Travel restrictions imposed in response to COVID-19 may impact a director's ability to travel to Ireland in order to attend board meetings and could therefore impact the residence status of an Irish tax resident company. The Irish Revenue are aware of this issue and published brief guidance on the matter on 23 March 2020. 

Certain other tax measures have also been announced in response to COVID-19, but these have been focussed on businesses with a turnover of less than €3m and will not be covered in this blog post. 

Why hold board meetings in Ireland?

A company incorporated in Ireland on or after 1 January 2015 is tax resident in Ireland by virtue of its incorporation. An Irish company should remain so tax resident, unless it is tax resident in another jurisdiction pursuant to the terms of an applicable double tax treaty. The tax residence tie-breaker provisions in Ireland's tax treaties are based on the central management and control (CMC) test, or mutual agreement of the relevant tax authorities.

The CMC test looks at where strategic control at the highest level of the company is exercised. The location of board meetings is a key factor in determining CMC (provided that key strategic decisions are not made elsewhere). Accordingly, it is best practice to hold regular (quarterly, but dependent on business activity) board meetings in Ireland with the majority of the board physically present to demonstrate that CMC is situated in Ireland. Taking steps to ensure that an Irish company is clearly centrally managed and controlled in Ireland protects against challenges from other jurisdictions that may seek to assert tax residence, or assert the existence of a taxable presence in that jurisdiction.

New Irish Revenue guidance 

The guidance indicates that Irish Revenue accept that the tax residence status of a company should not be impacted as a result of a director's inability to attend a board meeting in Ireland due to COVID-19 travel restrictions (where the director would otherwise have attended). We expect that the cancellation of commercial flights in absence of a formal travel ban will constitute a travel restriction but this is not clear from the guidance.

Irish Revenue states that records evidencing the relevant travel restriction should be retained (e.g. proof of flight cancellations, government announcements, medical reports etc.). We recommend also noting the inability to travel in board minutes. To further support the position and, where possible, board meetings held by conference call should be initiated by a director based in Ireland.

Review position in foreign jurisdictions 

Irish Revenue's guidance does not address tax implications in any foreign jurisdictions and foreign authorities may take a different view. Irish companies should identify any activities being undertaken in foreign jurisdictions instead of Ireland as a result of COVID-19 measures and consider the implications in the local jurisdiction.