the requisite legal standard" that Apple had received tax advantages from Ireland, and overturned the findings against Apple. A measure which marked the last years of the Cumann na nGaedheal government, and one that was out of kilter with their general free trade policy, but which came primarily as a result of Fianna Fáil pressure over the 'protection' of Irish industry, was the introduction of a higher rate of CPT for foreign firms. Ireland created the first OECD–compliant KDB in 2016 to support its IP–based BEPS tools. This move is called "checking the box" because that is all outside the U.S. tax-code), where the inversion was part of an acquisition, and the Irish target was at least 20% of the value of the combined group. [142][143], In an October 2013 interview, PwC tax partner Feargal O'Rourke ("architect" of the Double Irish, see above), said that: "the days of the Double Irish tax scheme are numbered". [192][193] This risk was highlighted in 2014 when Central Bank of Ireland consulted the European Systemic Risk Board ("ESRB") after lobbying to expand the L-QIAIF regime. [342], The Irish financial crises created unprecedented forces in the Economy. [83] The 1994 Hines–Rice paper showed that low foreign tax rates [from tax havens] ultimately enhance U.S. tax collections. However, Ireland replaced it with the new single malt system,[149][150] and an expanded capital allowances scheme. Ireland Corporate - Taxes on corporate income Last reviewed - 10 August 2020. In September 2018, Ireland had a global network of 73 bilateral tax treaties, and a 74th with Ghana awaiting ratification. Post-independence under Cumann na nGaedheal, Charles Haughey low-tax economy (1987–2009), The OECD does not class Ireland as a tax haven, and as of 2018, only considers Trinidad and Tobago as a tax haven (see. [304][305], In March 2018, the EU Commission proposed a "Digital Services Tax" (DST), targeted at U.S. technology firms using Irish BEPS tools. In the 1998 Budget (in December 1997) Finance Minister, Charlie McCreevy[334] introduced the legislation for a new regime of corporation tax that led to the introduction of the 12.5% rate of corporation tax for trading income from 1 January 2003. Even that, however, is too low for Ireland’s EU partners. the Double Irish, the Capital Allowances for Intangible Assets and the Section 110 SPV), to achieve an effective Irish CT rate, or ETR, of 0–2.5%. [229] The investigation aimed to examine whether Apple used offshore structures, in conjunction with arrangements, to shift profits from the U.S. to Ireland. ", "Guidance on Tax Residence Irish Revenue", "Change in tax treatment of intellectual property and subsequent and reversal hard to fathom", "Knowledge Development Box Public Consultation and Observations", "Ireland: The Leading European Jurisdiction for SPVs, Structured Finance and Securitised Structures", "How do vulture funds exploit tax loopholes? Foreign multinationals were now 80% of corporate taxes, and concentrated in a smaller group. Ireland has not attracted material technology or life sciences multinationals (outside of a specific plant, under its TP–based Contract Manufacturing BEPS tool), whose home jurisdiction operates a "territorial tax" system. After completing its corporate inversion to Ireland, Activis would complete more transactions (e.g. BEPS tools had artificially inflated Ireland's economic statistics by 62%). Ireland has two rates of corporation tax: a 12.5% rate; and a 25% rate. [344] Under pressure from the EU,[110][142] Ireland closed down the double Irish in 2015, which was described as the largest tax avoidance scheme in history. [24][52][53] The transformation was accelerated when Ireland's standard corporate tax rate was reduced from 40% to 12.5% (phased in from 1996 to 2003), in response to the EU's 1996–1998 decision to withdraw the State-aid waiver. In addition, the Irish State, to help obfuscate the activities of the larger and more important IP–based BEPS tools, sometimes present their data as manufacturing data. This table shows the withholding tax rates in the source country (Ireland’s treaty partner) for dividend, interest and royalty payments. U.S. investigations, from the first U.S. IRS study in 1981,[q][106] up to and including 2013 U.S. McCain–Levin Senate investigations into Apple's tax structures, label Ireland as a "tax haven" for U.S. [328], In December 2017, the Irish Government published a study on the sustainability of its corporate tax system by University College Cork economist Seamus Coffey (called the Coffey Report). However, Ireland is the only country in Europe where our official tax rate was in line with our actual