The due date for the filing of returns of information in relation to employee share participation schemes for the 2016 tax year is 31 March 2017.

The return is to be filed using the electronic Form RSS1 which can be downloaded here. Once the spreadsheet is populated, it can be uploaded through Revenue’s Online System (ROS).

Awards which have been subject to PAYE through payroll operations are not required on the Form RSS1.

In addition, a separate mandatory filing is required by 31 March 2017 in relation to the following Revenue approved share participation schemes:

Save As You Earn optionsApproved profit sharing schemesEmployee share ownership trust transactions

These continue to be filed by paper.

A penalty may be imposed for the failure to comply with the mandatory filing obligations and Revenue approved schemes may be withdrawn.

The Committee Stage amendments to Finance Bill 2016 were published on 04 November 2016, and one of the proposed amendments will significantly restrict the availability of Dwelling House Relief (s. 86 CATCA 2003).

Under the proposed new Dwelling House Relief legislation:

Relief is available for inheritances of a dwelling house or part of a dwelling house.

Relief will not generally be available for gifts of a dwelling house, or gifts which convert to         inheritances due to the death of the person making the gift within 2 years of the date of the gift. This proposed provision represents a significant restriction of the relief and could lead to unforeseen capital acquisitions tax liabilities for people who receive a gift of a house.

Dwelling House Relief will however be available on a gift of a dwelling house which is made to a dependant relative, i.e. a relative of the person making the gift or his spouse/ civil partner, and who is permanently and totally incapacitated by reason of mental or physical infirmity.

Generally speaking the house must be occupied by both the person making the gift at the date of death and the beneficiary of the gift at the date of the inheritance (but this requirement does not apply in cases of a gift to a dependant relative).

A new deemed occupation clause allows a donor or beneficiary to count a period when he is out of occupation of his home due to mental or physical illness as a period of occupation. If this provision is being relied on to avoid a clawback of the relief, then the medical condition must be certified by a medical practitioner.

The age at which a beneficiary can take a property without being subject to clawback provisions has been increased from 55 years to 65 years.

The taxation consequences of this amendment are significant, so one should seek taxation advice on the implications for future gifts and inheritances.

For further information contact:

Name:  Marie Bradley, Managing Director, Bradley Tax Consulting

Address: 14 Upper Leeson Street, Dublin 4

Tel: + 353 1 400 4123

E-mail: marie.bradley@bradleytaxconsulting.ie

As part of Budget 2017, the Department of Finance has published an Update on Ireland’s International Tax Strategy. The document sets out the objectives underpinning Ireland’s international tax policy and the progress that has been made in this regard over the past 12 months. The key points from the report which may be of interest to members include the following;

Ireland will implement the proposals in the Anti-Tax Avoidance Directive in line with the agreed deadlines set out in the Directive.Following changes to the OECD’s Transfer Pricing Guidelines which were agreed earlier this year, the Government will consider what changes are needed to ensure that Ireland’s transfer pricing rules meet the OECD standards.Ireland will engage fully in discussions on the European Commission’s CCCTB proposal (which is due to be released next month) while assessing if it’s against Ireland’s best interests.

Ireland “disagrees with any harmonisation of tax rates, minimum levels of taxation or the inappropriate encroachment of State aid rules into the core Member State competence of taxation”.

Irish tax legislation (Taxes Consolidation Act 1997, s 541C) provides for the taxation of returns (“carried interests”) on certain venture capital investments to be treated as capital gains subject to capital gains tax at reduced rates of 15% or 12.5%, where investor companies are involved in R&D type activities.

(1) CGT Payment Deadline - 15 December 2015

The due dates for payment of capital gains tax (CGT) for the tax year 2015 are as follows:

15 December 2015 for disposals in the period 1 January 2015 to 30 November 201531 January 2016 for disposals in December 2015.

Therefore, if an asset was disposed of between 1 January to 30 November 2015 and a chargeable gain arose, any liability to CGT is due for payment by 15 December 2015.

For disposals under an unconditional contract, the date of disposal is the date the contract is signed, not the completion date.

Where the contract is subject to a condition, the date of disposal is the date the condition is satisfied, not the completion date. A contract is conditional if a condition must be satisfied before an obligation to perform the contract arises.

