On 13 October 2015, the Finance Minister of Ireland announced Budget proposals for 2016 in the context of the country being the fastest growing economy in Europe for 2015, with GDP growth at 6.2%. The Minister also published a document entitled Update on Ireland’s International Tax Strategy.

Knowledge Development Box

In Budget proposals for 2016, the Minister declared that Finance Bill 2015 will include legislation to launch an Irish Knowledge Development Box (KDB) from 1 January 2016. With qualifying income under the Knowledge Development Box to be taxed at a rate of 6.25%, the Knowledge Development Box is a further addition to Ireland’s present portfolio of incentives to encourage investment in innovation activities in Ireland.

Country-by-Country (CBC) reporting

The Finance Minister declared that Ireland would be one of the first countries in the world to introduce CBC reporting aligned with OECD’s agreed minimum standard under Action 13 of the OECD base erosion and profit shifting (BEPS) project. It is broadly expected that Ireland will follow the template proposed by the OECD without any amendment.

The CBC reporting requirements will apply to multinational groups headquarter situated in Ireland with consolidated revenues in excess of €750M and will apply for accounting periods starting on or after 1 January 2016.

Failure to provide the CbC report or providing an incomplete or inaccurate report will trigger a penalty of €19,045. In some instances, a further penalty of up to € 2535 may be charged for each day during which the default continues.

International tax strategy

The minister published an update on Ireland’s international tax strategy, which contains the country’s approach to the implementation of the OECD BEPS reports and how Ireland will engage with the EU on other emerging trends. With respect to the BEPS actions that are described as “best practices” or “common approaches,” such as controlled foreign company regimes and interest deductibility rules, the international tax strategy document notes that these are not minimum standards requiring early action but that Ireland will continue to engage constructively with international developments on these issues.