Mulitnationals
Finance Bill 2013
Insight from Declan Butler, Tax Partner
T: +353 1 417 2822
E: debutler@deloitte.ie
Several significant measures have been introduced that positively impact multinationals and the FDI sector. These changes include:
Foreign tax credits on dividends
A very positive amendment has been introduced which allows for an additional amount of foreign tax credit relief on dividends received from companies resident in EU/EEA tax treaty countries. It arises in cases where the existing credit for foreign tax falls below the amount that would have arisen had it been equal to the nominal rate of tax in the country concerned.
This will significantly reduce the number of cases where additional Irish tax would arise on such dividends, given that the standard rate of tax in Ireland is lower than that applicable in most EU/EEA tax treaty countries.
Reduction of the claw back period IP allowance claims
The period over which tax depreciation claimed on specified intangible assets (IP) may be clawed back on a disposal of the IP is 10 years. The Bill reduces this claw back period to five years which is a very welcome development.
Industrial buildings for aircraft hangers
As announced in the Budget, a significant change has been introduced to encourage aviation businesses to establish or expand existing operations in Ireland. The change deems a building or structure in use for the purposes of a trade, which consists of the maintenance, repair or overhaul of aircraft used to carry passengers or cargo for hire or reward, to be an industrial building qualifying for industrial buildings allowances.
The relief will become effective on foot of a Ministerial Order and is being introduced for a five year period from the date the provisions become effective.
It will be interesting to see the impact of these changes on the level of aviation businesses in Ireland. Although, a positive start has been made a broader range of measures would likely be required to have a significant impact on the level of FDI in this area.
Real Estate Investment Trusts (REITs)
As announced in the Budget a new REITs regime has been introduced.
The provisions broadly allow property rental companies that meet certain conditions, and that give notice as required to the Revenue commissioners, to generate income and chargeable gains from its property rental business on a tax exempt basis. However, the REIT is required to distribute at least 85% of its income each year to its shareholders and if this minimum amount is not distributed, the excess is taxable at 25%.
The introduction of REIT regime is a very welcome development as such investment vehicles are already a feature of the investment landscape of many developed economies, such as the US and UK. A successful REIT regime should create liquidity in the Irish investment property market and potentially enable NAMA de-leverage some of its property portfolio.
Group Relief
An amendment clarifies that group relief for losses is only available in a group scenario where all relevant intermediate companies in the group are tax resident either in an EU or tax treaty state. Therefore, although the parent company may either be tax resident in an EU/tax treaty jurisdiction or the principal class of its shares must be quoted on a recognized stock exchange in an EU or tax treaty jurisdiction, each of the intermediate subsidiary companies between it and the Irish company claiming group relief must also be tax resident in an EU/tax treaty country.