If you require assistance in computing a liability to capital gains tax and/or discharging your preliminary tax obligations, please let us know. 

(2) Are you due a refund of tax for 2011? Don’t miss the deadline

There is a 4-year time limit for claiming tax refunds. Therefore if you are entitled to a refund in 2011, the refund claim must be sent to Revenue by 31 December 2015.

The Minister for Finance, Mr. Michael Noonan, and the Minister for Public Expenditure and Reform, Mr. Brendan Howlin, presented their fifth Budget speech on Tuesday 13th October 2015.

When starting up a business many people are faced with the dilemma of whether to set up business as a sole trader or to incorporate and trade using a limited liability company. Trading by way of a limited company offers the benefit of limited liability to the company’s shareholders. Also additional capital may be raised by issuing shares to investors. This brochure considers other benefits of trading via a limited liability company.

Incorporated companies may qualify for the start up exemption. If a company’s corporation tax liability is less than €40,000, their tax bill could be reduced to nil if certain conditions are met. This exemption can be applied for the first 3 years of a business.The profits of a sole trader will be taxed at an effective tax rate of 55% after PAYE, USC and PRSI are taken into consideration. In contrast, trading profits of a company are subject to the 12.5% corporation tax rate. Only amounts taken out as salary are subject to income tax at rates up to 52%. Where the profits of a business exceed the amount required to fund one’s personal lifestyle, the incorporation may give rise to immediate tax benefits.Incorporated businesses can reimburse employees and business owners for business expenses on a tax free basis subject to Revenue limits.In light of the recent caps introduced on personal pension contributions, pension funding via a company may be more tax efficient even when limitations on funding levels are taken into account. A company may claim a deduction for pension contributions into a company pension plan and the pension fund may grow on a tax free gross roll up basis. Personal tax is only payable when the pension fund commences making payments to the beneficiaries of the fund.

Although it is more time consuming to establish an incorporated firm in comparison to a sole trader, the tax benefits should be addressed form the outset. These benefits should be seriously considered when determining how to set up your business.

The Irish Minister for Finance, Mr Michael Noonan, has announced that he will not extend the CGT "seven year" exemption which is to expire at the end of 2014. The exemption provides that properties purchased before the end of 2014 will be exempt from any gain made in the first seven years, once they are held by the purchaser for a minimum of seven years. Minister Noonan is quoted as saying “I use tax breaks to get a particular economic or social response in the short term but I will not have it bedded in as a permanent feature of the tax code.” Irish Times Article:  http://www.irishtimes.com/business/economy/capital-gains-tax-exemption-to-be-abolished-in-budget-says-noonan-1.1941969?utm_content=Html%20email&utm_medium=Email&utm_campaign=TaxFax%20-%2026%20Sept%202014&utm_source=customerminds.com&utm_term=Irish%20Times%20CGT%20article

The next phase of mandatory filing of financial statements in iXBRL format will commence on 1 October 2014. All corporates will be required to file financial statements in iXBRL format unless they meet the size criteria for audit exemption under the Companies Bill 2012. Revenue’s FAQs on preparing for iXBRL filing can be found here:  http://www.revenue.ie/en/online/ros/ixbrl/faqs.html

Minister of Finance, Mr Michael Noonan TD, launched a public consultation process in relation to amendments of the tax appeal system.

The Department of Finance launched the consultation process after many professional bodies expressed their discontentment with the current system.  Currently, there are long delays in having a case heard and decisions made are not published.

The Irish Tax Institute (“ITI”) published a response to the consultation in which they made the following recommendations:

