Wednesday 15 October 2014

Ireland: incorporation and tax residency - a mandatory or default rule?

It was budget day yesterday in Ireland and the Government provided an update in respect of its corporate tax policy. This included publication of A Road Map for Ireland's Tax Competitiveness: see here (pdf). Media attention has focused on the demise of so-called 'Double Irish' arrangements which take advantage of the possibility of incorporating a company in Ireland that is not resident there for tax purposes: see, for example, here and here. In his budget speech, the Minister for Finance stated that the ability of companies to use the 'Double Irish' would be removed by changing the tax residency rules to require all companies registered in Ireland to be resident in Ireland for tax purposes. This suggests a mandatory rule: incorporation in Ireland will result in residency in Ireland.

It is interesting to note, however, that the Road Map document says that a default rule will be introduced under which all companies incorporated in Ireland will be treated as resident in Ireland for tax purposes. If the term 'default rule' is taken to mean a rule that will apply unless some contrary action or agreement is taken, then this would suggest the possibility for incorporation in Ireland not to be accompanied by residency in Ireland for tax purposes. The publication of the Finance Act 2014, in which the new residency rule will be introduced, should help to clarify this point.

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