Minister for Finance, Michael McGrath TD, has published a first feedback statement on the development of a participation exemption in Irish corporation tax for foreign dividends. Ireland currently differs from most EU and OECD member states who have already adopted a territorial approach in exempting foreign dividends from domestic tax.
The purpose of this feedback statement is to further progress work on the key building blocks of the participation exemption, which the government has committed to introducing in Finance Bill 2024, to come into effect from 1 January 2025. A public consultation has been launched on the ‘strawman’ proposals which closes on 8 May. Any comments can be emailed to tax@charteredaccountants.ie.
The feedback statement has been informed by stakeholder responses to the public consultation on the introduction of a participation exemption to Irish corporation tax, including our own under the auspices of the CCAB-I, together with research work undertaken by officials in the Department of Finance and Revenue. It includes a hypothetical example, a strawman proposal, for how a participation exemption for foreign dividends might work in Ireland, in order that individual elements can be discussed within the context of the regime as a whole.
‘‘The introduction of a participation exemption will be a very important step towards simplification of the Irish corporate tax system and reflects Ireland’s continued efforts to promote a business environment characterised by certainty and clarity. In a time of unprecedented change in international taxation, this move will give confidence and foresight to key stakeholders, maintaining Ireland’s reputation as a business-friendly destination and encouraging companies to establish and expand their operations in Ireland.
We have already introduced significant reforms in the area of Corporate Tax, with Finance (No.2) Act 2023 introducing the new 15% minimum effective corporate tax rate for in-scope companies, giving legislative effect to Pillar Two of the OECD Two-Pillar Agreement.
Against this backdrop, the introduction of a participation exemption for foreign dividends reflects Ireland’s commitment to ensuring that our corporation tax code is competitive and attractive to business investment and aligns with international best practice.
The publication of the feedback statement is a further significant step in the process and I look forward to engaging with stakeholder in relation to the strawman proposal ahead of Finance Bill 2024.”