CCAB-I responds to public consultation on the introduction of a participation exemption

The Institute, under the auspices of the CCAB-I, has responded to the public consultation on the roadmap for the introduction of a participation exemption to Irish corporation tax. This consultation focuses primarily on the dividend participation exemption. The key message remains that the CCAB-I supports the introduction of a participation exemption for both foreign dividends and foreign branch profits.

The main points from our response are:

• In recent years, measures introduced under the EU Anti-Tax Avoidance Directive (ATAD), OECD’s Base Erosion and Profit Shifting (BEPS) initiative, and the EU Minimum Tax Directive are aligned with a territorial system of taxation (of which a participation exemption for dividends is one part).
• We recommend careful consideration of the method of relief, i.e. whether the optimum relief is by way of an exemption (similar to section 129 Taxes Consolidation Act (“TCA”) 1997) or as a deduction from total profits. Our initial sense is that a deduction will be preferable when considered in light of the EU Minimum Taxation Directive and the Interest Limitation Rule.
• We recommend that the relief is drafted to provide broad optionality. Ideally, we recommend that taxpayers can opt to apply the rules on a distribution-by-distribution basis.
• We recommend that the exemption should apply by default with the option to claim double taxation relief on a distribution-by-distribution basis.
• We strongly support the formation of a committee under the umbrella of the Main Tax Administration Liaison Committee (TALC). In the context of the implementation of the EU Minimum Taxation Directive, the TALC BEPS Sub-Committee has proven the benefit for all stakeholders in addressing technical, legal, accounting and commercial uncertainties.