I propose to take Questions Nos. 234, 237, 238, 285 and 286 together.
I am advised by the Revenue Commissioners that under Irish tax law, non-resident companies are chargeable to Irish corporation tax only on the profits attributable to their Irish branches. The profits of non-resident companies that are not generated by their Irish branches – such as profits from technology, design and marketing that are generated outside Ireland – cannot be charged with Irish tax under Irish tax law. The trading income of an Irish branch of a non-resident company is charged at the statutory 12.5% rate of corporation tax.
The very low rates frequently cited in relation to multinational companies with branch operations in Ireland are derived by presenting the tax paid in Ireland by these non-resident companies, which are only liable to Irish tax on the income of their Irish branch, as a percentage of the global profits of such global companies – which is misleading as most of the global profit is not chargeable to Irish tax. Such percentages do not compare like with like, i.e. the Irish tax with the Irish income.
The issue of international tax planning, involving mismatches between different countries’ tax rules, is well known. Such mismatches, which can result in substantial profits escaping tax, necessarily involve the misalignment of the respective rules of two countries and, accordingly, are not the sole responsibility of either of the countries concerned. Nevertheless, consistent with Ireland’s support for the OECD’s BEPS Project to restrict the scope for international tax planning by multinational companies, when Ireland’s management and control-based company tax residence rules were identified as contributing to mismatches with countries that based company tax residence solely on place of incorporation , amending legislation was enacted without delay in the Finance Act 2013 to prevent such mismatches.
Accordingly, the Finance Act 2013 eliminated the mismatch of national rules which allowed an Irish-incorporated company that was managed and controlled in a treaty-partner country such as the United States not to be tax-resident in either country. Where a company became tax-resident in Ireland as a result of this legislative change, any opinion in relation to attribution of income to an Irish branch of a non-resident company ceased to be relevant.
With regard to the actions of other EU Member States, I would highlight that Member States have responded collectively to the issue of aggressive international tax planning by adopting a number of legislative instruments over the past 24 months including a specific Anti Tax Avoidance Directive (2016/1164/EU) as well as a number of amendments to extend the scope of the Directive on Administrative Cooperation (2011/16/EU) – which provides for exchange of tax information between Member States – to include tax rulings and country-by-country reporting. These are important steps in efforts to combat aggressive tax planning across Europe.
The EU exchange of information requirements, as set out in the amended Directive on Administrative Cooperation, apply to rulings provided since 2012, which would include Revenue opinions provided in 2012 and later years. The Deputies’ questions refer to pre-2012 opinions which, accordingly, fall outside the scope of the exchange of information requirements provided by the amended Directive, as agreed by Member States.
