background image
8.2.2. Withholding Taxes

Ireland levies withholding taxes on certain income derived in Ireland by non-resident enterprises. The payer is required to withhold the tax.

Dividends

Ireland levies a withholding tax on dividend payments in cash or in the form of additional shares to non-resident enterprises. If shares are given, the tax base is the cash equivalent amount. The withholding tax rate is 20%.

Exemptions for Qualifying Non-Resident Persons

Ireland provides for a very broad dividend withholding tax exemption. Indeed, there is no withholding tax under domestic law on dividends paid to:

  • Entities resident either in an EU Member State or in country with which Ireland has an applicable double tax treaty (these are referred to as “relevant territories”);
  • Non-resident entities that are ultimately controlled by residents in a “relevant territory”; and
  • Any company which is not resident in Ireland, the principal class of shares of which, or (a) of another company of which it is a 75% subsidiary, or (b) where the company is wholly owned by two or more companies, of each of those companies, is substantially and regularly traded on a recognized stock exchange in a “relevant territory”. The exemption also applies if the company’s principal class of shares is traded on a stock exchange in a country other than a “relevant territory” (i.e. non-EU and non-tax treaty partner country), to the extent that stock exchange is approved by the Minister of Finance for the purposes of the dividend withholding tax scheme.

For the purposes of the exemption, the word “entity” includes a company or similar entity, but also superannuation or pension funds, a trust or a charity.

The exemption from dividend withholding tax may be applied directly by the payor or withholding agent at the time of payment of the dividends, on condition that the recipient had filed a certificate of entitlement to exemption on one of the standardized declaration forms authorized by the Revenue Commissioners. The declaration can be made directly to the company making the distribution, or via a qualifying intermediary or authorized withholding agent.

Where the recipient is a qualifying non-resident person other than a company, the declaration form must be certified by the tax authority of the country of residence to the effect the person is resident there for tax purposes.

A declaration made by a non-resident company must be certified by an authorized signatory to the effect that (1) the company is not controlled by persons resident in Ireland (in this case, it will also be necessary for the company to obtain certification from the tax authority in the country in which it is resident for tax purposes), (2) the company is ultimately controlled by residents of a relevant territory, or (3) the principal class of the company’s shares is traded on an approved stock exchange as explained above.

Declarations submitted by trusts are ordinarily required to include the identity of the settlors and beneficiaries.

The certificates referred to above are generally effective or a period of five years.

If withholding tax is applied at the time of payment whilst an exemption is available, a refund of the withholding tax may be subsequently claimed.

Interest

Ireland levies a withholding tax on interest payments to non-resident enterprises at a rate of 20%. Nevertheless, there is a broad exemption from withholding tax. Indeed, under domestic law, there is no withholding tax on interest payments if:

  • The payment of the interest is made in the ordinary course of a trade or business carried on by the Irish company, and is not paid to the non-resident recipient in connection with a trade or nosiness it carries out in Ireland through a branch or agency;
  • The company in receipt of the interest is resident in an EU Member State or in a tax treaty partner country;
  • That country in principle assesses to tax foreign-source interest received therein by its residents; and
  • The payment of the royalties is made for bona fide commercial reasons and does not form part of a tax avoidance arrangement.

In addition to the broad exemption described above, interest payments may qualify for an exemption in application of the EU Interest and Royalty Directive, or an exemption or reduced rate under Ireland’s tax treaty network. In order for the exemption under the EU Directive to apply, the following conditions must be met:

  • The Irish payer and the EU recipient are associated. This is deemed to be the case if one holds for at least two years an interest of at least 25% in the other, or if a third company holds such an interest in both; and
  • The recipient (and the third company, if applicable) is resident in an EU Member State.

Finally, there is no withholding tax on interest payments by qualifying cash pooling and treasury businesses, regardless of the residence of the recipient.

Royalties

Ireland does not levy a withholding tax on royalty payments, with the exception of patent royalties and royalties qualified as “annual payments”, which may potentially attract withholding tax at the rate of 20%. A royalty qualifies as an “annual payment” if it is recurring in nature and the recipient earns it without having to incur any expenses. Film royalties will often so qualify, but an analysis must be made on a case by case basis to determine whether or not a royalty may be qualified as an “annual payment”.

Notwithstanding the above, no withholding tax applies where the recipient of the potentially taxable royalty is resident in an EU Member State or a tax treaty country, and the tax laws of that other country in principle assess to tax foreign-source royalties received therein by its residents. In any case, were a patent royalty would still be potentially subject to withholding tax in Ireland despite the above, an exemption may be available under the EU Interest and Royalty Directive (see above under Interest for the application conditions). Also, an exemption or a reduced rate may be available under an applicable tax treaty.

Ordinarily, patent payments to non-EU and non-treaty protected recipients will remain subject to the 20% withholding tax. However, the Revenue Commissioners have declared in a 2010 Statement of Practice (CT/01/10) that they would allow the payment of patent royalties to non-EU and non-treaty recipients free from withholding tax subject to conditions, It is understood that the main condition is that the payment relates to a “foreign patent” and the arrangement not be part of a conduit scheme for the avoidance of tax.

Capital Gains

Ireland levies a withholding tax of 15% on capital gains derived by non-residents but only on the disposal of the following asset types:

  • Land, minerals, or exploration rights in Ireland or the Irish continental shelf
  • Unlisted shares deriving 50% or more of their value from the above asset types
  • Unlisted shares issued in exchange for shares deriving 50% or more of their value from the above asset types
  • Goodwill of a trade carried on in Ireland

The withholding tax is not required if the consideration for the assets does not exceed EUR 500,000 or where the tax authorities authorize payment in full based on no capital gains tax being due, or if capital gains tax is otherwise paid. The tax relief for intra-group transfer of capital assets (covered in Sec. 5.3.) does not apply.

Approval for the withholding tax exemption must be obtained before the consideration is paid.

Rent or Other Payments

Ireland levies a withholding tax of 20% on rent payments made to non-resident enterprises.

Exit Taxes

Irish law provides for the imposition of an exit tax on companies ceasing to be tax resident in Ireland. In view of the very broad exemptions, however, this charge would apply in exceptional circumstances only. See further discussion in Sec. 11.2.

The following table shows the most up-to-date standard domestic withholding tax rates.

Capital Gains
0%
Dividends
0%
Interest
20%
Royalty Copyright
0%
Royalty Patent
20%
Royalty Trademark
0%
Sales
0%
Service Management
0%
Service Technical
0%

*Rates are current as of 05 February 2023