Thomas Pringle (Donegal, Independent)
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407. To ask the Minister for Finance the tax rules regarding a person who works at sea in international waters for longer than 185 days per year; the tax-free allowances that are available; and if the person is exempt from paying income tax or social insurance contributions to any state (details supplied). [30458/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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It would appear from the Deputy’s Question that the individual concerned is an Irish national who has retired in the State, having worked at sea in international waters for a number of years. During this period, the individual was resident in the Netherlands and worked with several different shipping companies which were registered in different countries. While it is not possible to give definitive answers based on the information supplied the following general information is relevant. If the person wants to clarify his or her tax treatment, he or she should contact Revenue.

Tax treatment of income in Ireland

An international seafarer who is resident and domiciled in the State will be subject to Irish income tax on his or her worldwide income, including income derived from the exercise of an employment on board a ship in international waters. Section 819(1) of the Taxes Consolidation Act 1997 (TCA 1997) provides that an individual is resident in the State for tax purposes for a tax year if he or she is present in the State for:

i. 183 days in that tax year, or

ii. 280 days between that tax year and the previous tax year, with a minimum of 30 days in either tax year.

With respect to tax incentives applying to those working in the commercial maritime sector, section 472B TCA 1997 provides for the Seafarers’ Allowance.

The Seafarers’ Allowance provides an allowance of €6,350 to individuals working in the shipping transport sector. Along with other conditions, an individual who wishes to claim the allowance must be at sea for at least 161 days in the course of the year and carry out their work wholly on-board a sea-going ship while on an international voyage. Further information in relation to the Seafarers’ Allowance is available in Tax and Duty Manual Part 15-01-30 - Seafarer Allowance on the Revenue website.

This incentive may only be claimed by Irish residents assessable to income tax under Schedule D or Schedule E (i.e. self-employed or an employee). In general, non-resident individuals are not entitled to any of the normal personal credits, reliefs, and deductions, including the Seafarers’ Allowance. However, in certain circumstances, full or apportioned tax credits, reliefs or deductions may be available under section 1032 TCA 1997. Apportioned tax credits are calculated based on the proportion which the income of the non-resident which is assessable to Irish tax, bears to their total worldwide income.

Tax treatment of income overseas

In general, the state where an international seafarer is liable to tax on income derived from the exercise of an employment on board a ship in international waters will depend on a number of different factors, including, but not restricted to the following:

- the domestic tax rules in the state of residence of the seafarer;

- the tax rules applying to the employment income of international seafarers in the state where:

- the employment is held and from where the employment income is paid

- the vessel is registered

- the vessel is managed.

On this basis, it is not possible to confirm that a person who works in international waters for more than 185 days in a year is exempt from paying income tax or social insurance contributions on their income to any state.

In cases where the employment income of the international seafarer is subject to tax under the domestic tax rules of two jurisdictions, the terms of a double taxation agreement (DTA) concluded between these jurisdictions may apply to alleviate double taxation. In such instances, Article 15(3) of the OECD Model Tax Convention provides that two jurisdictions may agree that remuneration which is derived from an employment exercised aboard a ship operated in international traffic is taxable in the country in which the place of effective management of the operator of the ship is located.

For example, an international seafarer who is resident and domiciled for Irish tax purposes will be subject to Irish income tax on his or her worldwide income, including that derived from the exercise of an employment on board a ship in international waters. If the seafarer is subject to tax on this income in another jurisdiction with which the State has a DTA, then the income may be relieved from double taxation in accordance with the terms of the DTA.

Neale Richmond (Dublin Rathdown, Fine Gael)
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408. To ask the Minister for Finance if he will provide an update on the OECD proposals relating to corporation tax; and if he will make a statement on the matter. [30563/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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As the Deputy is aware, the OECD/G20 Inclusive Framework on BEPS met last October to agree a two-pillar solution to address tax challenges arising from the digitalisation of the economy.

Pillar One will see a reallocation of 25% of residual profits to the jurisdiction of the consumer. The scope is confined to multination groups with turnover in excess of €20 billion annually. Residual profit is profit greater than 10% of turnover.

Pillar Two provides that the minimum effective rate is 15% for multinational enterprises with annual turnover in excess of €750m.

It is expected that the Agreement will bring long-term stability and certainty to the international tax framework arising from discussions which have taken place.

The implementation timeframe for both Pillars is ambitious as acknowledged recently by the Secretary General of the OECD. However, I am fully committed to delivering both pillars of the agreement as soon as possible.

Intensive work is ongoing, both at the OECD and EU, to reach agreement on the technical detail required in both Pillars to ensure that these complex provisions are transposed robustly and in co-ordination by all signatories to the agreement.

An intensive programme of meetings is ongoing at the OECD to ensure that the Agreement can be translated into rules which ultimately can become legislation. My officials and those of the Revenue Commissioners are endeavouring to shape the rules to ensure that they provide the necessary tax certainty, are administrable for business and tax administrations, and remain broadly faithful to the October Agreement.

On Pillar One the OECD have divided the work into 14 building blocks necessary to implement Pillar One. Each block is sent to public consultation as part of the development process and these elements will eventually form the Pillar One Model Rules.

These model rules, which will govern the reallocation of taxing rights to market jurisdictions, are to be delivered through a Multilateral Convention. This will be both legally and legislatively challenging to develop and deliver.

Pillar Two is more advanced. The OECD published Model Rules in December 2021 and published a commentary to these rules in March of this year. The Model Rules provide an important framework to assist individual jurisdictions to implement the Global Minimum Effective Tax Rate in a coordinated and consistent manner in accordance with the terms of the Agreement.

Work is ongoing on the OECD’s Implementation Framework to deal with further implementation issues, such as coexistence with the US GILTI regime, and the GloBE information return.

In the EU, work on delivering Pillar Two into legislation through the Minimum Tax Directive is very advanced. I am fully supportive of the efforts of the French presidency towards reaching unanimous agreement of the Directive and am optimistic that unanimous agreement can be reached at ECOFIN soon.

The EU Minimum Tax Directive now provides for implementation by 31 December 2023, which is in line with the OECD agreement of 2023 implementation. This remains faithful to the original deadline, while recognising the complex work required of both tax administrations and businesses in order to introduce and operate these rules effectively.

Domestically, a public consultation has recently been launched on the implementation of Pillar Two into Ireland’s tax code and I encourage all interested parties to engage with this consultation.