‘Interest deductibility rules are complex and cumbersome’

KAREN FRAWLEY Tax Partner Deloitte

TAX ISSUES Tax issues of concern to clients include Ireland’s high income tax burden, interest limitation rules, Pillar I & II and ATAD III. In comparison with our competitors, Ireland’s interest deductibility rules are complex and cumbersome. The myriad rules pertaining to financing has resulted in significant uncertainty and cost for taxpayers, and place Ireland at a competitive disadvantage with other countries. The rules in respect of interest deductibility should be reviewed with the aim of streamlining same and ensuring Ireland’s rules are competitive.

Ireland’s current double tax regime is extremely complex with different rules applying depending on the type, nature, and source of the income. This has resulted in a double tax regime which does not lend itself either to taxpayer certainty or user-friendly compliance obligations. We would recommend that Ireland introduces a foreign source dividend exemption (participation exemption) on an elective basis – i.e. a territorial regime; and foreign branch profit exemption on an elective basis.

With regard to other types of income such as interest and royalties, Ireland should also take steps to simplify and enhance the existing double tax relief rules in Schedule 24 TCA97. This would bring greater clarity for companies and reduce the compliance workload and complexity associated with double taxation relief.

CAPITAL TAXES The current CGT rate of 33% is high by international standards, and consideration should be given to reducing it. Alternatively, consideration could be given to reducing the CGT for entrepreneurs who stay with their enterprise with a view to scaling up their business. A new tapered tax relief could operate so that applicable rate of CGT would be reduced depending on the length of ownership in the relevant assets by the individual concerned. Such relief would reward commercial longevity, signal Ireland as an excellent place to operate as an entrepreneur, and encourage direct domestic investment and future employment.

TAX REFORM The taxation of entrepreneurs in a broad context should be addressed both in the context of personal taxation, taxation of funding/financing returns, as well as capital events. In our view, reliefs such as Employment Investment Incentive, Start Up Relief for Entrepreneurs, CGT Entrepreneur Relief Special Assignee Relief Programme, the Foreign Earnings Deduction and Key Employee Engagement Programme have in general not met their policy objectives.

REMOTE WORKING We would recommend a €1,000 tax credit which could be reduced pro-rata depending in the number of days an individual spends in the office. Or alternatively, removing the 30% cap on expenses and allowing a credit for the full amount of the expenses. In order to facilitate WFH, businesses are incurring additional costs to ensure that home offices are properly equipped and safe. These costs only qualify for capital allowances over eight years. We would recommend that a 100% capital allowance is allowed in year one for such expenditure.