Dáil Éireann Debate, Tuesday - 21 February 2017
168. Deputy Mattie McGrath asked the Minister for Finance his views on whether it is appropriate for accounting companies (details supplied) to advertise the facilitation of payment of 0% tax rates to foreign companies that may wish to do business here; and if he will make a statement on the matter. [8659/17]
View answerIreland has a number of different rates which are applicable within our corporation tax regime.
Primarily we have our headline rate of 12.5%. The 12.5% rate is for trading income unless the income is from an excepted trade in which case the rate is 25%. Excepted trades include certain land dealing activities, income from working minerals and petroleum activities. Ireland also has a 25% corporation tax rate for non-trading income (e.g. investment income, rental income). Additionally, our regime has a 33% rate which is applicable to chargeable gains.
The Knowledge Development Box also provides an effective 6.25% rate of corporation tax on profits from certain qualifying assets that are earned by a company, chargeable to corporation tax in the State, to the extent that the assets relate to R&D undertaken by that company.
I assume that the question refers to the taxation of Irish collective investment funds. The normal tax treatment afforded to Irish collective investment funds is that the funds invested are allowed to grow on a tax-free basis within the fund. The income is taxed at the level of the investor rather than the fund, as is standard international practice.
In order to ensure that the appropriate tax is collected from Irish investors, funds are obliged to operate an exit tax regime and remit the tax deducted in this manner to Revenue. This charge to tax does not apply in the case of unit holders who are non-resident. In the case of non-resident investors, their liability to tax on gains from the fund will be determined in their home jurisdiction.
The broad rationale for exempting such funds from direct taxation is to facilitate individuals to invest collectively, without suffering double taxation (that is, taxation both within the fund and in the hands of the investor on distribution). Most OECD countries now have a tax system that provides for neutrality between direct investments and investments through a Collective Investment Vehicle/Fund.
It is worth noting that due to the changes that I made in Finance Act 2016 this does not apply to collective investment vehicles where 25% or more of the fund derives its value from Irish real estate assets. In such a case the vehicle is deemed to be an Irish Real Estate Fund. Certain payments from an Irish Real Estate Fund to non-resident investors are subject to withholding tax.