Hearings should continue to be held “in camera”, meaning members of the public cannot attend the hearing.Three Appeal Commissioners should be appointed on a full time basis and prohibited from undertaking any other work duties not related to the post.Temporary Appeal Commissioners should be appointed who can act as ‘expert members’ and assist a permanent Appeal Commissioners on a case by case basis. A panel of experts could be established from which to choose a temporary Appeal Commissioner.The name ‘Office of the Appeal Commissioners’ should be changed.Office of the Appeal Commissioners should be responsible for its own staffing.Procedures for an appeal should be clear and straightforward so that any member of the public would be able to submit an appeal.If the ruling in one case may affect other cases in the future, then two appeal commissioners should be authorised to hear the case at the request of either party.Processes and guidelines should be developed to minimise delays.Revenue should be obliged to provide the taxpayer with detailed reasoning for their assessment.An official and transparent system should be implemented for the appointment and removal of Appeal Commissioners. An eligible candidate should have at least ten years experience in law or taxation. Appeal Commissioners should serve a term of seven years with a maximum of two terms of service.Rulings should be made public while still protecting the identity of the tax payer.The current system of paying the tax when the appeal process has concluded should continue.The ITI agrees with the Department of Finance's proposed ‘Three Stage Process’. This allows tax payers to have their appeal heard in a District Court rather than going straight to the High Court which would be very costly and may deter taxpayers from launching an appeal.Cases should be heard in a specialised District Court by an experienced judge.A separate forum should be established for cases where the consideration is below €50,000.

Revenue also participated in the public consultation process regarding this matter and have conflicting views on a number of key areas. In their view

Hearings should be held “in curia” where members of the public can attend the hearing.Rulings should be published on a discretionary basis.Payment or repayment of tax should be made at the end of each stage of the appeal process.Finally, Revenue favours the ‘Two Stage Process’ where cases would go directly to the High Court after a hearing by an Appeal Commissioner.

As of 1 January 2015 new VAT regulations will come into effect regarding the digital economy.  Suppliers of telecommunications, electronically supplied services and radio/television broadcasting services to non taxable persons must apply VAT in accordance with VAT rates in the country of residence of the customer. To help suppliers cope with this change the Mini One Stop Shop (“MOSS”) was established.

MOSS is an optional web portal service where taxable persons registered in a Member State (the Member State of Identification) submit quarterly returns online outlining digital services supplied to non taxable persons in other Member States (Member States of consumption) along with any tax due. The Mini One Stop Shop VAT returns (as well as VAT paid) are forwarded to Member States of consumption by the Member State of Identification. As a result the taxable person must only submit one return and one payment, thus avoiding the obligation to register and submit returns in several Member States. However, the taxable person must still comply with their domestic VAT obligations and file VAT returns in its own Member State.

Within MOSS there are two schemes: ‘The Union Scheme’ and ‘The Non-Union Scheme’. Both schemes apply to the entire EU and cannot be exercised in just one Member State. The Union Scheme can be used by a taxable person who has established its business or has a fixed establishment within the EU. MOSS can be used for all Member States except for those where the taxable person has an establishment. Taxable persons who are not required to register for VAT in the EU and do not have an establishment in any Member State can apply to the Non-Union Scheme.

The BEPS project addresses forms of tax treaty abuse consisting of arrangements that “erode” the tax base or that avoid tax through profit shifting, hence “Base Erosion and Profit Shifting” (BEPS). To this end, the OECD issued a Discussion Draft on 14 March on Preventing the Granting of Treaty Benefits in Inappropriate Circumstances. The Draft proposes to deal with the problem by means of a new combined test for eligibility for treaty benefits, consisting of a “limitation on benefits” (LOB) clause and a “main purpose” general anti-abuse clause, to be included in tax treaties.

Recognising the benefits of tax treaties, Ireland has concluded more than 60 such treaties with other countries, many of them in recent years. This is part of a global trend in which the number of tax treaties in force worldwide now exceeds the 3,000 mark. Tax treaties play an important role in encouraging and facilitating international and multinational trade by protecting against the risk of double taxation but also by countering ”fiscal evasion with respect to taxes on income”. A key feature of a tax treaty network must always be the guarantee, within reason, of certainty as to the tax treatment applicable to cross border activities. It is in relation to this aspect that proposals included in the Discussion Draft give rise to real concerns.

The proposed LOB clause is based on such a clause first introduced in treaties to which the US is a party and hence tailored in many respects to features of the US economy. Ownership and activity requirements of the clause are likely to result in particular difficulties for economies such as the Irish economy, and indeed for those of much of the EU. With a view to preventing “treaty shopping”, for example, the ownership element requires a company of a contracting state to be owned predominantly by eligible persons resident in that state, a condition that would be particularly difficult to meet in the case of smaller countries with less developed capital markets. Thus, treaty benefits could be denied to a company that sources capital from countries other than one of the two contracting states. At a minimum therefore, the unduly restrictive proposed LOB clause should be modified to take full account of the way companies involved in international business are financed, now and in the future. Where it is clear that treaty shopping is not a factor, companies should not be burdened with uncertainties arising from the presence of an LOB clause.

