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.