Law firms back Irish corporation tax regime moving to territorial system

Law firms back Irish corporation tax regime moving to territorial system

Ireland must quickly move its corporation tax regime to a territorial system of taxation to avoid being at a “major competitive disadvantage” to other countries, some of the largest corporate law firms in the State have told the government.

The government last year launched a consultation on Ireland’s possible adoption of a territorial tax system, where corporations would only pay tax in Ireland on income and gains earned in Ireland.

The Coffey Report, published in 2017, previously recommended the introduction of an exemption method of double taxation relief in place of Ireland’s current credit-based worldwide regime.

Law firms A&L Goodbody and Arthur Cox, as well as the Law Society of Ireland, are among those whose responses to the government consultation were published online yesterday.

“We think that change is needed to maintain Ireland’s competitive offering, and the current global uncertainties make maintaining competitiveness all the more important and pressing,” A&L Goodbody said.

The firm noted that Ireland “is at a competitive disadvantage in comparison with both fellow member states and other jurisdictions who operate a territorial taxation regime”, and warned that it has “clients that are suffering double taxation due to anomalies in the credit system”.

It said a move to a territorial system of double taxation relief would “help to bolster Ireland’s status as an attractive location for multi-national enterprises to establish a business or global and regional headquarters”.

Arthur Cox said: “Irish holding companies have already waited a long time for this regime to be implemented and any further delays could be detrimental to Ireland’s competitiveness as a holding company location.”

The firm said holding companies “are becoming increasingly linked to other business activities with significant employment due to substance rules (including most recently the EU Unshell proposal)”, and Ireland therefore “risks losing businesses providing employment in Ireland if its holding company regime is not competitive with other EU and OECD countries”.

Both firms said the proposed changes to Ireland’s corporation tax regime should be brought into effect by 1 January 2023.

In its submission, the Law Society said a territorial system “would be simpler in its application and more in line with the taxation systems of other jurisdictions, making Ireland more competitive”.

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