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Budget 2020: international tax measures announced continue moves to greater tax transparency

8 October 2019 While given a relatively light touch in Budget 2020, continuing Irish tax reform measures will undoubtedly have a considerable impact on taxpayers in 2020 and for future years, according to Deloitte.

Commenting on the measures, Louise Kelly, Tax Partner, Deloitte commented:

The Minister referred to a number of changes that corporate taxpayers will need to be aware of from 1 January 2020.

The changes to Irish Transfer Pricing rules referred to in Budget 2020 will represent a significant shift in the law. The alignment of Irish Transfer Pricing rules to 2017 OECD Guidelines is a welcome step in the right direction given the increasing focus on substance over form underscoring BEPS Actions, but will create work for Irish taxpayers who must now assess their pricing in light of the revised rules. Concise guidance and continued engagement with stakeholders on these changes will continue to be vital in order to ensure taxpayer certainty and the effective operation of these new rules.

Budget 2020 also signalled a number of other changes affecting Ireland’s international tax laws, including the continued implementation of the Anti-Tax Avoidance Directive.

Further movement on the EU agenda is clear from various international tax developments that the Minister referred to. In particular, the introduction of anti-hybrid rules, forthcoming in Finance Bill 2019, will have the potential to impact a number of taxpayers across a range of sectors including the financial services, life sciences and technology. Following a public consultation on the introduction of the new rules, a key focus will be on ensuring that the scope of the legislation does not depart from the Directive unnecessarily and thus threaten Ireland’s competitiveness globally. The summary of taxation measures estimates document expects additional tax in 2020 in relation to a combination of the transfer pricing changes and introduction of the anti-hybrid rules.

The changes to the R&D credit regime in relation to the limit of qualifying expenditure incurred for research carried out by third level universities are welcome.

The increasing move towards tax transparency is a key area of change, for which taxpayers and tax advisors alike will need to be well prepared. In particular, Finance Bill 2019 is likely to see the implementation of the EU Mandatory Disclosure regime (DAC 6), requiring the disclosure of cross border transactions bearing specific hallmarks. However, given the scope of the rules and the potential for high penalties for non-compliance, caution must be exercised in practice to ensure reportable transactions are effectively disclosed within the required timeframe.

Kelly concluded:

The international tax landscape has experienced significant change and disruption in recent years. Budget 2020 continues to set out how the Government will evolve Ireland’s tax regime against this backdrop. All eyes now turn to the publication of Finance Bill 2019 next week to see what further detail on these changes emerge. While there will be significant change, it is important, and indeed encouraging, that the Minister has once again confirmed the commitment to Ireland’s 12.5% rate of corporation tax.

Ends

For Further Information Please Contact

Louise Kelly

Tax Partner, Deloitte

087 2117542

Aoibheann O’Sullivan

Murray

01 498 0300

087 6291453

aosullivan@murrayconsultants.ie

Claire Quinn

Deloitte

01 417 2356

087 9777783

cquinn@deloitte.ie

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In this press release references to Deloitte are references to Deloitte Ireland LLP. The information contained in this press release is correct at the time of going to press. Deloitte Ireland LLP is the Ireland affiliate of Deloitte NSE LLP, a member firm of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”). DTTL and each of its member firms are legally separate and independent entities. DTTL and Deloitte NSE LLP do not provide services to clients. Please see www.deloitte.com/about to learn more about our global network of member firms.

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