The purpose of this amendment is to ensure that the transition arrangements that allow the application of the existing rules on residence for companies until the end of 2020 cannot be accessed by shelf companies or other companies incorporated before 2015 which are acquired in certain circumstances after the end of this year.

Section 38 amends the company residence rules in section 23A of the Taxes Consolidation Act 1997, to provide that an Irish incorporated company will be regarded as resident for tax purposes in the State. The purpose of the change in company residence rules is to bring Ireland's rules into line with the rest of the OECD jurisdictions and to address the potential reputational damage arising from the use of corporate structures commonly referred to as the double Irish. A six year transitional period is provided for in the Bill to give existing companies a reasonable time frame to plan and re-organise their business structures.

The proposed Committee Stage amendment will address concerns that the commencement provisions in the Bill as published could be circumvented so that shelf companies or other such companies incorporated before 2015 could be acquired and re-used as non-resident companies in new business operations set up after 2014 and thereby avail of the transitional period. This amendment will prevent such a scenario and will ensure that the transitional period is only available to companies with real and substantive business operations in place at the end of 2014. The amendment replaces the existing subsection (2) in the Bill with a new subsection (2) to provide for the revised commencement arrangements.

I should emphasise that the new subsection does not change the commencement date of 1 January 2015 for companies incorporated on or after that date nor does it change the commencement date after 31 December 2020, for companies incorporated before 1 January 2015, which have real business operations established before the end of the year.

My amendment essentially introduces a two-step test to provide that the non-resident status may not apply if, first, there is a change in the ownership of a company incorporated before 2015 and second, there is a major change in the business of the company. Where these two events occur during the transition period, the transition arrangements will cease to apply and the new rules on company residence will apply from the date of the change of ownership. This should deter the acquisition or transfer of companies for use as non-resident companies in new structures that are set up after this year in order to avail of the transitional period. This amendment will ensure that where there is an ongoing business in the company that was established before the end of 2014, the non-resident status will not change even if ownership of the company changes during the transition period. In particular, this should allow mergers or acquisitions of existing companies that are undertaken for bona fide commercial reasons to avail of the transition arrangements.

In summary, the revised commencement provisions will ensure that existing projects can continue to avail of the old residence rules for the transitional period up to the end of 2020, while new projects which are set up from the 1 January 2015, will be subject to the new residence rules, as was originally intended. I commend the amendment to the committee.