Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

Different countries use different factors to determine the tax residence of companies. Ireland has traditionally relied primarily on a "management and control" test which takes into account where the key strategic decisions about the company are taken. Some other countries rely primarily on the incorporation test whereby companies are tax-resident in the place where they are incorporated. The interaction of these different types of rules has previously led to a situation where a company could be incorporated in Ireland but managed and controlled elsewhere. These were commonly known as "Irish-registered but non-resident" companies.

There is a Department of Finance tax strategy group paper from 1998 that details the illegitimate use of "Irish-registered but non-resident" companies by groups engaged in fraud, money-laundering, drug-trafficking and other illegal activities. This report followed work undertaken by the Department of Finance, the Revenue Commissioners and what is now the Department of Jobs, Enterprise and Innovation. The Department of Justice, Equality and Law Reform and the Attorney General's office were also consulted. The issues outlined in the paper were subsequently addressed by a package of measures including amendments to company law provisions and the introduction of taxation provisions in the Finance Act 1999.

The existence of these "Irish-registered but non-resident" companies is a matter of public record going back to the 1990s. Their existence was even debated in the Dáil during this time.

The Deputy has asked a question that relates to "stateless" companies. The term refers to the ability of companies to take advantage of mismatches in the tax residence rules of two countries in order to achieve a situation where they can claim that they are not tax-resident anywhere, that they are "stateless" for tax purposes. The concept of a "stateless" company only came to light in 2013, following the US Senate hearings into Apple.

Additional information not given on the floor of the House

I acted swiftly on foot of this information and, in the Finance Act later that year, amended Ireland's tax residence rules to ensure that an Irish-registered company could not be "stateless" in terms of its tax residency.

In the following Finance Act, I made a further change to bring Ireland's company residence rules into line with those in other OECD jurisdictions and address the reputational damage arising from Ireland's association with the term "double Irish". Owing to recent changes made to the company residence rules, such structures no longer exist as from 1 January 2015 it is no longer possible for an Irish-incorporated company to claim that it is "stateless" for tax purposes, and from 1 January 2015 a new company incorporated in the State is generally regarded as tax-resident in the State, thereby bringing an end to the so-called "double-Irish". This will take effect for existing companies, incorporated before 1 January 2015, from 31 December 2020.

I have never claimed that these changes will bring an end to international tax planning. For that to happen, co-ordinated action by many countries working together is required. Ireland has continued to play our part in bringing about solutions to such problems, and I have signed up to the OECD base erosion and profit shifting reports and the EU anti-tax avoidance directive as further evidence of that commitment.

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