In his Budget 2015 statement of October 14, 2014, Ireland’s Finance Minister Michael Noonan announced that the Irish rules on corporate tax residence would be changed so that all companies incorporated in Ireland are tax resident in Ireland. The new rules will come into effect on January 1, 2015 for new companies but a transitional rule will apply for companies with existing operations in Ireland to 2020.
The change may be seen as a response to international tax developments, in particular the OECD’s BEPS initiative. The new rules will likely impact current holding structures for US parented groups which use Irish incorporated holding companies which are not resident in Ireland. For many such groups, there are a number of alternative approaches which do not rely on Irish incorporated companies while retaining their main EU trading operations in Ireland.
At the same time, Minister Noonan announced his intention to introduce a ‘Knowledge Development Box’ income-based tax regime for intangible assets in 2015. A public consultation will be held on this in late 2014. The full package of measures announced in the budget is intended to enhance Ireland’s corporate tax regime and to align it with best practice internationally.
The change to the Irish corporate residence rules should be seen in the context of the other measures announced, as well as the Government’s explicit commitment to its 12.5% corporate tax rate, that are designed to secure continued inward investment into the Irish economy.