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Ireland’s Corporation Tax Roadmap Incorporating implementation of the Anti-Tax Avoidance Directives Prepared byand the recommendationsDepartment of Finance of the Coffey Review September 2018 Prepared by the Department of Finance Ireland’s Corporation Tax Roadmap Incorporating implementation of the Anti-Tax Avoidance Directives and recommendations of the Coffey Review September 2018 Prepared by the Tax Policy Division, Department of Finance, Government Buildings, Upper Merrion Street, Dublin 2, D02 R583, Ireland Website: www.finance.gov.ie Contents Foreword by the Minister ........................................................................................................................ i The journey so far – international tax reform in recent years ............................................................... 1 Actions Ireland has taken on corporate tax ............................................................................................ 4 EU Anti-Tax Avoidance Directives ........................................................................................................... 6 ATAD Interest Limitation ..................................................................................................................... 7 ATAD Exit Tax ...................................................................................................................................... 7 ATAD General Anti-Abuse Rule ........................................................................................................... 8 ATAD Controlled Foreign Company Rules ........................................................................................... 8 ATAD Hybrid Mismatches and Reverse Hybrid Mismatches .............................................................. 8 2017 Review of Ireland’s Corporation Tax Code................................................................................... 10 Consultation on Coffey Recommendations & ATAD Implementation .................................................. 14 Stakeholder Responses to Consultation ........................................................................................... 15 Next Steps: ATAD Implementation and Coffey Recommendations ..................................................... 21 Interest Limitation Rule (BEPS A.4, ATAD A.4, Coffey R.12) ............................................................. 21 General Anti-Abuse Rule (ATAD A.6) ................................................................................................ 22 Controlled Foreign Company Rules (BEPS A.3, ATAD A.7 & 8) ......................................................... 22 Hybrid Mismatch Rules (BEPS A.2, ATAD A.9 & 9a) .......................................................................... 23 Transfer Pricing (BEPS A.8, 9, 10 & 13, Coffey R.6 - 11) .................................................................... 23 Consideration of a Territorial Regime (Coffey R.16) ......................................................................... 24 Implementation of other international commitments ......................................................................... 26 OECD BEPS Multilateral Instrument ................................................................................................. 26 DAC6 – Mandatory Disclosure .......................................................................................................... 26 Dispute Resolution Mechanism (DRM) Directive ............................................................................. 27 International Mutual Assistance Bill ................................................................................................. 27 EU list of non-cooperative tax jurisdictions ...................................................................................... 27 Ireland’s Commitments to Further Action ........................................................................................... 29 Ongoing EU and international tax agenda ............................................................................................ 31 Appendix 1 - The OECD BEPS Recommendations - How actions taken by Ireland match up to the BEPS agreements ........................................................................................................................................... 33 Appendix 2 - International tax fora in which Ireland are involved ....................................................... 35 Appendix 3 - Spotlight on Tax Transparency and Exchange of Information ......................................... 39 Foreword by the Minister I am delighted to publish this roadmap which marks another milestone in Ireland’s ongoing work on corporate tax reform. It lays out the next steps in Ireland’s implementation of the various commitments we have made through EU Directives, the OECD BEPS reports and the recommendations set out in the Coffey Review. In this decade of centenaries it is perhaps fitting to note that the modern system of double taxation agreements between nations was an outcome of a process of examining issues of double taxation and tax evasion commenced by the League of Nations in 1920. This process was driven by the increasing globalisation of trade in the early twentieth century, giving rise to conflicts between national tax systems resulting in unrelieved double taxation and barriers to international trade. Almost a century later, the work undertaken by the OECD’s Base Erosion and Profit Shifting (BEPS) project, and the related Directives agreed at EU level, have again demonstrated that co-operative, multi-lateral agreements between nations are the most effective means to facilitate international trade and counteract cross-border tax evasion. These agreements at political level are a powerful statement of intent, signalling that countries stand together to require a fair share of tax to be paid by multinational organisations operating within their borders. The huge body of work required to implement these agreements into national legislation cannot be understated. Implementing the Anti- Tax Avoidance Directives (ATADs) alone will result in a fundamental re-writing of large parts of our corporation tax code – introducing new Controlled Foreign Company rules, a new Exit Tax, complex anti-hybrid and anti-reverse-hybrid rules, a new interest limitation ratio, and a review of our existing general anti-avoidance rule. Ireland is fully committed to this process, and to ensuring that our corporation tax code is in line with international best practices. It is for this reason that the Coffey review of Ireland’s corporation tax code was commissioned and, following its publication in 2017, I launched a consultation on the implementation of the review’s recommendations and the ATAD measures. This roadmap reflects on the submissions received and sets out the direction of travel for corporation tax reform over the coming years. It demonstrates my commitment to continuing the significant progress already made to strengthen Ireland’s corporation tax system. Ireland has been criticised for the way in which our tax system has been used by multinationals in their aggressive tax planning structures to exploit mismatches among various countries and gaps in the international tax framework. Much has been changing in the international tax system in recent years and this will continue as the process of BEPS implementation is completed, the ATADs are transposed by EU Member States and the Department of Finance iii effects of US tax reforms become evident. I believe that these changes, both globally and in the Irish tax code, should prevent such mismatches from arising into the future and significantly reduce the opportunities for companies to engage in aggressive tax planning. While all countries take steps to bring their domestic rules in line with the BEPS recommendations, the international tax rules remain in flux with continued focus on the question of where profits are actually generated and therefore where corporate tax should be paid, particularly by highly-digitalised businesses with new models for revenue generation. There is widespread agreement that this is an issue which requires global consensus so that profits are recognised in the right place, and tax is paid in the right place, for all types of business models. This work will continue with the expectation that agreement can be reached by 2020. Ireland is committed in its support for an international tax framework that is founded on a shared understanding of value creation and that is responsive to the changing ways in which business operates. We demonstrate this commitment through our engagement in international fora, our agreement of new rules and recommendations at the EU and OECD and through implementing changes in our own domestic system. This roadmap sets out what Ireland has already done, and is committed to doing over the coming years, to implement these global changes. The confluence of the OECD BEPS outcomes and the most significant US Tax Reform in recent history is likely to lead to significant changes in the structure of multinationals over the next number of years. The programme of changes set out in this Roadmap will see Ireland remaining on a sustainable path for growth and investment in this rapidly-changing international tax environment. We will continue to participate in the necessary adaptation of the international tax system to reflect how present-day revenue systems can work effectively in the complex, integrated, globalised modern
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