tax rate (12.5% V’s 12.4%), giving us the most effective tax rate in Europe. During Apple's restructure into an Irish CAIA BEPS tool in Q1 2015, the cap was temporarily lifted to 100% (e.g. Companies are also charged with the value added tax and this is why they also need to conclude the necessary formalities for VAT registration in Ireland. [245][246], In December 2017, the Department of Finance published a report they commissioned on the Irish corporate tax code by UCC economist, Seamus Coffey. Provided the IP is held for five years, a subsequent disposal of the IP will not result in a clawback. During 2009–2012, both the Labour Government and the Conservative Government, overhauled the UK corporate tax code, switching from a "worldwide tax" system to a "territorial tax" system. Country tax laws are continually changing, so an MNE's tax planning and management processes must therefore include a continual updating of tax practices by country. The ability of foreign institutions to use QIAIFs (and particularly the ICAV-wrapper) to avoid all Irish taxes on Irish assets has been blamed for the bubble in Dublin commercial property (and, by implication, the Dublin housing crisis). Inverted to Switzerland (2012), Ireland (2014), then UK (2016). Therefore, as shown in § Yearly returns (2001–2017), while Irish CT has consistently been between 10 and 15% of Total Irish Tax, the additional employment contribution made by U.S. multinationals in Ireland, has led to strong growth in overall Irish Total Taxes. It is expected that the Irish L–QIAIF will replace the Irish Section 110 SPV as Ireland's main Debt–based BEPS tool for U.S. multinationals in Ireland. Ireland's economic model was transformed from a predominantly agricultural-based economy to a knowledge-based economy, when the EU agreed to waive EU State-aid rules to allow Ireland's 'special rate' of 10% for manufacturing (created in 1980–81 with the EU's agreement),[24] to be extended to the special economic zone called the International Financial Services Centre ("IFSC") in Dublin city centre in 1987. [54] The results, summarised on Section 2 (page 13) of the report, showed all of the Irish experts, with the exception of Dr. Jim Stewart, agreed with Feargal O'Rourke and PricewaterhouseCoopers: In August 2016, when the EU Commission published the results of their 2–year detailed investigation of Apple's tax structure in Ireland (see above), showing that Apple's ETR in 2014 was 0.005%,[109][244] the Irish Revenue Commissioners stated that they: "had collected the full amount of tax that was due from Apple in accordance with the Irish law". multinationals. [11][163], The KDB behaves like a CAIA BEPS scheme with a cap of 50% (i.e. The creation of the IFSC is often considered the birth of the Celtic Tiger and the driver of its first phase of growth in the 1990s. By 2018, Ireland had received the most U.S. § Corporate tax inversions in history, and Apple was over one–fifth of Irish G… The report also shows that the effective tax rate in Ireland - the percentage companies are actually paying - is quite close to the headline rate of 12.5%. [334] This has not been without controversy and complaint from both Ireland's EU partners,[336][337][338] and also from the US (whose multinationals, for specific reasons, comprise almost all of the major foreign multinationals in Ireland).[339]. In February 1994, the most cited academic on tax havens, In October 2013, Bloomberg commissioned a, In June 2018, 24 years after the 1994 James R. Hines paper into global tax havens, French tax economist, Ireland is noted as a tax haven on all academic tax haven lists (Hines 1994 2007 2010, Dharmapala 2006 2010, and, CORPNET (University of Amsterdam) identify Ireland as one of the five leading global, Tax haven investigators identify Ireland as showing signs of behaving like a ', This page was last edited on 26 January 2021, at 17:14. Academics rank Ireland as the largest tax haven; larger than the Caribbean tax haven system. It is for this reason that the offey review of Ireland’s corporation tax code was commissioned and, following its publication in 2017, I launched a "Worldwide tax". [230] Senators Carl Levin and John McCain drew light on what they referred to as a special tax arrangement between Apple and Ireland which allowed Apple to pay a corporate tax rate of less than 2%. Corporate Tax Rate in Ireland averaged 27.43 percent from 1981 until 2020, reaching an all time high of 50 percent in 1982 and a record low of 12.50 percent in 2003. [164][165], The Irish KDB was created with tight conditions to ensure OECD compliance and thus meets the OECD's "modified Nexus standard" for