Last week, the Institute, under the auspices of the CCAB-I, responded to the Department of Finance’s feedback statement on the Strawman proposal for a participation exemption for foreign dividends. The Institute has been calling on the Government to introduce legislation establishing a territorial basis of taxation in Ireland. The Strawman proposal is the next step in this process. While we welcome this step in the process, we continue to call on the Government for a similar feedback statement on a participation exemption for foreign branch profits. You can read our full response here.
Below, we summarise our main points for consideration in advance of finalising the legislation:
- We recommend that there is no minimum ‘opt-in’ period. Where a company receives a distribution from an in-scope territory, then the default position should be that the distribution is exempt.
- The dividend exemption should apply to distributions received from companies located in any jurisdiction other than those on the EU list of non-cooperative jurisdictions for tax purposes. Ideally, we would prefer that there is no geographic limitation on the participation exemption. Alternatively, the exemption could be disapplied where the payor company is located in a no-tax/zero-tax jurisdiction or, where the jurisdictional tax rate is less than 9% (borrowing from the OECD Subject-to-Tax rule).
- We recommend that the reference to “voting rights” is removed. This should not be a condition of the foreign dividend exemption.
- A bona fide test is not required as it introduces an unnecessary layer of complexity. The existing anti-avoidance provisions in Irish tax law are sufficiently robust.
The relief should be available for income distributions received on or after 1 January 2025, i.e. there should be no reference to accounting periods.
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