IRELAND Law and Practice Contributed by: Amelia O’Beirne and Trevor Glavey, A&L Goodbody
Revenue’s guidance indicates that it will consider the highest level of control in a company when consider - ing where its CMC is located, and analyse where: • company policy is decided; • investment decisions are made; • major contracts are defined; • the company’s head office is located; • the majority of directors live; and • meetings of the board of directors are held. 2.6 Definition of Permanent Establishment A non-resident company is only subject to Irish cor - poration tax if it carries on a trade in Ireland through a “branch or agency”. A “branch or agency” is not meaningfully defined in Ireland’s tax legislation and is simply described as meaning “any factorship, agency, receivership, branch or management”. Revenue has, however, published guidance on the interpretation of the term, wherein it accepts that it is synonymous with a permanent establishment (PE) within the meaning of Ireland’s DTAs. In this respect, Ireland’s DTAs generally follow Article 5 of the MTC and the definition of a permanent establishment con - tained therein. As deviations from Article 5 of the MTC can arise, the relevant DTA must be consulted in each case. An example of a deviation arises under the Ire - land-UK DTA where a building site or construction or installation project lasting for more than six months will constitute a PE (the threshold under Article 5 MTC is 12 months). 3. Taxation of Cross-Border Income 3.1 Income From Immovable Property See 2. Territoriality, Residence and Permanent Establishment for the rules that apply to the taxa - tion of income from Irish immovable property held by resident and non-resident individuals. Where immovable property is held through a corpo - rate entity (either Irish tax-resident or non-Irish tax- resident), rental income receivable from letting the property is chargeable to Irish corporation tax at 25%.
In calculating the taxable income derived from immov - able property, deductions are allowable for certain expenses: these include, for example, the costs of maintenance, repairs and management/administra - tion. Certain reliefs and exemptions are also avail - able to reduce the amount of tax payable on income from immovable property, including, subject to certain conditions, in relation to interest on borrowed money employed in the purchase, improvement or repair of a property. Ireland has a special regime relating to payments to non-resident landlords. The regime requires either: • that such landlord appoint an Irish resident collec - tion agent to collect and be assessed for Irish tax in the name of the non-resident landlord in relation to rental income and to file Irish tax returns on their behalf; or • where an Irish resident collection agent is not act - ing in this capacity, that the non-resident landlord allow their tenant, where paying directly, or their collection agent (following receipt of rent from a tenant), to withhold 20% of the rent due and to submit it to Revenue – the non-resident landlord can then claim a credit for the tax withheld and remitted to Revenue by the tenant when filing its tax return. 3.2 Business Profits Corporation tax is charged at 12.5% on profits of a trade carried on at least partly in Ireland, subject to certain exceptions, while non-trading income (eg, investment income) is taxed at 25%. There is no statutory definition in Irish tax law as to what constitutes a “trade”, although the UK courts have set down a number of general principles which are broadly followed. The primary characteristics of a trade are operational substance, profit motive, the tak - ing of risk to generate a profit, dealing with a number of (ideally third-party) customers, etc. The concept of “trading” presupposes a certain level of activity by the company – it must be actively engaging in its busi - ness and deriving profits from its business, rather than simply passively receiving investment income. However, the “trading” analysis is not industry- or function-specific – any revenue-generating activities
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