As part of international efforts to tackle tax base erosion and profit shifting (BEPS), Ireland is now sharing details of the tax rulings and advance pricing agreements it approves for companies with other countries' tax authorities.
Tax rulings are intended to support taxpayers by providing them with a written interpretation of specific tax law issues from the tax agency. An advance tax ruling binds the tax agency to the terms agreed, giving the company surety with regards the taxation of a transaction or set of transactions for the duration of the agreement's term.
The OECD proposed, as part of its BEPS project, that countries should share details of these tax rulings multilaterally, to ensure that one country does not allocate itself taxing rights over income that would be contested by another territory but for a lack of transparency.
For instance, if a US tax resident company decides to carry out business activities in Ireland and seeks an opinion from Revenue on whether these activities constitute a permanent establishment for tax purposes, Ireland will be obligated to provide the Internal Revenue Service with details of any tax ruling or opinion offered.
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On 7 June 2019, the Irish Revenue confirmed that it is now spontaneously exchanging information on tax rulings with all members of the BEPS Inclusive Framework, of which there are now 129, if they have corporate income tax systems. This means that Ireland does not exchange details of tax rulings with authorities in Anguilla, The Bahamas, Bahrain, Bermuda, the British Virgin Islands, the Cayman Islands, and the Turks and Caicos Islands.
Irish rulings are offered only in a very limited number of circumstances. Typically, requests for advance rulings will only be given by the Revenue where:
• The issues are complex, unusual, or uncertain and the taxpayer or agent requires clarification of the tax or duty treatment of the proposed transaction or business activity
• Clarification of the issue is not already in the public domain
• The request is specific to a particular named taxpayer and relates to an actual proposed (rather than hypothetical) transaction
• All the relevant information and facts have been provided to enable an opinion or confirmation to be given
Opinions and confirmations will also not be given where the Revenue is of the view that the proposed transaction is part of a scheme or arrangement designed to avoid tax.
The Revenue's Large Cases Division has a second offering for large firms to provide them certainty on their tax affairs. Under the Cooperative Compliance framework, a participating business can engage in regular dialogue with Revenue in relation to its tax or duty exposures, to enable the taxpayer to predict with reasonable confidence what Revenue's position will be in relation to particular tax or duty issues of interest to the business.
In 2016, the Irish Government announced that it would undertake a full review of tax rulings more frequently – every five years – following international discussions.
The announcement came shortly after the European Commission's conclusions that two tax rulings issued by Ireland to Apple have substantially and artificially lowered the tax paid by Apple in Ireland since 1991. The Irish Government has fully recovered the €13bn in alleged unlawful state aid from Ireland in this case, but is preparing a legal challenge to that decision before EU courts.
The exchange of tax rulings is one piece of the puzzle in boosting transparency surrounding the tax affairs of multinational companies, with countries also exchanging information on the tax affairs and economic activities of the world’s largest firms in country-by-country reports.
This new transparency brings both benefits and risks for multinationals. It potentially increases the risk of disputes between taxing authorities over the same income. However, the new landscape will provide multinationals with greater tax certainty that long-established positions are less likely to be challenged, and for all businesses, it ensures a level playing field, without special treatment for select firms.
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