Ireland Issues Guide On Dual-Resident Companies
Jason Gorringe, Tax-News.com, London
18 October, 2019
The Irish Revenue has published guidance on dual-resident companies that explains new rules introduced under the BEPS multilateral convention on tax treaties.
Tax and Duty Manual Part 35-01-11 outlines the new rule under Article 4 of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI). It concerns the so-called "tie-breaker rule" on the residence for tax purposes of companies which are resident of more than one jurisdiction.
The MLI allows signatories to modify their existing tax agreements to include measures under the OECD/G20 BEPS project without having to individually renegotiate these treaties. It will implement minimum standards to counter treaty abuse, prevent the artificial avoidance of permanent establishment status, neutralize the effects of hybrid mismatch arrangements, and improve dispute resolution mechanisms.
The MLI entered into force for Ireland on May 1. The extent of modification of any particular treaty impacted by the MLI will depend on the final positions adopted by Ireland and its treaty partners. Ireland opted for the new tie-breaker rule under Article 4.
The Irish Revenue explained that where both Ireland and its treaty partner have opted for the tie-breaker rule, their treaty will be modified to include this provision. From the effective date, the rule will require the competent authorities to endeavour to resolve cases of corporate dual residence by mutual agreement. Regard will be given to the company's place of effective management, the place where it is incorporated or otherwise constituted, and any other relevant factors.
Taxpayers affected or potentially affected by the tie-breaker rule must request the initiation of the Mutual Agreement Procedure (MAP) article of the relevant tax agreement.
Revenue said that, in general, the tie-breaker rule will come into effect in respect of any of Ireland's tax treaties at the earliest for taxable periods beginning on or after November 1, 2019.