Global Tax Developments
Key measures
Minister McGrath published a public consultation document on the introduction of a ‘participation exemption for foreign dividends to the Irish corporate tax system’ during 2024. Minister Chambers committed to said participation exemption being introduced from 1 January 2025 in the forthcoming Finance Bill. The participation exemption for foreign dividends is envisaged to provide an alternative, less administratively-burdensome method of double taxation relief for dividends received from subsidiaries in EU / EEA and double tax treaty partner jurisdictions.
In addition, Minister Chambers commits to continuing the existing work on further participation exemptions, including a foreign branch exemption. The Tax Policy Changes document published today references that the geographic scope of the participation exemption (for dividends and branch profits) may require further consideration as global implementation of Pillar Two continues.
Also referenced were the reviews anticipated over the coming months regarding the taxation of interest and the review of the research and development tax credit which are designed to reduce complexity in the Irish tax code and appropriately reward innovation within the Irish economy.
Who will be affected?
Multinational groups with a presence in Ireland.
When? What to do now?
The participation exemption for foreign dividends is expected to be introduced from 1 January 2025 onwards via the forthcoming Finance Bill. As previously highlighted, said participation exemption should apply to dividends received from subsidiaries in EU / EEA and double tax treaty partner jurisdictions. Companies should also continue to monitor the developments of both: 1) the potential participation exemption for foreign branch profits; 2) Pillar Two (global minimum tax rate) implementation in Ireland; 3) the output of the review that has been launched on the taxation of interest with a view to removing unnecessary complexity; and 4) the output of the review expected to be launched regarding the R&D tax credit over the coming months to appropriately reward innovation.
Our view
Deloitte provided a response to the public consultation on the participation exemption for foreign dividends; we welcome the introduction of the proposed participation exemption as it is expected to simplify the administrative processes in the corporate tax system associated with such dividends. We hope the suggestions we made in our submission to the recent public consultation are reflected in the forthcoming Finance Bill.
