Press release
Minister McGrath publishes feedback statement on participation exemption in Irish corporate tax system for foreign dividends
Published on
Last updated on
Published on
Last updated on
1. Commitment to ensuring competitive corporation tax regime in line with international best practice.
2. Legislative amendment will be introduced as part of Finance Bill 2024.
Minister for Finance Michael McGrath TD has today published a first feedback statement on the development of a participation exemption for foreign dividends to the Irish corporate tax system . This is in line with the Roadmap published in September 2023 , which committed to the introduction of the participation exemption in Finance Bill 2024, to come into effect from 1 January 2025.
Ireland currently operates a worldwide corporate tax regime which considers all profits, both domestic and foreign source, of a resident entity to be within scope of taxation while allowing double taxation relief for foreign tax paid on foreign source profits.
In this way, Ireland differs from most EU and OECD member states who have adopted a territorial approach exempting foreign dividends from domestic tax, sometimes complemented by an exemption for foreign branch profits.
The purpose of this feedback statement is to further progress work on the key building blocks of the participation exemption. It includes a strawman proposal that sets out a hypothetical example for how a participation exemption for foreign dividends might work in Ireland, in order that individual elements can be discussed within the context of a regime as a whole. The design of this strawman proposal has been informed by stakeholder submissions received in response to the Roadmap consultation, together with research work undertaken by officials in the Department of Finance and Revenue.
On Publication of Feedback statement, Minister McGrath stated:
‘‘The introduction of a participation exemption will be a very important step towards simplification of the Irish corporate tax system and reflects Ireland’s continued efforts to promote a business environment characterised by certainty and clarity. In a time of unprecedented change in international taxation, this move will give confidence and foresight to key stakeholders, maintaining Ireland’s reputation as a business-friendly destination and encouraging companies to establish and expand their operations in Ireland.
We have already introduced significant reforms in the area of Corporate Tax, with Finance (No.2) Act 2023 introducing the new 15% minimum effective corporate tax rate for in-scope companies, giving legislative effect to Pillar Two of the OECD Two-Pillar Agreement .
Against this backdrop, the introduction of a participation exemption for foreign dividends reflects Ireland’s commitment to ensuring that our corporation tax code is competitive and attractive to business investment and aligns with international best practice.
The publication of the feedback statement is a further significant step in the process and I look forward to engaging with stakeholder in relation to the strawman proposal ahead of Finance Bill 2024.”
ENDS
Notes for Editors
A Roadmap for the introduction of a participation exemption to the Irish corporation tax system was published by the Department of Finance on 14 September 2023. The Roadmap committed to the introduction of a participation exemption for foreign dividends in Finance Bill 2024, and to continuing consideration of the policy merits for the introduction of a foreign branch exemption.
The consultation period ran from 14 September until 13 December 2023. Seventeen responses were received, and have been published on the Department’s website.