IRELAND Law and Practice Contributed by: Philip Tully, Emma Doherty, Geraldine Carr, Simon Shinkwin and Carlo Salizzo, Matheson LLP
allowances are available to offset taxable prof - its earned from the specified intangible assets subject to an 80% cap. Revenue will expect a robust valuation report to support the arm’s length nature of the capital expenditure, and taxpayers must maintain docu - mentation and records used to prepare the intel - lectual property valuation. Participation Exemption for Certain Foreign Distributions A participation for exemption for certain foreign distributions was introduced in Finance Act 2024 and applies to distributions received after 1 Jan - uary 2025. The key conditions are, broadly, as follows: • the parent company must hold at least 5% of the ordinary share capital of the foreign subsidiary for at least 12 months; • at the time of the distribution and for the pre - vious five years, the foreign subsidiary must have been resident for the purposes of a foreign tax in an EU or Irish tax treaty country and not have been generally exempt from tax; and • the distribution must be made out of profits or, if not, made out of the assets of a com - pany in respect of which a disposal of that company’s shares would qualify for the sub - stantial shareholders’ exemption from capital gains tax. The new exemption sits alongside Ireland’s exist - ing tax and credit regime and must be claimed by a taxpayer in its corporation tax return. Where a taxpayer claims this participation exemption in respect of a distribution received in a taxable period, it will automatically apply (in place of the tax and credit system) in respect of all other dis -
tributions received in that period that qualify for the participation exemption. 5.4 Tax Consolidation Tax consolidation is not available under Irish tax law, and a company subject to corporation tax must prepare and file its tax return for corpora - tion tax purposes for each assessment period. However, Irish tax law does provide for group relief, which permits companies within the same corporate group to surrender certain losses to other profitable group companies. 5.5 Thin Capitalisation Rules and Other Limitations Ireland does not have any specific thin capitali - sation rules, but there are a number of circum - stances where interest payments may be con - sidered non-deductible in calculating the taxable profits of a company. For instance, interest paid by a company may be recharacterised as a non-deductible distribution where interest is paid for securities that are con - vertible into shares, where interest is dependent on the company’s results, or where it represents more than a reasonable commercial rate. Ireland has introduced anti-hybrid rules and anti- reverse-hybrid rules, in accordance with the EU Anti-Tax Avoidance Directives (ATAD I and II). These rules can deny tax deductions in respect of certain arrangements between associated enterprises, giving rise to tax mismatches as a result of hybrid instruments or entities. These rules can also apply to treat certain transparent Irish entities as subject to tax. Ireland has also implemented interest limitation rules in accordance with EU ATAD. These rules apply to cap deductions for interest at 30% of
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