Finance Bill hits the mark for FS Industry – Deloitte

- Remittance basis measures a step in the right direction -

- Lack of proposed changes on facilitating cash pooling activities a disappointment –

The Finance Bill published on Thursday includes more than 20 sections of proposed financial services tax changes, covering a wide spectrum of activity– funds, banking, leasing and insurance. Commenting on the measures, Deirdre Power, Financial Services Partner, Deloitte said:

“This is a very positive Finance Bill and delivers on many of the tax changes that the FS industry was hoping to see.

“Of particular note are the changes to assist Ireland in further enhancing its excellent funds regime to assist in UCITS IV and fund migration opportunities;  new Islamic finance legislation and enhancements to the tax credit and leasing regimes (amongst others). Transfer pricing is a very significant change being proposed which affects not just financial services organisations, but all companies that have a cross border element to their operations.  Many in the financial services community are very familiar with transfer pricing, given the cross border nature of their operations and the fact that they deal with group companies located in countries which already have transfer pricing. 

“While the changes to widen the application of the remittance basis to include EU/EEA nationals (other than Irish nationals) are certainly to be welcomed and will broaden the pool of people availing of this, there is scope to further enhance the relief by providing a complete exemption for any excess over the current €100,000 threshold.

“One of the real disappointments was the lack of proposed changes on facilitating cash pooling  Here’s hoping that we see some positive changes making their way into the final Bill.  In fact there was a wild card in the pack that affects not just cash pooling but the wider FS industry.  It relates  to the current situation whereby Irish companies or regulated funds can pay interest gross to treaty and EU countries. In addition, such recipients of this interest are not treated as having a liability to tax in Ireland on such Irish source income. This ability to pay interest gross to such locations and not have a tax exposure in Ireland is fundamental to the operating of the financial system.  It appears the Bill has thrown a spanner in the works and now requires that in order for the interest to be paid gross, the recipient must be taxed on the interest in the other location. This is quite an unexpected amendment, and quite impractical from an implementation perspective.  How are companies to prove how the recipient is going to be taxed on it?  Surely the fact that the companies are located in the EU or a treaty location is enough of a test? When we are looking to make Ireland more attractive to overseas investors, legislation such as this is not appropriate.  One hopes that the powers that be will see the error in this proposal and look to eliminate it. 

“If this was a report card, it would be ‘Exceeded expectations but a few errors to be corrected’!  

Further analysis on the Finance Bill will be available on www.deloitte.com/ie/financebill2010.

For Further Information Please Contact

John McGuinness

Murray Consultants

01 498 0361

jmcguinness@murrayconsult.ie

Ed Micheau

Murray Consultants

0868037155

Claire Quinn

Deloitte

087 6825766

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