Ireland’s Department of Finance has released a second feedback statement for consultation on implementing a participation exemption for foreign-sourced dividends on 27 August 2024.
Minister Chambers publishes second feedback statement on participation exemption in Irish corporate tax system for foreign dividends
Minister for Finance Jack Chambers, on 27 August 2024, published a second feedback statement on the development of a participation exemption for foreign dividends to the Irish corporate tax system.
Ireland currently operates a worldwide corporate tax regime which considers all profits, both domestic and foreign source, of a resident entity to be within scope of taxation while allowing double taxation relief for foreign tax paid on foreign source profits.
In this way, Ireland differs from most EU and OECD member states who have adopted a territorial approach exempting foreign dividends from domestic tax, sometimes complemented by an exemption for foreign branch profits.
This is the next step towards delivering on the commitments set out in the Roadmap published in September 2023, which committed to the introduction of the participation exemption in Finance Bill 2024, to come into effect from 1 January 2025.
The roadmap also contained technical consultation questions on key areas of importance in the design of participation exemption measures. Responses received from stakeholders were used to inform detailed research by the Department of Finance in conjunction with Revenue in early 2024, culminating in the publication of a first Feedback Statement on the participation exemption for foreign dividends on 5 April 2024.
Building on the important feedback received a second Feedback Statement is now being published seeking stakeholder input to further progress the work towards introducing a participation exemption. This Feedback Statement contains potential draft approaches to key elements of the legislation as well as information on some consequential amendments that may be introduced in conjunction with the participation exemption for foreign dividends. On Publication of second Feedback statement, Minister Chambers stated:
“The introduction of a participation exemption will deliver on the commitment to simplify the Irish corporate tax system. This demonstrates Ireland’s continued desire to promote a business environment that remains best in class. We are in a period of unprecedented change in the international taxation landscape, and enhancement of Ireland’s tax system will provide stakeholders with the certainty and simplicity needed to continue to prosper in Ireland.
The publication of the second feedback statement builds on the valuable insight received from stakeholders in response to the initial feedback statement which included a strawman proposal. I look forward to receiving additional stakeholder insight and bringing forward legislation to deliver on this commitment in Finance Bill 2024.”
The deadline for submitting comments is 5 September 2024.
Notes
A Roadmap for the introduction of a participation exemption to the Irish corporation tax system was published by the Department of Finance on 14 September 2023. The Roadmap committed to the introduction of a participation exemption for foreign dividends in Finance Bill 2024, and to continuing consideration of the policy merits for the introduction of a foreign branch exemption.
An initial consultation period ran from 14 September until 13 December 2023. Seventeen responses were received, and have been published on the department’s website.
A feedback statement was published on 5 April 2024 and twenty responses were received to this consultation and have been published on the Department of Finance website.
A second Feedback Statement is now being published seeking stakeholder input to further progress the work towards introducing a participation exemption.
