Ireland – Remaining Competitive in an Ever Changing Global Tax Environment – 2023

Ireland – Remaining Competitive in an Ever Changing Global Tax Environment – 2023

Ireland – Remaining Competitive in an Ever Changing Global Tax Environment – 2023

Ireland’s exchequer tax receipts for 2023 are already beating expectations. While multinational corporate tax receipts have been a big contributor, the domestic economy continues to play a pivotal role. This is evident from the busy start to 2023 that Warren & Partners are seeing within our client base of Irish private companies, entrepreneurs, partnerships, and private clients.

Below we highlight what we are advising on and seeing in our day to day interactions with clients.

Trading in Ireland

The standard rate of corporation tax on trading profits in Ireland is now 50% lower than it is in the UK. 

While this continues to make Ireland a very attractive location to set up business, arguably the UK offers more attractive options to SMEs in terms of accelerated capital allowance claims, enhanced R&D tax relief and enticements to set up in regional investment zones which offer attractive tax incentives.

Assuming the Windsor Framework is adopted in Northern Ireland, the benefits it offers could lead to a loss of investment in Ireland with a resultant lower tax take.

So Ireland can’t rest on its laurels – it needs to constantly look for ways to incentivise SMEs to set up and expand from here.  Arguably, there is no justification for levying an additional corporation tax surcharge on SME professional services close companies, given non-close companies in that space can avail of the 12.5% rate.

Ireland’s Holding Company Regime

Our holding company regime is attractive and offers tax incentives in the form of capital gains tax (“CGT”) participation exemption etc.

This has helped to support a lot of corporate transaction activity.

Over the past 12 months we have provided tax support to clients who have sold businesses in the tech, public relations and automation sectors to listed and private multinational companies.  

However, arguably our holding company regime could be further enhanced, to include some of the benefits which holding companies in the UK and EU jurisdictions currently have.  This would lead to further investment in Ireland.

Matters facing Businesses with Global Reach and Hybrid Working Arrangements.

Irish headquartered businesses with an export focus need to be vigilant when it comes to managing their subsidiary or branch operations in EU/Non-EU jurisdictions.

We have noticed an increase in foreign tax authorities’ enquiries into global mobility/hybrid working arrangements (leading to payroll tax and social insurance issues) and permanent establishment issues (particularly querying the levels of profit left in what is typically a higher tax foreign jurisdiction). Such matters require constant attention and monitoring to ensure no unforeseen or contentious tax issues arise for businesses down the track.

Restructuring Activities

Relatively recent changes to Irish company law and tax have made it easier to restructure businesses in an efficient manner.

We have assisted clients on several commercial restructuring, partitioning and MBO projects so far this year and expect that trend to continue.

However, it does appear that other jurisdictions, including the UK, offer more guidance and provide a more streamlined process to businesses considering such a strategy, particularly when a business is facing challenging times.  SCARP has been introduced to address some of these concerns to some degree, but the level of take up of SCARP has been lower than expected.  We were recently involved in a Scheme of Arrangement and saw first-hand the benefits which the UK system offers compared to Ireland.

Perhaps there is more that can be done in Ireland to facilitate restructuring, particularly in an era where the methods of doing business are evolving at a fast pace.

The High Income Tax Cost of Rewarding Staff

When it comes to rewarding management and staff for working hard and contributing to business growth, the level of income tax suffered in Ireland remains a barrier to sourcing and retaining domestic or international talent.

More needs to be done to enhance opportunities to reward effort more tax efficiently, whether it be through share incentives schemes, or long-term incentive plans. While there have been enhancements recently to share schemes such as KEEP, too many barriers remain to such schemes being attractive for employers and employees alike.

Ireland remains a competitive jurisdiction in our ever changing global tax environment, but we must be vigilant and continue to enhance our tax system to keep attracting investment and ultimately maintain growth in our economy.

Please note: The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.

Warren & Partners are a boutique Irish tax and business advisory firm based in Ballsbridge, Dublin. Our experienced-team of tax advisors will create unique tax solutions for your specific business needs.