Mairéad Farrell (Galway West, Sinn Fein)
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208. To ask the Minister for Finance further to Parliamentary Question No. 261 of 5 February 2025, which of those treaties contain a limitation of benefits clause; and if he will make a statement on the matter. [4703/25]

Paschal Donohoe (Dublin Central, Fine Gael)
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Ireland is committed to preventing ‘treaty shopping’; an abusive practice whereby a taxpayer establishes itself in a country for the sole purpose of accessing tax treaty benefits.

The inclusion of the detailed Limitation on Benefits provision, or LOB, in tax treaties is one of three anti-abuse options recommended as a result of the Action 6 Base Erosion and Profit Shifting Report (referred to in this reply as the “BEPS report”) dealing with preventing the granting of tax treaty benefits in inappropriate circumstances. The second option is the inclusion of the Principal Purpose Test provision, or PPT, and the third option is a combination of the PPT and a simplified LOB.

The LOB limits tax treaty benefits to those who are ‘qualified persons’ in accordance with the LOB tests. The operation of these tests to determine whether a taxpayer is a ‘qualified person’ can result in persons being excluded from the benefit of a tax treaty because they do not meet certain conditions. In this regard, Ireland, along with the majority of jurisdictions, considers the PPT to be more preferable. The PPT denies tax treaty benefits where the principal purpose of a transaction was to obtain those benefits.

Most of Ireland’s tax treaties have been or will be modified by the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (which Convention implemented the recommendations in the BEPS report referred to above) to include the PPT. Ireland’s tax treaty with the United States is the only treaty in Ireland’s tax treaty network which currently includes a detailed LOB provision. The United States are not signatories to the Multilateral Convention and so the treaty will not be modified to include the PPT.

Where a tax treaty does not already include one of the three anti-abuse options and will not be modified by the Multilateral Convention to include the PPT, Ireland will seek to update the treaty bilaterally to include the PPT. Ireland will also seek to include the PPT in future bilateral tax treaty negotiations.