Ireland's Department of Finance has launched a public consultation on the introduction of a participation exemption for foreign-sourced dividends, as well as the consideration of the potential merits of introducing a foreign branch exemption. The deadline for comment is 13 December 2023. The following is a release on the roadmap and consultation for the participation exemption.
Minister McGrath publishes roadmap for the introduction of a participation exemption to Irish Corporation Tax
The Minister for Finance, Michael McGrath T.D., has today (Thursday) published a Roadmap for the Introduction of a Participation Exemption to Irish Corporation Tax, including a technical consultation to inform ongoing design work.
The roadmap sets out a timeline for the introduction of a participation exemption for dividends, and the next steps towards the planned introduction of a participation exemption for foreign branch profits in the autumn 2024 Finance Bill.
Publishing the roadmap and detailed consultation today, Minister McGrath said:
"I am delighted to announce the publication of this roadmap, setting out a timeline for the introduction of a participation exemption for foreign sourced dividends to Ireland's corporate tax system.
Ireland is committed to ensuring that our corporation tax code is competitive and attractive to business investment while maintaining consistency with International best practices. The corporation tax landscape globally has been undergoing a concentrated period of change in recent years, largely arising from the outputs of the OECD/G20 project on Base Erosion and Profit Shifting. Most recently, in October 2021, Ireland was one of almost 140 other jurisdictions to sign up to the OECD "Two Pillar solution to address the tax challenges arising from the digitalisation of the economy". This has been described as a once-in-a-generation agreement and the capstone to the process of international tax reform that began over a decade ago.
These reforms have resulted in the introduction of a range of new measures to the corporation tax code, to be joined in Finance Bill 2023 by extensive new legislation to implement Pillar Two of the OECD agreement. In this context, the introduction of a participation exemption for foreign dividends to Ireland's tax regime will provide much-needed administrative simplification and greater certainty for businesses, while continuing to ensure a robust and effective tax system. It will be a significant change to Irish corporation tax; a change which, I believe, will support Ireland's competitiveness in the years to come."
Notes to Editors:
The roadmap outlines a range of commitments for the introduction of a participation exemption for foreign sourced dividends in Finance Bill 2024, beginning with today's launch of a technical consultation. The consultation period will run from now until 13 December 2023. Following consideration of responses, and further stakeholder engagement as required in early 2024, it is planned that a first Feedback Statement will be published by the end of March 2024, to set out draft approaches to legislation and facilitate detailed technical consultation. A second Feedback Statement, if required, would be facilitated in July 2024, in advance of the introduction of legislation for a participation exemption for foreign-sourced dividends in Finance Bill 2024, to come into effect in 2025.
The technical consultation includes 53 questions covering the structural design of a participation exemption regime for dividends, and other consequential amendments which may be required to accommodate the new exemption regime.
It also includes 8 questions seeking further information in relation to a potential exemption for foreign branch profits, to inform further consideration of the policy merits of this proposal.