The Parliamentary Budget Office has published a new briefing note on Recent Reforms to European Union Value Added Tax 2020-2022 providing a brief overview of some the most recent initiatives from the European Commission to tackle tax avoidance and modernise the EU’s VAT rules.  Recent reforms to VAT in the EU from 2020 to 2022, include:  The Package for Fair and Simple Taxation  The VAT e-Commerce Package   VAT in the Digital Age   The ‘Reduced VAT Directive’  

A key function of the Institute’s Tax Department is responding to the various public consultations which arise throughout the year. We normally update you on the work we do as it arises. However, as we took a break from issuing Tax News in August, we are providing an update this week on the latest contributions.  Where the Irish Government seek feedback on a particular matter, we typically respond under the auspices of the CCAB-I where there is a tax focus. The CCAB-I’s Tax Committee South is the body responsible for overseeing the submissions that we prepare. This body provides the vital technical input, and their role is pivotal in the overall quality of our output. We have summarised the latest contributions to the public discourse below.  Feedback Statement on New Taxation Measures to apply to Outbound Payments  This consultation was a follow-up to the Department of Finance’s public consultation in November 2021. The Feedback Statement contained a range of proposals based on the feedback received then. The legislation proposed sets out measures to apply to outbound payments of interest, royalties, and dividends to prevent perceived double non-taxation.   In our submission, CCAB-I noted the significant tax reforms which have taken place in successive Finance Acts and the impending landmark legislation being introduced as part of the EU Minimum Taxation Directive. As a result, a range of measures to safeguard against double non-taxation outcomes have already been introduced and have already had a significant impact.   In that regard we urged caution in terms of increasing the compliance burdens faced by MNE groups and asked that the new legislation is targeted at double non-taxation outcomes and not unintended ones. CCAB-I also recommends that any new legislation is drafted in a simple and targeted manner, so genuine commercial transactions are not affected and Ireland’s competitiveness as a home for international investment remains in situ.  Pillar Two Implementation Second Feedback Statement  This consultation was a follow-up to the Department of Finance’s initial feedback statement in May of this year. Since the first feedback statement, we have been engaged extensively with the Department of Finance and Revenue via the TALC BEPS Sub-committee. The key area of focus for the Government ahead of Finance (No.2) Bill 2023 is in the design of the Qualified Domestic Minimum Top-up Tax. In addition, we noted the need for clarity as to the interaction of the accountancy frameworks under which the various entities in an international group operate.  Funds Sector 2030: A Framework for Open, Resilient & Developing Markets  This consultation by the Department of Finance is a wide-ranging and ambitious project. CCAB-I's contribution has focused on the tax-related issues, primarily contained in Sections 5, 6 and 7 of the consultation. We have highlighted the success of the Irish funds regime and how integral it is to the overall Irish financial services’ sector. We have made several key suggestions which we believe will improve the functioning of the funds’ sector and ensure Ireland remains an attractive location for fund managers across the world. 

A delegation from the Institute under the auspices of the CCAB-I attended the September meeting of the TALC Indirect Taxes Sub-committee. Issues discussed included proposed updates to the wording of the VAT56A accountant’s letter (in lieu of the accountant’s certificate on the form itself) to Revenue.  The Institute has been engaged extensively with Revenue’s representatives seeking agreement of wording to satisfy Revenue’s requirements in lieu of certification. We understand there is mixed experience from practitioners with some Revenue officials accepting versions of the letters that other officials are refusing. We also raised concerns with the move to single-year authorisations under the VAT 56A procedures where before the same operations would have been granted two and/or three-year authorisations.  The minutes of the meeting will be approved at the next meeting in November. You can access the minutes from all previous meetings here.  

A delegation from the Institute, under the auspices of the CCAB-I, attended the September meeting of the TALC Direct and Capital Taxes sub-committee. Among the issues discussed were the definition of “farmer” for the purposes of agricultural relief, the tax treatment of GMS income among partners in a GP practice, and the Employment Investment Incentive Scheme (EIIS).  Regarding agricultural relief, Revenue is examining the impact of “replacement land” on the definition of “farmer”. It was also noted that the manual needs to be updated generally.  On the EIIS, Revenue is considering the impact of the updated General Block Exemption Regulation (GBER) on the scheme. Revenue is engaged with the Department of Finance presently and will suggest a meeting between the Department of Finance and stakeholders in due course.  The minutes of the meeting will be published on revenue.ie once they are approved at the next meeting in November. You can access the minutes from all previous meetings here.  

Revenue has issued a reminder for eligible businesses that the deadline to submit claims for the Temporary Business Energy Support Scheme (TBESS) is 30 September 2023. The TBESS claim portal can be accessed via the e-Repayments system in Revenue’s Online Service (ROS).   This scheme is a two-step process, with registration being a necessary first step for access to the scheme, followed by claim submission. At present, there are a number of incomplete registrations and claims on ROS for TBESS. Revenue intends to make direct contact with those businesses to encourage them to complete the registration and/or claims process.  Businesses are reminded of the need to fully complete the registration and claims process to access TBESS monies that may be due to them as the facility will not be available after 30 September 2023.   As of 9 September 2023, 30,475 businesses have registered for TBESS and 56,126 claims, valued €129.04 million, have been approved.   Further information is available here. 

