Ireland, quite apart from being the land of saints and scholars, has established itself as a very attractive offshore centre over the last few decades, while tactfully remaining on the right side of global watch-dog bodies such as the OECD. In particular, in late 2021, Ireland announced an increase to its corporate tax rate to be in line with the 15% global minimum per Pillar Two. Today we summarize two further interesting tax developments from the Emerald Isle, which is currently shining its rugby boots in advance of what we hope will be incipient glory in France.
WHT changes
Ireland is of course a longstanding member of the European Union (“EU”) and thus applies the various EU directives, which inter alia, exempt withholding tax from applying on certain intra-EU payments.
Now Ireland is suggesting that it may start implementing withholding taxes on payments made to other EU member countries. However, on closer inspection these withholding taxes would only apply to offshore payments made to connected parties who are listed by the EU as either a non-cooperative or low tax jurisdiction (or zero-tax), so not really undermining the directives.
What will this mean? Well, let’s explore one of the reasons why the Irish government is proposing the change in the first place. You’ve probably heard the terms “BEPS” and “OECD” before, see here for a recap.
BEPS of course stands for base erosion and profit shifting, the name for nefarious activities whereby multinational groups shift their profits to low tax jurisdictions so that they can pay as little tax as possible and which the OCED sees as the main mortal sin. So, under the banner of combatting tax avoidance by multinationals, Ireland is proposing to levy withholding tax for certain offshore payments related to a country that is seen as non-cooperative or low tax by the EU.
However, these measures will only apply to certain connected parties (and there are further stringent requirements on the type of “influence” and “control” that needs to exist between the parties). Thus it seems that these proposed withholding taxes will only apply in very select circumstances and with an anti-avoidance focus.
Non-resident landlords
Anything the UK can do, Ireland can do better. And this year Ireland has implemented a withholding tax regime for non-resident landlords.
From 1 July 2023, if you are not tax resident in Ireland but own property there from which you earn rent, then you have a whole lot more responsibilities. As a non-resident landlord, your collection agent will deduct 20% withholding tax from rental payments. This withholding tax will then be paid over to the Irish Revenue Commission. If no collection agent is involved, the tenant will directly withhold the 20% of the rental payments.
Furthermore, a tenant will have to provide the Irish Revenue Commission with a whole list of details regarding the landlord and the relevant tax being withheld. Critically, the landlord is now responsible for filing the Income Tax Return and not the collection agent or tenant.
Also, it is worthwhile getting up to speed with this new system now, as there has been talks that the Irish Revenue Commission will be checking up on this in 2024 or 2025 to see if non-resident landlords are complying
Conclusion
As can be seen from Ireland’s bid to impose a global minimum tax and their efforts in combating the effects of BEPS by proposing withholding taxes, Ireland is definitely proving to be a team player when it comes to the OECD’s international tax goals and guidelines.
Tax guidelines, developments and policies are always changing, in an effort to stay up to date with changes around the globe. Therefore, it is critical to stay up to date with the latest tax developments, especially as a business owner. For more information on jurisdiction selection, structuring and all tax matters please contact us.
Meet The Author
Today’s newsletter was written by Liané Bouwer, an International Tax Consultant based in Johannesburg. Contact Liané at lbouwer@reganvanrooy.com