IP. Directly contributed €28.3 billion annually in taxes, wages and capital spending; Paid 80% of all Irish corporation and Irish business taxes; Paid 50% of all Irish salary taxes (due to higher paying jobs), 50% of all Irish VAT, and 92% of all Irish customs and excise duties; Created 57% of private sector non–farm value–add: 40% of value–add in Irish services and 80% of value–add in Irish manufacturing; Made up 25 of the top 50 Irish companies (by 2017 turnover) (see. When the Irish State applied a cap of 80% on the total amount of Irish intangible capital allowances that can be used against taxable profits in any year, it gave an Irish effective tax rate (ETR) of 2.5% for the CAIA BEPS tool, being the Irish corporation tax rate of 12.5% multiplied by 20%. Please try again. Income Tax. [65] In January 2018, Eurostat used 2015 data to show the gross operating surplus of foreign companies in Ireland was almost exclusively from U.S. companies, with the UK was a distant second, and little other foreign firm activity. Note that the accounts referenced below are from U.S. multinationals in Ireland who were at the time of filing. The near twenty years of Fianna Fáíl government between from 1931 to 1948, cannot be said to have been a time where much effort was expended on changing or analysing the taxation system of corporations. Make no mistake: the headline rate is not what triggers tax evasion and aggressive tax planning. [189], The Irish QIAIF regime is exempt from all Irish taxes and duties (including VAT and withholding tax), and apart from the VCC wrapper, do not have to file public accounts with the Irish CRO. A 12.5% corporate tax is supposedly critical to keeping multinationals in Ireland - yet Google pays 20% there • Google Ireland's 2009 accounts in full (pdf) In 2014, Ireland refused to implement the 2013 EU Accounting Directive, and invoked exemptions on reporting holding company structures until 2022, so that multinationals can register as Irish "unlimited liability companies" (ULCs), which do not have to file public accounts with the Irish CRO. [9][54][334], A 'special rate' of 10% for companies in manufacturing (and the Shannon Free Zone), was introduced in 1980–81 (with EU State-aid approval), and extended to the financial services in the International Financial Services Centre (IFSC) zone in 1987 (with EU State-aid approval); due to EU decision to withdraw EU State-aid approval in 1996–1998,[24] the special rate was phased-out and ended on 31 December 2003 for new schemes, with expiry for all existing IFSC schemes in 2005, and all existing manufacturing schemes by 2010. That comes from schemes that facilitate profit shifting. The 12.5% corporate tax rate is at the centre of the ‘Irish brand’ for inward investment. In November 2016 the Central Bank began to overhaul the L-QIAIF regime. In general, expenses incurred wholly and exclusively for the purposes of the trade are tax-deductible. The Irish State asserts Ireland's ETR similar to the Irish headline CT rate of 12.5%. In June 2018, the American Chamber of Commerce (Ireland) estimated the value of U.S. investment in Ireland was €334 billion, which compared to 2017 Irish GNI* of €181.2 billion. Ireland's GDP is artificially inflated by BEPS accounting flows. Ireland helps them do this by generously defining what profit it will tax, and what it will leave untouched. Tax Incentives: At 12.5%, Ireland’s corporate tax rate is one of the lowest in the developed world. [292] In August 2018, U.S. multinational Afilias, who had been headquartered in Ireland since 2001, announced that as a result of the TCJA, it was moving back to the U.S.[293]. Inverted with privately owned Azur Pharma Limited. [253], In December 2017, the Trump administration's U.S. Tax Cuts and Jobs Act (TCJA) overhauled the U.S. tax-code and replicated many of the changes the UK made to their tax-code in 2009–2012 to successfully combat inversions (see below). If CT is payable on a capital gain, a company must adjust the gain. Ireland’s corporate tax rate is amongst the lowest in Europe, and it can only be changed by the Irish Government. [299] During 2007–2008, several major UK multinationals executed corporate tax inversions to Ireland. The government is finding out", "Ireland's 'Single Malt' still aiding tax avoidance", "Revenue to close 'single malt' tax loophole", "LinkedIn's Irish subsidiary pays $127m on $2.67bn profit", "Irish Microsoft firm worth $100bn ahead of merger", "Commission on Taxation Report Ireland 2009: Proposed property tax, a carbon tax, and domestic water charges as part of overhaul of Irish tax system", "After a Tax Crackdown, Apple Found a New Shelter for Its Profits", "New Report on Apple's New Irish Tax Structure", "Uses of Ireland for German Companies: Irish "Intellectual Property" Tax of 2.5% ETR", "Maples and Calder Irish Intellectual Property Tax Regime - 2.5% Effective Tax", "Revenue Guidance Notes for Knowledge Development Box", "Action 5 Agreement on Modified Nexus Approach for IP Regimes", "Knowledge Development Box Improvements Needed", "Knowledge Development Box: Best in Class? [26] In response, the Government introduced "modified GNI" (or GNI*) in 2017, which was circa 40% below 2017 Irish GDP, and a paired back of some BEPS schemes to improve corporation tax sustainability.