The changes announced in the Finance Bill 2008 with regard to the Irish taxation of foreign dividends are to be welcomed as they reduce the tax rate. However, they will also have the unfortunate effect of increasing the compliance burden for Irish holding companies while not in reality succeeding in their stated aim of making the Irish tax regime compliant with Community law in this area.

Declan Butler, Tax Partner, Deloitte said:

“As a result of the decision of the Court of Justice in the case of the FII Group Litigation Order it was obvious that the rules relating to the Irish taxation of foreign dividends needed to change.
 
The move to a 12.5% rate for foreign dividends out of trading income from jurisdictions which Ireland has treaty obligations towards may increase Ireland's attractiveness as a holding company location from the perspective of certain inbound investors. However, the amount of complexity introduced into the tax code by such changes is to be regretted.  This will reduce certainty for taxpayers while increasing their compliance costs.”
 
Ends

About Deloitte 

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