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Ireland’s Budget 2015: the first non-austerity Budget in recent times
Corporation tax rate
A strong commitment to the 12.5% corporation tax rate was reiterated in the Plan.
Corporate tax residency rules
Ireland’s corporate tax residence rules are being amended so that an Irish incorporated company will be regarded as Irish tax resident, unless otherwise stated under the terms of a tax treaty. If a company is managed and controlled in Ireland it will be regarded as Irish tax resident notwithstanding that it is not incorporated in Ireland.
The amendment to the rules will not affect the majority of companies operating in Ireland. However, it will result in the phasing out of the controversial so-called ‘double-Irish’ structure. From 1 January 2015 companies should no longer be able to avail of the structure as it currently exists. A grandfathering period will apply until 2020 to companies who have implemented the structure before 1 January 2015. Companies who are currently availing of the structure therefore have ample time to restructure their operations.
Intellectual property regime
To increase Ireland’s competiveness and ability to attract high value research and investment from multinationals, an enhanced IP tax regime for companies has been introduced. The centrepiece of the new proposals is the introduction of a ‘Knowledge Development Box’ akin to a patent box. On Budget day it was announced that a consultation process would be launched to ensure it is “best in class”. It will be legislated for in next year’s Finance Act.
In addition, a number of improvements have been made to the current intangible asset regime which allows companies to claim capital allowances on specified intangible assets. Customer lists have been added to the list of qualifying intangible assets, and the 80% cap on the amount that can be claimed for the acquisition of a qualifying intangible asset in any one accounting period has been removed. These amendments come into effect for accounting periods on or after 1 January 2015.
In relation to the research and development tax credit, the 2003 base year will be removed so that the amount companies can claim will no longer be restricted to the expenditure incurred in excess of the 2003 expenditure. This is a hugely significant improvement for those companies carrying out R&D in Ireland since 2003.
Special Assignee Relief Programme (SARP)
The SARP relief is being extended to 2017. The SARP is a relief aimed at facilitating foreign employers who wish to relocate staff to their Irish operations. The SARP relief operates so that the taxable employment earnings of an individual assigned to work in Ireland is reduced in order to reduce their tax bill. Major improvements are being made to the SARP relief in order to enable a broader scope of people to qualify. The main amendment is that the upper salary threshold of EUR 500,000 is being removed; this will make the SARP relief a very attractive relief for executives moving to Ireland.
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In addition to Ireland’s highly competitive corporation tax rate of 12.5%, the measures contained in the Budget will further advance Ireland as a leading destination for multinationals to set up operations. However, multinationals looking to set up operations in Ireland should fully investigate all regulations in order to keep afresh of any developments and in order to remain compliant.
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