Written answers

Wednesday, 12 December 2018

Photo of Tommy BroughanTommy Broughan (Dublin Bay North, Independent)
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85. To ask the Minister for Finance when he expects the so-called single malt tax avoidance loophole to be completely closed off by Ireland and Malta; and if he will make a statement on the matter. [52478/18]

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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Ireland’s corporate tax residence rules were amended in Finance Act 2014 to shut down an aggressive tax planning structure referred to as the ‘Double Irish’.  Subsequently, reports emerged of a new alternative aggressive tax planning structure, known as the ‘Single Malt’ that sought to achieve a similar objective.   I understand that the ‘Single Malt’ structure involves an Irish incorporated company relying on the fact it is tax resident in Malta, a country with which Ireland has a Double Taxation Convention, to prevent it from also being tax resident in Ireland.   Tax was ultimately avoided in certain circumstances where payments from an Irish group company to the ‘Single Malt’ company were not ultimately received in Malta. 

I understand that US tax reform should already have significantly reduced the potential tax advantages of using a ‘Single Malt’ structure.  However, I asked my officials to examine what additional actions could be taken to remove any remaining concerns.  This examination resulted in the agreement of a Competent Authority Agreement between the Revenue Commissioners and the Maltese authorities.

I am advised by Revenue that the recent Competent Authority Agreement gave notice that, with reference to the Ireland-Malta Double Taxation Convention, a specific result of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) will be prevent the Irish-incorporated ‘Single Malt’ company from using its status as a Maltese tax resident to prevent it from being Irish tax resident under section 23A of the Taxes Consolidation Act 1997.  On their becoming Irish-resident for corporation tax purposes, the relevant provisions of the Taxes Consolidation Act 1997 will then render previously untaxed income of the companies concerned fully chargeable to corporation tax.

The timing of the change coming into effect will depend on the date at which both Ireland and Malta deposit their notices of ratification of the MLI with the OECD.  The change will impact companies’ accounting periods beginning after the 9th full calendar month following the month in which both Ireland and Malta making the relevant deposit with the OECD.  Ireland intends to deposit its notice of ratification with the OECD in January 2019, and accordingly, where Malta have also done so by the end of January, the changes will be in effect for periods from November 2019.

For companies that were incorporated in Ireland prior to 1 January 2015, the Irish corporation tax residency rules that were in place prior to Finance Act 2014 remain in effect until the end of 2020.

The action taken by Ireland in respect of this aggressive tax planning structure is another sign of Ireland’s commitment to tackling aggressive tax planning, as set out in Ireland’s Corporation Tax Roadmap.

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