[9][247]. the 2020 Digital Services Tax, and the CCCTB). Transparent. Last year corporate taxes amounted to more than €10bn. In writing its report, the IMF conducted confidential anonymous interviews with Irish corporate tax experts.[332]. they could afford to pay more to acquire US competitors to re-domicile them to Ireland), and listed the post-inversion acquisitions of Activis/Allergan, Endo, Mallinckrodt and Horizon.[256]. As of November 2018[update], there are two rates of corporation tax ("CT") in the Republic of Ireland:[10][11][12][13], As of November 2018[update], the key attributes that tax experts note regarding the Irish corporate tax system are as follows:[12][16], The trends in Irish corporation tax ("CT") receipts to the Irish Exchequer were:[25][26][27][28]. As of 2017, 25 of the top 50 Irish firms were U.S.–controlled businesses, representing 70% of the revenue of the top 50 Irish firms. These profit inflows are retained in Ireland with a corresponding outflow only arising when a dividend is paid to the foreign owner. "Spin-off inversion" from Johnson / Tyco inversion (2016). [59] However, research also showed that the artificial distortion of Ireland's economic data, and GDP in particular, by BEPS flows, led to a large credit bubble during 2003–2007 (due to the mispricing of Ireland's credit by international markets), and an eventual credit–property–banking crisis in 2008–2013 (when Ireland's credit was re-priced). Corporate Tax. [114] In March 2018, the Financial Stability Forum showed Ireland's Debt–based BEPS tools made it the 3rd–largest Shadow Banking OFC in the world. Personal Income Tax Rate in Ireland averaged 45.65 percent from 1995 until 2020, reaching an all time high of 48 percent in 1996 and a record low of 41 percent in 2007. It is a key benefit to investors locating here and makes for an attractive global investment location. An additional ‘profit resource rent’ tax applies to certain petroleum activities. Ireland has a 12.5% corporate tax rate. © 2017 - 2021 PwC. In early 2018, the Central Bank upgraded the L-QIAIF regime so that it could replicate the Section 110 SPV (e.g. The "Tax Revenues" quoted are Exchequer Tax Revenues, and do not include Appropriations-in-Aid ("A–in–A") items, the largest being Social Security (or PRSI) which for 2015 was €10.2 billion, and other smaller items. [105] As of November 2018, Ireland was the destination for the largest US corporate tax inversion in history, the $81 billion merger of Medtronic and Covidien in 2015. The table below defines the corporation tax rates applicable for each company type based on residence. [325][326][327], The above post–2009 UK, EU and U.S. countermeasures against Ireland's corporate tax system, and by extension Ireland's economic model, have been a cause of concern in Ireland, and even the "architect" of Ireland's BEPS tools, PricewaterhouseCoopers tax-partner, Feargal O'Rourke, has warned on the sustainability of Irish CT revenues. Spvs and QIAIFs ), Ireland, due to its BEPS tools e.g. Aggressive tax planning is globally untaxed profits, like Bermuda ). [ ]. The centre of the principal and paid to the trading profits of a site, the Caymans ( )., due to the Caymans ( 2002 ), the US 2017 TCJA ( esp '', when! In 1928 assets other than Development land this has made QIAIF an important `` backdoor '' out of the are! Economists to be taxable after deductions an inadequate tax compliance position of the OECD and. 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A summary of Irish taxation 150 ] and an expanded capital allowances.... in Ireland is fully to..., but without needing to file public CRO accounts from £500, ireland tax rate corporate tax shield of principal. Escalated in Q1 2015 re-structure of their Irish BEPS tools had artificially inflated BEPS... Ip is held for five years, a rate of 25 % rate ; a! 2.5 % with Ghana awaiting ratification ( see the income determination Section ). [ 184 ] 314!

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