Ireland: Domestic Corporate Taxation
Scope of Corporation Tax
Corporation tax is levied under the Taxes Consolidation Act 1997. Resident companies pay corporation tax on their worldwide income; non-resident companies carrying on business in Ireland are liable to corporation tax on their Irish-sourced income only. Equivalent rules apply to capital gains; however there are roll-over exemptions available for capital gains.
For a number of years, residence has been determined primarily according to a 'management and control' test, with some subsidiary tests such as the location of actual trading, location of bank accounts, location of head office, etc. Until 1999 there was no statutory definition of 'residence', and it has been possible to maintain non-residence for an Irish company despite a substantial level of activity in Ireland.
As part of a general response to the EU's initiative against 'harmful tax competition', Ireland installed or announced new tax regimes during 1999, agreed with the EU, which continued the existing favourable tax regime in many respects, but which brought some parts of the tax system much more closely into line with general EU practice.
Under the Finance Bill, 1999, all Irish-incorporated companies became resident; however, there are a number of exceptions to the rule, some of them to accommodate the situation of multinational companies (many American) who have established themselves in Ireland. See Offshore Legal and Tax Regimes for a detailed description of the exceptions; the most important ones cover companies which are owned or controlled in a country with which Ireland has a Double Tax Treaty, and which have trading activity in Ireland.