Roadmap for the introduction of a participation exemption published and public consultation launched

Last week, the Minister for Finance, Michael McGrath TD published a Roadmap for the Introduction of a Participation Exemption to Irish Corporation Tax. The roadmap sets out a timeline for the introduction of a participation exemption in respect of foreign dividends and next steps towards the planned introduction of a participation exemption for foreign branch profits in Finance Act 2024. The Minister has also launched a public consultation on the design of the proposed systems which will run until 13 December 2023. 

The Institute has made two submissions to the Department of Finance (March 2022 and April 2023) calling for the implementation of a territorial system of taxation and so this roadmap is a most welcome development to our members. 

Commenting on the publication of the Roadmap and the public consultation, Minister McGrath noted: 

“I am delighted to announce the publication of this roadmap, setting out a timeline for the introduction of a participation exemption for foreign sourced dividends to Ireland’s corporate tax system. 

Ireland is committed to ensuring that our corporation tax code is competitive and attractive to business investment while maintaining consistency with International best practices. The corporation tax landscape globally has been undergoing a concentrated period of change in recent years, largely arising from the outputs of the OECD/G20 project on Base Erosion and Profit Shifting. Most recently, in October 2021, Ireland was one of almost 140 other jurisdictions to sign up to the OECD “Two Pillar solution to address the tax challenges arising from the digitalisation of the economy”. This has been described as a once-in-a-generation agreement and the capstone to the process of international tax reform that began over a decade ago. 

These reforms have resulted in the introduction of a range of new measures to the corporation tax code, to be joined in Finance Bill 2023 by extensive new legislation to implement Pillar Two of the OECD agreement. In this context, the introduction of a participation exemption for foreign dividends to Ireland’s tax regime will provide much-needed administrative simplification and greater certainty for businesses, while continuing to ensure a robust and effective tax system. It will be a significant change to Irish corporation tax; a change which, I believe, will support Ireland’s competitiveness in the years to come.”