On 8 October 2019, the Irish Minister for Finance made his 2020 Budget speech to the Irish Parliament. A number of unexpected measures were introduced by way of Financial Resolution with immediate effect. The remaining measures will be introduced through the Finance Bill 2019 which is scheduled to be released on 17 October 2019.
At this stage, the key points of interest for the international business community include:
Stamp duty rate increase – from 9 October 2019, the stamp duty rate for commercial property (land and leases) has been increased from 6% to 7.5% (following an increase from 2% to 6% in 2018). Transitional provisions apply to existing binding contracts, provided that the instrument of transfer is signed before 1 January 2020. Stamp duty on residential property remains unchanged.
Stamp duty on schemes of arrangement – from 9 October 2019, the acquisition of an entity using a scheme of arrangement (under the Companies Act 2014) will trigger a charge to stamp duty (at a rate of 1%). Prior to this measure, a scheme of arrangement did not attract stamp duty because, technically, it involves existing shares being cancelled and new shares being issued (i.e. there is no transfer). Stamp duty will now be charged on the market value of any consideration received for the cancellation of shares. The rules make no exceptions for group restructures. The rules include no transitional provisions so this measure is set to impact some high profile schemes of arrangements already underway.
Irish Real Estate Funds (IREFs) – from 9 October 2019, new anti-avoidance measures aimed at curtailing so-called "aggressive behaviours to avoid tax" apply to IREFs. The measures include an interest limitation rule to prevent IREFs from sheltering profits from Irish property with "excessive" interest expenses, a rule that treats certain expenditure as non-deductible for the purposes of computing an IREF profits for distribution, as well as provisions targeting the taxation of gains arising on the redemption of IREF units.
Real Estate Investment Trusts (REITs) – several amendments to the REIT regime became effective on 9 October 2019. The amendments seek to increase the level of tax paid on property gains. The amendments aim to tax proceeds which are not distributed or reinvested in certain circumstances, reduce the scope for REIT proceeds to be distributed free of Irish dividend withholding tax and limit the availability of concessionary rules which can apply when a REIT leaves the REIT regime.
Dividend withholding tax increase – from 1 January 2020, the dividend withholding tax rate will increase from 20% to 25%. There are broad dividend withholding tax exemptions under domestic law so the increase should have no impact on most international investors who are resident in a "good" (i.e. EU or tax treaty) jurisdiction.
Irish corporation tax rate remains at 12.5% – the Minister for Finance has publicly committed to Ireland's current corporation tax rate, stating that: "Ireland has a competitive corporation tax rate. It has served us well and it will not be changing".
Anti-hybrid rules – new ATAD-compliant anti-hybrid mismatch rules will be introduced in the Finance Bill 2019 with effect from 1 January 2020. The rules will address tax advantages arising due to differences in how jurisdictions treat instruments or entities for tax purposes.
Transfer pricing – Ireland's transfer pricing regime will be reformed in order to comply with OECD standards with effect from 1 January 2020. Draft legislation is currently under consultation. The draft rules indicate that (amongst other things) the revised regime will incorporate the OECD 2017 transfer pricing guidelines and will also apply to certain capital transactions (which are not currently within the scope of the existing rules).