The list of comprehensive Double Taxation Treaties with Ireland has steadily increased over the last number of years.
List of Treaties
Ireland currently has full Double Taxation Treaties with the following countries:-
Australia, Austria, Belgium, Canada, Cyprus, Denmark, Finland, France, Germany, Israel, Italy, Japan, Luxembourg, Netherlands, New Zealand, Norway, Pakistan, Poland, Portugal, Russia, South Korea, Spain, Sweden, Switzerland, United Kingdom, United States of America and Zambia.
Each of the Treaties with Israel, Poland and Russia has been recently negotiated and come into effect for corporation tax purposes for any financial period beginning on or after 1st January, 1996 and for income tax and capital gains tax purposes on 6th April, 1996.
The Ireland / U.S. Treaty is in the process of being re-negotiated. Discussions commenced in Summer 1995 and further talks were held in December 1995. The old form (and still valid) Irish / U.S. Treaty is quite favourable and the Irish Revenue Commissioners are negotiating the revised Treaty in an effort to preserve the already significant U.S. investment in Ireland, which has greatly contributed to Irish employment.
An amendment to the Ireland / U.K. Treaty dealing with contributions to occupational pension schemes having been ratified in late 1995, is now applicable and covers years of assessment commencing on or after 6th April, 1994.
New Treaties with Hungary and the Czech Republic have been ratified by Ireland and it is hoped that they will come into operation in 1996 / 1997.
Negotiations with Greece and Mexico are at an advanced stage and it is hoped that Treaties with these countries will be ratified in 1996.
Virtually all of Ireland's Double Taxation Treaties provide for a nil withholding tax on interest paid to recipients resident in a Treaty country, with a few exceptions which include Belgium, Canada and Japan. In the case of Israel and Poland certain types of interest may be subject to limited withholding tax, while other types of interest will be subject to nil withholding Tax. The Treaties also generally exempt royalty payments from Ireland to a recipient resident in a Tax Treaty country from any withholding tax. Again there are some exceptions including Israel, Poland, Spain and Canada (although in the case of royalty payments to Canada, the business profits article may provide some relief).
Ireland does not levy withholding tax on dividends paid from Irish resident companies, however advance corporation tax (equal to the tax credit attaching to the dividend) is payable by the Company on payment of a dividend. Advance corporation tax paid by a company may be offset against that company's mainstream corporation tax and carried forward until used in full, subject to certain conditions. The requirement to account for advance corporation tax is removed in certain circumstances including:-
(a) When an Irish company pays a dividend to its Irish resident parent company owning at least 51% of the issued share capital of the paying company; or
(b) When an Irish company pays a dividend to its non-Irish resident parent company and where such parent company holds at least 75% of the issued share capital of the Irish company and is resident in a Double Taxation Treaty country.
Where no Treaty prevails, income tax is withheld at the standard rate of tax from interest and royalties paid from Irish sources. Currently the standard rate of income tax is 27%.
For further information contact Caroline Devlin on +353 16 76 46 61 or enter text search 'Arthur Cox' and 'Business Monitor'.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.