The Platform for Collaboration on Tax released a new report on carbon pricing metrics. The purpose of the report is to strengthen the understanding of different carbon pricing metrics of the largest international organisations, including the IMF and the UN. 

Revenue has commenced issuing notices to agents’ and employers’ ROS inboxes, inviting them to register for webinars on the new Enhanced Reporting Requirements (ERR) for employers. The notice will contain a link to Eventbrite where a free ticket can be booked to attend a webinar on a suitable date and time. These webinars are scheduled to take place over the next 8 weeks. A sample event invitation can be viewed here.  As previously reported, we have written to the Minister for Finance to highlight significant concerns our members have about the proposed introduction of ERR which will require all employers to report to Revenue details of certain non-taxable benefits and payments to employees from 1 January 2024. The letter, and comments from Cróna Clohisey, Tax & Public Policy Lead, were covered in yesterday’s Sunday Independent. 

The OECD has published a report “Tax Policy Reforms 2023” which analyses the role tax policy has played as governments sought to shield households and businesses from the surge in inflation in 2022. The OECD notes that “tax policy has been at the forefront of government support to families and businesses in the face of elevated levels of inflation”.

The European Commission has published two key proposals in the past week; Business in Europe: Framework for Income Taxation (BEFIT) and harmonized transfer pricing rules.   The BEFIT proposals set out rules for the calculation of the BEFIT tax base, the allocation of the BEFIT tax base to members of the BEFIT group, as well as rules governing the transposition of the directive into local law.   The Institute, under the auspices of the CCAB-I, responded to last year’s consultation on BEFIT and recommended that BEFIT should not be implemented until such time as the Pillar Two minimum taxation rules have matured to at least some degree.  With regard to transfer pricing, the proposals are aimed at harmonising transfer pricing rules within the EU and ensuring a common approach to transfer pricing. 

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.” 

In Irish news, the Institute has informed the Minister for Finance of members’ concerns with the proposed new enhanced reporting requirements and we give you an update from the recent meeting of the Tax Administration Liaison Committee Collections subcommittee. In UK news, the Autumn Statement will take place on Wednesday 22 November, and the Institute is discussing with HMRC the 31 October 2023 deadline for the end of the VAT margin scheme in respect of certain second-hand cars.  In International news, the OECD publishes the 2023 Secretary General tax report.  Ireland The Institute, under the auspices of the CCAB-I, has written to the Minister for Finance, Michael McGrath T.D., to highlight significant concerns our members have about the proposed introduction of Enhanced Reporting Requirements. Read our update from the September 2023 meeting of TALC Collections subcommittee. UK Last week the Chancellor of the Exchequer announced that the Autumn Statement will take place on Wednesday 22 November. The Institute is discussing with HMRC the 31 October 2023 deadline for the end of the VAT margin scheme in respect of certain second-hand cars. International This year’s Secretary General tax report has been published providing an update on the progress on the OECD’s Two-Pillar Solution. Keep up to date with all the latest Irish, UK, and international tax developments through Chartered Accountants Ireland’s Tax Newsletter. Subscribe to the Tax News by updating your preferences in MyAccount. You can also read this week’s EU exit corner here which features updated guidance and publications and the news that the UK has agreed a deal to associate to Horizon Europe.     

The Minister for Finance, Michael McGrath TD has announced his intention to introduce a legislative amendment in Finance Bill (No. 2) 2023 to deal with how the Defective Concrete Products Levy (DCPL) impacts on the sale of certain precast products. Current legislation, contained in Part 18E TCA 1997, provides that while such products are not within scope of the DCPL, the pouring concrete element which forms a constituent part of precast concrete products is within scope. The amendments are to be introduced following the identification of a potentially negative impact on the export of these products.  Minister McGrath commented:  “The Defective Concrete Products Levy (DCPL) is intended to ensure a contribution by the construction sector towards the cost of the Mica Redress Scheme.  A limited number of precast products had originally been listed as being within scope of the levy when it was announced in October 2022.  Following further consideration, these were removed prior to the publication of what became Finance Act 2022. The legislation provided that while such products would not be within scope of the DCPL, the pouring concrete element which forms a constituent part of precast concrete products is within scope. This is reflected in Section 99 of the Act as passed by the Oireachtas.  My officials have held a series of meetings with industry bodies where they outlined their concerns about this aspect of the application of the levy. It has become clear that the manner in which the levy impacts on the sale of certain precast products has a potentially negative impact on the export of these products and competition from suppliers into the jurisdiction.  It is my intention to bring forward an amendment in the forthcoming Finance Bill to exclude the value of pouring concrete used in precast products from the scope of the levy. This will come in to effect on 1 January 2024 and a refund scheme will apply for the interim period to the end of 2023. Concrete blocks and pouring concrete for use other than in precast products will remain within scope of the DCPL.  It is my belief that, taking account of the proposed amendment, the overall design of the levy balances the need to ensure some of the costs of the redress scheme are met from a source other than the Exchequer, while limiting the impact on inflation in the construction sector.  The Department of Finance will, with Revenue’s assistance, closely monitor the introduction and operation of the DCPL and will continue to engage with industry to identify ways to address any issues that arise.”