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July 14, 2023

Ireland launches consultation on new taxation measures to apply to certain outbound payments comment period closes on 8 August

  • On 7 July 2023, the Irish Department of Finance (the Department) released a Feedback Statement (FBS) outlining possible draft legislative approaches to certain outbound payments.
  • It is intended that new legislative provisions will apply to certain payments of interest or royalties or the making of a distribution on or after 1 January 2024.
  • The discussion draft legislation would apply withholding tax to certain payments to associated entities located in territories on the European Union "black list"1 and "zero-tax territories."
  • Stakeholders are invited to submit comments on the possible legislative approaches and questions raised by the Department in the FBS.
  • The consultation period runs to 8 August 2023.
  • One of the key objectives of the consultation is to ensure that the proposed changes do not have any unintended effects. The possible legislative approach set down in the FBS could change substantially through the consultation process.


The Irish Department of Finance (the Department) has released a Feedback Statement (FBS) outlining possible draft legislative approaches to certain outbound payments. The new legislative provisions would apply to certain payments of interest or royalties or the making of a distribution on or after 1 January 2024.

In July 2020, in response to the COVID-19 pandemic, the Council of the European Union agreed to an historic €750 billion recovery package for Europe. As part of this, a Recovery and Resilience Facility (RRF) was created, one of the main purposes of which was to provide funding to address the economic and social impacts of the pandemic. To access funding from the RRF, EU Member States were required to submit a National Recovery and Resilience Plan to the EU Commission. Ireland's National Recovery and Resilience Plan was formally adopted in August 2021 and included four commitments to be delivered in relation to tackling aggressive tax planning.

Three of these commitments have been fulfilled in recent years with the final remaining commitment being the introduction of legislation applying to outbound payments to prevent double non-taxation.

The Department launched an initial public consultation, "New Taxation Measures to apply to Outbound Payments," in November 2021. Building on that initial consultation, the Department has now issued an FBS, which includes possible legislative approaches on such outbound payments.

Detailed discussion

The proposed approach is to introduce new legislation in Finance (No. 2) Bill 2023 that will apply to certain payments of interest or royalties or the making of a distribution on or after 1 January 2024.

As discussed in more detail below, the discussion draft legislation in its terms applies only to certain payments between associated entities where the recipient is tax resident in a "black list" territory or "zero-tax territory" (as defined below). The draft would also apply to certain payments to permanent establishments in such territories and stateless/transparent entities formed under the laws of a such a territory.

In-scope payments

Third-party payments are not in-scope

The discussion draft legislation is limited to in-scope payments between certain associated entities, specifically:

  • An associated entity that is resident in a specified territory
  • An associated entity that is not resident in any territory and is created under the laws of a specified territory or
  • A permanent establishment of an associated entity:
    • That is situated in a specified territory and
    • Through which the associated entity carries on a business in a specified territory

The discussion draft legislation provides that two entities will be "associated entities" in respect of each other where:

  1. One entity is entitled to not less than 50% share capital or 50% owner rights of the other entity or
  2. One entity is entitled to not less than 50% of voting power of another entity or
  3. One entity is entitled to not less than 50% of the distributed profits of another entity or
  4. There is another entity in respect of which two entities are considered associated under (i-iii) above or
  5. One entity has "definite influence" in the management of the other entity

A "definite influence" is defined in the FBS as "where one entity has the ability to participate, on the board of directors or equivalent governing body of the entity, in the financial and operating policy decisions of that entity, where that ability results, or could result, in the affairs of the entity being conducted in accordance with the wishes of the first mentioned entity."

Scope is limited to a recipient in a "specified territory"

A "specified territory" is defined in the FBS as "a territory, other than an EU Member State, which is a listed territory or a zero-tax territory."

A "listed territory" is defined as "a territory included in Annex 1 of the Council conclusions on the revised EU list of non-cooperative jurisdictions for tax purposes."

A "zero-tax territory" is defined as "a territory that, in respect of interest, royalties, or distributions receivable or received by an entity from sources outside that territory or derived by an entity from a source in that territory imposes a tax at a nominal rate of zero percent, or does not impose a tax that generally applies to such income."

Carve out for supplemental tax

The discussion draft law explicitly excludes from the scope of withholding tax any payments that would otherwise be in-scope but are taken into account in calculating a (non-Irish) Controlled Foreign Company (CFC) charge, or a top-up-tax under Organisation for Economic Co-operation and Development's (OECD) Global Anti-Base Erosion (GloBE) rules.

Carve out for participation exemption regimes

The FBS notes the intention is that these new measures will not apply to jurisdictions with a participation exemption if the relevant conditions for availing of that exemption are satisfied, although for now the mechanism to achieve that remains unclear.

Treaty relief is unaffected

The FBS also notes that although it is not intended to renegotiate any of Ireland's double-taxation agreements as part of this process, treaty relief will continue to be available where applicable.


If the discussion draft law were implemented without amendment, the following domestic exemptions from interest withholding tax would not apply to in-scope payments:

  • Payments in respect of interest accruing on quoted Eurobonds
  • Various exemptions for payments of yearly interest
  • Interest payments in respect of wholesale debt instruments and
  • Other exemptions for qualifying nonresidents

The discussion draft law proposes that for in-scope payments withholding tax would be extended to non-yearly interest payments as well as annual interest.


If the discussion draft law were implemented without amendment, the implications for in-scope royalty payments would include:

  • The scope of application of withholding taxes would be extended to a wider range of royalties2 than under current law.
  • The existing domestic withholding-tax exemption for certain royalty payments would not be available.

Distributions (including dividends)

If the discussion draft law were implemented without amendment, the relevant domestic exemptions from dividend withholding tax would not apply for in-scope distribution payments.

Anti-avoidance provision

The discussion draft legislation contains an anti-avoidance provision applicable where an arrangement is entered into by any person and the main purpose or one of the main purposes of the arrangement or any part of the arrangement is to avoid the new measures.

Next steps

EY will continue our extensive engagement with the Department and other stakeholders on the implementation of the proposed measures to outbound payments to avoid unintended consequences such as actual double taxation and to help minimize administrative burden.

EY can assist taxpayers in evaluating their perspectives and responses to the FBS ahead of the 8 August deadline.


For additional information with respect to this Alert, please contact the following:

Ernst & Young (Ireland), Dublin

Ernst & Young (Ireland), Financial Services, Dublin

Ernst & Young (Ireland), Cork

Ernst & Young (Ireland), Limerick

Ernst & Young (Ireland), Waterford

Ernst & Young (Ireland), Galway

Ernst & Young LLP (United States), Irish Tax Desk, New York

Ernst & Young LLP (United States), Irish Tax Desk, San Jose

Published by NTD's Tax Technical Knowledge Services group; Carolyn Wright, legal editor


1 Countries on the black list include: American Samoa, Anguilla, Bahamas, British Virgin Islands, Costa Rica, Fiji, Guam, Marshall Islands, Palau, Panama, Russia, Samoa, Trinidad and Tobago, Turks and Caicos Islands, US Virgin Islands, Vanuatu. See—2023-INIT/en/pdf.

2 Under the discussion draft law, a "'relevant royalty' means a payment of any kind paid in consideration for -

  1. the use of, or the right to use —
    1. any copyright of literary, artistic or scientific work, including cinematograph films and software,
    2. any patent, trade mark, design or model, plan, secret formula or process,
  2. information concerning industrial, commercial or scientific experience;
  3. the use of, or the right to use, industrial, commercial or scientific equipment."

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.


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