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Ireland, Malta To Close 'Single Malt' Tax Loophole

by Jason Gorringe, Lowtax.net, London
03 December, 2018

The tax authorities of Ireland and Malta have signed a Competent Authority Agreement in a bid to prevent the use of the so-called "Single Malt" tax planning structure.

The Agreement focuses on the interpretation of the bilateral Ireland-Malta double tax agreement (DTA), intended to prevent the use of tax minimization techniques that use a company incorporated in Ireland but tax resident in Malta.

The Agreement outlines the shared understanding of the respective tax authorities that the BEPS Multilateral Convention on Tax Treaties will, once it is in effect in both jurisdictions, make it clear that it is not the purpose of the DTA to enable the 'Single Malt' structure.

The authorities have agreed that the DTA's deeming of a company – incorporated in Ireland but managed and controlled in Malta – to be resident in Malta only does not serve the purposes of the DTA and is not "for those purposes."

Accordingly, under Section 23A of Ireland's Tax Consolidation Act 1997, such an Irish-incorporated company will be deemed resident in Ireland and the relevant payments to it will come within the charge to Irish corporation tax.

Commenting on the Agreement, Irish Finance Minister Paschal Donohoe said: "I am pleased that this agreement has been reached which should eliminate any remaining concerns about such structures."

The Competent Authority Agreement will have effect for taxable periods beginning on or after the later of the dates on which the BEPS Convention enters into force for Ireland and Malta.


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