Corporate Tax 2010 - BMR Advisors

McCann FitzGerald
Ireland
services, acquisitions of goods and services (reverse supplies) from
other European Union Member States and imports into Ireland of
goods from outside the European Union.
The standard rate of VAT is 21.5%, with lower rates of 13.5% and
0% applicable to certain supplies of goods and services.
2.3 Is VAT (or any similar tax) charged on all transactions or
are there any relevant exclusions
A number of supplies are either exempt from, or outside the scope
of, VAT. These supplies include the provision of financial services,
share issues and transfers, and the transfer of a business or part of a
business between VAT registered persons.
2.4 Is it always fully recoverable by all businesses If not,
what are the relevant restrictions
A business that suffers VAT on its inputs (other then VAT on certain
specified items such as entertaining, hospitality and petrol) will be
entitled to recover such VAT, to the extent that the inputs are used
for the purposes of its taxable supplies or for the purposes of its
qualifying activities (as defined in Section 12 of the VAT Act 1972
as amended). A business which is engaged wholly in VAT exempt
activities will not be able to recover VAT on its inputs.
2.5 Are there any other transaction taxes
Apart from stamp duty, there are some levies that apply to certain
insurance contracts and financial products.
2.6 Are there any other indirect taxes of which we should be
aware
In addition to VAT, customs duty is payable on goods imported
from outside the European Union. Excise duty is payable on
mineral oils, alcohol and tobacco. Excise duty is also payable on
electricity (known as electricity tax) from 1 October 2008. Vehicle
registration tax is payable in respect of all vehicles which are to be
kept permanently in Ireland.
to withhold an amount in respect of tax from royalties in respect of
the right to use secret processes, trademarks etc. that are not
protected as patents, unless the right to use these secret processes,
trademarks etc. are incidental to the rights protected by a patent.
However, there is an exemption from the obligation of an Irish
resident limited company (or an Irish branch of a European Union
resident company) to deduct tax from royalty payments to a
company resident in another European Union member state, where
the following conditions are met:
the recipient is the beneficial owner of the royalty payment;
either the paying company or the recipient company owns
directly at least 25% of the share capital of the other for an
uninterrupted period of at least two years; or
a third E.U. resident company owns directly at least 25% of
the share capital of the payor and the recipient company for
an uninterrupted period of two years.
Many of Ireland’s double taxation agreements provide for a 0% tax
rate to apply to payments of patent royalties.
3.3 Would there be any withholding tax on interest paid by a
local company to a non-resident
In general, withholding tax at the standard rate of income tax
(currently 20%) must be deducted from payments of yearly interest
that are within the charge of Irish tax. Yearly interest includes any
interest that is capable of arising for a period of at least one year.
This includes interest arising where no period is defined, even
though in practice, the period may be significantly less.
There are a number of exemptions from the obligation to withhold
tax on payments of yearly interest. These include an exemption for
interest payments made by a company in the ordinary course of a
trade or business carried on by it to a company that is resident in an
E.U. Member State or in a country with which Ireland has a double
taxation agreement that is in effect, except where such interest is
paid to that company in connection with a trade or business which
is carried on in Ireland by that company through a branch or agency.
3.4 Would relief for interest so paid be restricted by reference
to “thin capitalisation” rules
Ireland
3 Cross-border Payments
3.1 Is any withholding tax imposed on dividends paid by a
locally resident company to a non-resident
In general, Irish companies are obliged to deduct dividend
withholding tax at the standard rate of income tax (currently 20%)
from dividends and certain other distributions. However there are
a number of exceptions to this requirement including situations
where Parent/Subsidiary Directive applies and also where the
dividend is paid to a resident of a country with which Ireland has a
double taxation agreement that is in effect, provided an appropriate
declaration has been made.
3.2 Would there be any withholding tax on royalties paid by a
local company to a non-resident
In general, withholding tax at the standard rate of income tax
(currently 20%) must be deducted from payments of patent
royalties that are within the charge to Irish tax. This applies to
payments in respect of patent royalties only. There is no obligation
ICLG TO: CORPORATE TAX 2010
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Ireland does not have “thin capitalisation” rules per se. However,
in certain circumstances, interest payments made by a company
may be treated as a distribution and no tax deduction will be
available to the company in respect of such interest payments. Any
such interest paid is taxable as distribution in the hands of the
recipient and treated as a distribution for the purposes of Irish
dividend withholding tax, unless otherwise exempt.
3.5 If so, is there a “safe harbour” by reference to which tax
relief is assured
Not applicable.
3.6 Would any such “thin capitalisation” rules extend to debt
advanced by a third party but guaranteed by a parent
company
Not applicable.
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