A company unable to meet the ownership requirement of the proposed LOB clause may still be entitled to treaty benefits if it can satisfy the “Substantial Activity” test. As suggested above, a key element of a tax treaty is a reasonable assurance of certainty as to the tax treatment applicable to cross border activities. In this connection, the subjective nature of the Substantial Activity test would almost certainly militate against this requirement. This subjectivity derives, not surprisingly, from the nature of the US judicial system and, unless the test is suitably modified (assuming this is possible at all), is likely to result in disagreement of interpretation between tax authorities in many cases, leading in turn to an undesirable additional layer of bureaucracy surrounding the increase in the number of ruling requests by companies that must follow. 

Uncertainty in relation to the operation of the LOB clause could further be avoided or reduced by the inclusion of a number of suitable “safe harbour” provisions.

To avoid a denial of treaty benefits, a company must also satisfy the proposed “main purpose” general anti-abuse test. Not only must tax avoidance not be the dominant purpose of any transaction or arrangement, but it must not be one of its “main purposes”. Again, the presence of the main purpose test is bound to result in subjectivity and uncertainty. It is doubtful that even the provision of detailed guidance, to assist tax authorities as well as taxpayers in interpreting this test, would be an adequate safeguard against uncertainty. It is considered that a “dominant purpose” test would adequately meet the anti-avoidance objective in this regard and would be better calculated to prevent undue interference in legitimate transactions.  

In February 2014, the OECD published a draft template for country-by-country (CBC) reporting of the allocation of income, taxes and business by multinational companies under the BEPS initiative. This was in response to an Action Plan released in July 2013 calling for a review of existing transfer pricing documentation rules and the development of a template for CBC reporting of income, taxes and business activity for tax administrations.

The draft template requires a company for each country in which it operates to list its “constituent entities”, effective place of management, and important business activities. It also looks for detailed information including revenue, tax payments, payment and receipt of royalties, interest and service fees, along with details of assets and employee expenses. 

One of the specific actions listed with the Action Plan was the re-examination of transfer pricing documentation. The objective of the re-examination is to improve transparency and to include a requirement to provide all relevant governments with information on global allocation of the income, economic activity and taxes paid among countries according to a common template - hence, the concept of CBC reporting.

The following are some comments on, and concerns relating to, the Action Plan:

A re-examination of transfer pricing (TP) documentation has been proposed to ensure transparency for the tax administration, having regard to the significant costs for business. The rules to be developed should specifically include a requirement that MNCs provide all relevant governments with necessary information on their global allocation of the income and economic activity.

Information to be stipulated by the OECD for the foregoing purposes will involve the provision of data, on a CBC basis, on global income and taxes paid, according to a common template, although, to avoid undue complexity in compiling the necessary data, a more narrowly focussed requirement on particular risks might be a more practical approach. There is also a concern that the information to be compiled could be used inappropriately by tax authorities and might even become accessible by the public, where it could be misinterpreted or used in an anti-competitive manner.

The OECD memorandum of 3 October 2013 on TP documentation and CBC reporting as part of Action 13 forms another key part of the risk assessment process. The key themes of substance, transparency and risk are consistent with other recent OECD publications and areas of the BEPS Action Plan. Interestingly, the memorandum acknowledges that including information on other measures of economic activity may encourage “unwarranted reliance on formula-based income allocations”.

The memorandum could result in taxing authorities advancing arguments based on abstract notions of comparability where, for example, there might be an inadequate understanding of an industry. On the whole, the memorandum does provides a clear indication of the type of information that is likely to be required in the CBC reporting template and raises key topics for discussion through the consultation process that should be considered as part of the broader BEPS question.

The primary objective of BEPS in requiring reporting information on a CBC basis is to enhance transparency for tax administrations alone. Balancing compliance costs for business is critical. Business generally will be in favour of a standardised approach, with better rather than just more information.

Template information should therefore be focused on the bigger picture using information which is readily available, and materiality should be taken into account.