Extension of the concessional treatment of Irish tax commissioners for corporate income tax

In 2020, due to uncertainty caused by COVID-19 related travel restrictions, the Irish Revenue Commissioners (‘revenue’) confirmed that, as a temporary concession, they would disregard presence in the State or other jurisdiction of persons for the purposes of establishing taxable residence or presence.

While Revenue recently released an e-brief confirming that the concessional treatment will remain in effect until December 31, 2021 (and will be withdrawn with effect from January 1, 2022), it has now been confirmed that the concessional treatment will continue to apply until December 31, 2021. ‘as of January 31, 2022. and that the position will be reviewed to determine if another extension will be necessary. This is a positive and very welcome development.

In this briefing, we look at the potential impact that the future withdrawal of this concessional treatment could have on some Irish and non-Irish companies.

How will the withdrawal of the concession impact the tax residency status of companies?

The withdrawal of the concession is not expected to have a significant impact on Irish companies. This is because all companies incorporated in Ireland are automatically considered Irish tax residents as of January 1, 2021, the only exception being when a company can be considered tax resident in another jurisdiction under a treaty. double taxation.

Accordingly, the withdrawal of the concession itself should not have a direct impact on the assessment of the tax residency of companies incorporated under Irish law – however the only consideration in practice is whether a foreign tax authority could claim that a company incorporated under Irish law is resident in its jurisdiction, so that the terms of a double taxation agreement could then potentially override the position of domestic Irish law.

However, the withdrawal of this concession may have a greater impact for non-Irish incorporated companies (especially those claiming to be Irish resident), as different residency rules apply to such companies. Generally, a non-Irish incorporated company will be Irish tax resident when it is centrally managed and controlled in Ireland. The holding of board meetings in Ireland (and the physical presence of directors at those meetings) is one of the factors Revenue will consider in determining whether a company is centrally managed and controlled in Ireland and, therefore, Irish tax resident.

The tax concession allowed directors, in certain circumstances, to attend board meetings remotely (from other jurisdictions) without fear that such attendance would affect tax residency status Irish society. However, following the withdrawal of this concession, companies will have to carefully consider the impact that the remote presence of directors at board meetings may have on the tax residency of the company. Before the concession is terminated, it remains important for companies using it to document the facts and circumstances of the bona fide presence in Ireland or abroad, for example in the minutes of the board of directors and correspondence from the director concerned prior to the board meeting.

Will the withdrawal of the concession lead to “permanent establishment” problems?

Similar to the corporate residency position described above, the tax concession allowed employees and directors of non-Irish tax resident companies, in certain circumstances, to perform the duties of their employment in Ireland (due to restrictions COVID-19) without creating a ‘taxable presence’ for the employer company in Ireland.

The withdrawal of the concession will mean that non-Irish resident companies will have to carefully consider the presence of their employees / managers in Ireland and determine whether that presence will create a ‘taxable presence’ in Ireland. Businesses may seek to rely on the OECD guidance on the impact of the COVID-19 crisis (published in April 2020 and updated in January 2021) when interpreting the relevant double taxation treaty as the COVID-19 public health measures remain in effect, confirming that “The exceptional and temporary change in the location where employees work because of the COVID-19 pandemic… should not create a new MOU for the employer”.

However, we recommend that non-Irish tax resident companies whose employees / directors work in Ireland consider this position very carefully.

Luisa D. Fuller