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Non-Resident Companies

Dáil Éireann Debate, Wednesday - 29 May 2013

Wednesday, 29 May 2013

Questions (75, 76, 77)

Pearse Doherty

Question:

75. Deputy Pearse Doherty asked the Minister for Finance if his attention has been drawn to a 1998 report produced by his Department on Irish registered non-resident companies which stated that IRNR companies have posed a threat to Ireland's international image and its reputation as a well-regulated jurisdiction for conducting business and that the companies are regularly advertised for sale in magazines alongside companies which are incorporated in tax havens; his views on whether the findings of this paper still stand; and if he will make a statement on the matter. [26063/13]

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Pearse Doherty

Question:

76. Deputy Pearse Doherty asked the Minister for Finance if the findings of a 1998 Department of Finance report on Irish Registered Non-Registered Companies were ever enacted on, including the recommendations for company law and taxation elements; and if he will make a statement on the matter. [26064/13]

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Pearse Doherty

Question:

77. Deputy Pearse Doherty asked the Minister for Finance his views following a 1998 report on Irish Registered Non-Resident Companies by his Department that changes need to be made to IRNR companies that change the tax residence rules where registration entails a test of tax residence as an alternative to the control and management test. [26066/13]

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Written answers

I propose to take Questions Nos. 75 to 77, inclusive, together.

Each year, as part of the Budget and Finance Bill process, papers are prepared by my Department for consideration by the Tax Strategy Group which is a group of senior officials from a number of Government Departments. These annual Tax Strategy Group (TSG) papers are then published on the Department of Finance website when the Budget and Finance Bill process has concluded. The paper in question is a Tax Strategy Paper from 1998 which is available on the Department’s website and can be reached at the following link: http://www.finance.gov.ie/viewdoc.asp?fn=/documents/Publications/tsg/tsg9855.htm.

This report followed work undertaken by the Department of Finance, the Revenue Commissioners and what is now the Department of Jobs, Enterprise and Innovation. The Department of Justice, Equality and Law Reform and the Attorney General’s office were also consulted. The issues outlined in the paper were subsequently addressed by a package of measures including amendments to Company Law provisions and the introduction of taxation provisions in Finance Act 1999.

The focus was on companies, engaged in fraud, money laundering, drug-trafficking and other illegal activities, which had no contact or association with the State following their registration. As these companies were managed and controlled outside the State, they were not resident in Ireland for tax purposes under our long-standing management and control rule. The measures were designed to target as far as possible those companies which have no economic connection with Ireland and to minimise any adverse effects on legitimate business. The Company Law measures are contained at sections 42-51 of the Companies Amendment)(No. 2) Act, 1999, which was enacted on 15 December, 1999.

First, as a precondition of incorporation, every application for registration is required to demonstrate that the proposed company intends to carry on an activity in the State. Secondly the 1999 Act required that every company registered in the State was required to maintain an Irish resident director or bond to the value of €25,394.76. The Irish resident director requirement was subsequently changed to a requirement for a director resident in the European Economic Area. Additionally the number of directorships which could be held by one person was limited to 25 (subject to certain exemptions). Finally the Act contained enhanced strike-off provisions and enhanced notification to the CRO where directors have resigned.

The taxation measures are contained in 23A of the Taxes Consolidation Act 1997 which was introduced by section 82 of Finance Act 1999 in order to supplement the management and control rule, which is the primary determinant of company tax residence, by providing that certain companies incorporated in the State are to be regarded as being resident in the State for tax purposes.

Consistent with the purpose of the provisions - to address companies that were not managed and controlled in the State and had no real connection with the State apart from having been incorporated here - the 1999 additions to the residence rules provided that only Irish-incorporated companies with no other connection with the State were to be regarded as resident in the State by virtue of their incorporation here.

A company incorporated in the State is not regarded as tax-resident here where -

- either the company or a related company is carrying on a trade in the State and either -

- the company is ultimately controlled in a tax treaty country or in an EU Member State or

- the company or a related company is quoted on a recognised stock exchange in the EU or in a tax treaty country, or

- the company is treated under a tax treaty as not resident in the State.

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