Corporation Tax

Oct 10, 2017

Corporation Tax is a sensitive matter for Ireland. Over the last number of years, we have been the subject of constant scrutiny from the European Commission and the OECD, and the Government is tasked with dealing with international initiatives in the spirit of being good international tax citizens.  Today’s measures, which mainly introduce a restriction to intangible asset relief along with announcements of further consultation on transfer pricing standards, are not as drastic or damaging as they might have been. 

Restriction of tax relief for intangible assets

The measure announced provides that the deduction for capital allowances for intangible assets, and any related interest expense, will be limited to 80 percent of the relevant income arising from the intangible asset in an accounting period.

A tax deduction for capital expenditure incurred on the acquisition of specified intangible assets (SIA) is provided for under section 291A TCA 1997.  SIAs include patents/registered designs, trademarks/brand names and know-how etc.  The relief is seen as an essential part of our FDI offering.  

Minister Donohue says that this measure will help sustain corporation tax receipts which are expected to drop from 2015 levels by 2020 and the measure is expected to raise €150m in addition tax per annum.  

Public consultation on International Tax Strategy 

The Seamus Coffey report was published on 12 September and provided a review of Ireland’s Corporation Tax code. The report made a number of recommendations for further consultation in the areas of transfer pricing and Ireland’s response to the Base Erosion and Profit Shifting (BEPS) initative along with the EU’s Anti-Tax Avoidance Directive.  The Minster today launched this consultation titled “Update on Ireland’s International Tax Strategy’s International Tax Strategy”.  The consultation period will run from 10 October 2017 to 30 January 2018, a period of 16 weeks.  

Accelerated Capital Allowances for energy-efficient equipment extended to 2020

This is an incentive to encourage investment in energy efficient equipment for use in a company’s trade and is provided for under section 285A TCA 1997.  The scheme was due to expire by 31 December 2017 but will now continue until the end of 2020.