The Irish High Court has ruled that Foreign Royalty Withholding Tax incurred by Accenture Global Solutions Limited cannot be deducted as a trading expense under Irish tax law, overturning a Tax Appeals Commission decision and confirming that double taxation relief must be applied exclusively under Schedule 24 TCA 1997.
The Irish High Court, in a judgment delivered by Ms Justice Marguerite Bolger on 12 May 2026, ruled on a tax dispute involving Accenture Global Solutions Limited, an Irish tax-resident company, concerning the treatment of Foreign Royalty Withholding Tax (FWHT) incurred in its cross-border intellectual property licensing activities. The central issue was whether FWHT paid in foreign jurisdictions could be deducted as a trading expense under Irish tax law.
Case background
Accenture, an Irish tax-resident company, manages the intellectual property (IP) for its global group. It licenses this IP to operating entities in various foreign jurisdictions. Under local laws in those countries, tax was withheld at source from the gross royalty payments sent to Accenture.
During the period in question, Accenture was in a loss-making position for Irish corporation tax purposes. Because it had no Irish tax liability, the standard mechanism for foreign tax relief—a credit under Schedule 24 of the Taxes Consolidation Act 1997 (TCA 1997)—resulted in a credit of zero. Consequently, Accenture attempted to claim the FWHT as a trading expense deduction under Section 81 TCA 1997 to increase its trading losses for future use. Revenue denied this, leading to an appeal to the Tax Appeals Commission (TAC).
The tax appeals commission (TAC) determination
The TAC originally ruled in favour of Accenture, finding that:
- FWHT was an economic cost of carrying on trade.
- While FWHT is a “tax on income,” this did not automatically preclude it from being a deductible expense under Section 81.
- The prohibition on deductions in Schedule 24 only applied if a credit was actually being allowed; since no credit was available to Accenture, it could seek a deduction instead.
- The tax was “wholly and exclusively” incurred for the purposes of Accenture’s trade.
High court analysis and decision
Revenue appealed the TAC’s decision to the High Court on 11 questions of law. Ms. Justice Bolger overturned the TAC’s determination, finding errors of law in all but one of the questions stated. The Court’s decision focused on two primary issues:
- The Interaction Between Schedule 24 and Section 81
The Court held that the Oireachtas (Irish Parliament) intended for Schedule 24 to be the exclusive, stand-alone regime for double taxation relief.
- No “Step-Out” Right: The Court rejected the idea that a taxpayer could simply “step outside” the double taxation regime and use Section 81 if the Schedule 24 calculation resulted in zero relief.
- Statutory Maxim: The Court applied the maxim generalia specialibus non derogant, meaning the specific legislative regime for foreign tax relief (Schedule 24) takes precedence over the general provision for trading expenses (Section 81).
- Characterisation of FWHT as a deductible expense
The Court found that FWHT did not meet the legal test for a deductible trading expense under Section 81:
- Tax on Income vs. Expense to Earn Profit: Following established case law, the Court ruled that a tax on income is an application of profits after they are earned, rather than an expense incurred to earn those profits.
- Distinction from Other Taxes: The Court distinguished FWHT from deductible taxes like rates or stamp duty, which are incurred before income is earned.
- Choice of Business Model: The Court noted that FWHT was not an “unavoidable” cost of trade. It resulted from Accenture’s choice to license IP from Ireland rather than through local permanent establishments (branches) in those foreign jurisdictions, which would have avoided the withholding tax.
The High Court concluded that the TAC erred in law by allowing Accenture to claim a Section 81 deduction. The Court clarified that if the statutory double taxation regime yields no relief in a particular set of circumstances, the taxpayer cannot circumvent those limitations by seeking a deduction under general computational rules.
