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Half of double Irish is still a good deal

30 Oct 2014

Under increasing pressure from the EU Ireland has announced changes to the area of "double Irish" structures. Taxand USA explains the new rules and gives guidance to multinational companies.

Currently entities incorporated in Ireland are treated as tax resident in Ireland.

Two exclusions from this default rule exist. Irish subsidiary companies that are tax resident in non-treaty countries operate exempt from tax in Ireland because they are managed and controlled in those foreign countries. From 1 January 2015 no new structures will be in a position to avail of the double Irish regime using this exclusion. For existing companies incorporated in Ireland and resident in a non-tax-treaty-partner jurisdiction, a grandfathering period will apply until the end of 2020.

The second exclusion from Irish tax residency applies if an Irish company is resident in another country by virtue of an Irish income tax treaty. This exclusion applies, for example, when the Irish incorporated company is managed and controlled in a treaty jurisdiction, such as Malta, and where the tiebreaker rule of the treaty applies to enforce Malta as the place of tax residency. 

As the second treaty-based exclusion has remained in place, no change may be necessary for structures relying on residency in treaty-based countries. In other words, if a company is incorporated in Ireland but is managed and controlled in a treaty-based country, then typically tax residence defaults to where the entity is managed and controlled, and the tiebreaker rules of the treaty will continue to apply. 

Discover more: Why half of double is still a good deal in Ireland >

Your Taxand contacts for further queries are: 
Al Liguori
T. +1 212 763 1638

Jill Harding
T. + 1 415 490 2279

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Taxand's Take

  • The 12.5% tax rate in Ireland is expected to continue
  • Structures that currently rely on the first exclusion to the tax residency rules have six years to re-evaluate and restructure  
  • Structures relying on treaty provisions for tax residency should be unaffected  
  • The time may be right to re-evaluate the tax footprint of your company's intellectual property holdings.

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