IRELAND Law and Practice Contributed by: Andrew Quinn, David Burke, William Fogarty and Lynn Cramer, Maples Group
• if the interest expense exceeds its interest equiva - lent income, the ability to claim a tax deduction for the excess interest may be limited to 30% of EBITDA (see 2.5 Deduction of Interest ); • in certain cases, payments to a non-EU 75%-relat - ed affiliate may be recharacterised as a distribution subject to dividend withholding tax and disallowed as a deduction; and • where a company borrows to finance the acqui - sition of shares, there may be a restriction if the lender is related to the borrower, under Section 247 of the TCA. 6. Taxation of Foreign Income of Local Corporations 6.1 Foreign Income Exemptions Foreign income is not exempt from corporate tax. A company that is tax-resident in Ireland is subject to corporation tax on all its profits, wherever they arise, at either 12.5%, 15% or 25%. 6.2 Non-Deductible Local Expenses This question is not applicable in Ireland. 6.3 Dividends From Foreign Subsidiaries Foreign dividends received by Irish companies are generally subject to corporation tax at a rate of 25%. However, dividends received by an Irish company from non-resident subsidiaries are subject to corpo - ration tax at 12.5% if such dividends are paid out of the trading profits of a company that is resident in: • an EU member state; • a country with which Ireland has a double tax treaty; • a country that has ratified the Joint Council of Europe/OECD Convention on Mutual Assistance in Tax Matters; or • a non-treaty country, if the company is directly or indirectly owned by a quoted company. Companies that are portfolio investors (ie, investors holding not more than 5% of the company and having no more than 5% of the voting rights) and that receive dividends from a company that is resident in an EU member state or a country with which Ireland has a
double tax treaty will be subject to corporation tax on those dividends, at the 12.5% rate. Furthermore, where a company is a financial trader, such dividends may be exempt from corporation tax in certain cir - cumstances. On 1 January 2025, Ireland introduced a participa - tion exemption for foreign dividends. This exemption initially only applied to dividends from shareholdings of at least 5% in companies resident in EU jurisdic - tions or jurisdictions with which Ireland has a double tax agreement. The geographic scope of this exemp - tion has since been extended to include jurisdictions operating a non-refundable dividend withholding tax subject to conditions. The holding period requirement has also been reduced from five years to three years. The Finance Act 2025 brought these changes into effect in respect of relevant distributions made on or after 1 January 2026. The introduction of this exemption represented a major change that significantly improves Ireland’s cor - porate tax regime for holding company and private equity fund structures and aligns Ireland with many EU and OECD member states. 6.4 Taxation of Intangibles Developed by Local Corporations If an Irish company licenses intellectual property to a subsidiary, it will be subject to Irish corporation tax on the licence fees (or deemed licence fees if transfer pricing applies) received in respect of the licence. The rate will be 12.5% if licensing is part of the trading activity of the Irish company, or 25% if it is part of non-trading activity. 6.5 Controlled Foreign Corporation-Type Rules CFC income is that which arises to a non-Irish-res - ident company from non-genuine arrangements put in place for the essential purpose of obtaining a tax advantage. CFC income is attributed to the controlling company or a connected company in Ireland where that controlling or connected company has “sig - nificant people functions” (SPF) in Ireland. The CFC charge is based on an arm’s length measurement of the undistributed profits of the CFC that are attribut - able to the SPF.
241 CHAMBERS.COM
Powered by FlippingBook