Sign up for tax alert emails    GTNU homepage    Tax newsroom    Email document    Print document    Download document

September 15, 2023
2023-1543

Irish Government publishes roadmap for introducing dividend participation exemption to Ireland's corporation tax system

  • Ireland's Department of Finance (the Department) has confirmed the introduction of a participation exemption for foreign-sourced dividends to take effect at the beginning of 2025.
  • The Department has advised that further analysis will be completed on the possible introduction of a foreign branch exemption.
  • The roadmap published sets out a series of milestones with the first phase of consultation launched on 14 September.
  • The detailed technical consultation contains more than 50 specific questions related to the design of the exemption.
  • Stakeholders are invited to provide responses to the technical questions presented. The consultation period runs to the close of business on 13 December 2023.

Introduction

On 14 September 2023, Ireland's Department of Finance (the Department) published a roadmap outlining a project plan for introducing a dividend participation exemption to the Irish corporation tax system.

The expectation is that legislation implementing this regime will be introduced in Autumn 2024 and will take effect in 2025.

The consultation process is expected to deliver draft legislation before the end of March 2024.

The Department is continuing to evaluate the competitiveness and policy considerations associated with the introduction of a foreign branch exemption. The consultation raises a series of questions in that regard, including possible sectoral impacts.

Detailed Discussion

In his foreword to the roadmap, the Minister for Finance, Michael McGrath, (the Minister) reaffirmed the Irish Government's commitment to maintaining a stable and competitive corporation tax system, saying:

"Ireland is fully committed to ensuring that our corporation tax code is competitive and attractive to business investment, while also maintaining consistency with international best practices.

As a small, open economy, integrated with global markets, our tax system must also be stable, competitive and in line with agreed international standards. This provides a supportive environment for businesses to invest, creating economic activity and employment and generating tax revenues for the State."

An initial consultation on a territorial system of taxation was launched in December 2021.1 Following a detailed review of the various submissions2 received in response to that consultation, the Minister has decided to progress the development of a dividend participation exemption with a view to introducing relevant legislation in Finance Bill 2024. This roadmap represents the first step in this implementation process.

The roadmap includes a project timeline for the consultation process as follows:

Action

Timeline

Publication of project roadmap, including detailed consultation on introduction of a participation exemption(s) to the Irish corporation tax system

September 2023

Close consultation and consider responses

13 December 2023

Consideration of responses and further stakeholder engagement

December 2023 — March 2024

Feedback Statement 1 (Dividend Exemption)

End March 2024

Feedback Statement 2 (Dividend Exemption) — if required

Circa July 2024

Finance Bill 2024 — Legislate for dividend exemption to take effect from 2025

October — December 2024

The roadmap includes a technical consultation and invites stakeholders to respond to a series of questions around the design of a dividend participation regime. These questions are divided into four main areas:

  1. Structural considerations (e.g., optionality with existing "tax plus credit" regime)
  2. Consequential impacts (e.g., alignment with existing reliefs for foreign subsidiaries)
  3. Anti-avoidance rules (e.g., potential modification of Ireland's anti-hybrid provisions)
  4. Any other issues that should be considered in the design of a participation for foreign dividends

The Minister has committed to a further-detailed examination of the potential benefits and policy considerations associated with introducing a foreign branch participation exemption to the Irish tax system. Stakeholders have been invited to provide responses to general technical questions in this regard.

Next steps

EY welcomes the publication of this roadmap and will continue to engage with the Irish Government and other stakeholders during the consultation and implementation process

We look forward to assisting clients in evaluating perspectives and responses to the roadmap ahead of the 13 December 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

———————————————

ENDNOTES

1 Consultation on the Territorial System of Taxation, December 2021, Irish Department of Finance.

2 EY Ireland Response to December 2021 Consultation, dated 7 March 2023.

 
 

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.

 

Copyright © 2024, Ernst & Young LLP.

 

All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.

 

Any U.S. tax advice contained herein was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.

 

"EY" refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.

 

Privacy  |  Cookies  |  BCR  |  Legal  |  Global Code of Conduct Opt out of all email from EY Global Limited.

 


Cookie Settings

This site uses cookies to provide you with a personalized browsing experience and allows us to understand more about you. More information on the cookies we use can be found here. By clicking 'Yes, I accept' you agree and consent to our use of cookies. More information on what these cookies are and how we use them, including how you can manage them, is outlined in our Privacy Notice. Please note that your decision to decline the use of cookies is limited to this site only, and not in relation to other EY sites or ey.com. Please refer to the privacy notice/policy on these sites for more information.


Yes, I accept         Find out more