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Ireland has presented a roadmap for a project to abolish taxation of dividends received from foreign companies

Ireland has presented a roadmap for a project to abolish taxation of dividends received from foreign companies

Back in 2021, the Irish government began an initial consultation on a territorial tax system.

The purpose of the innovations is to exempt dividends received by Irish companies from foreign sources from corporation tax. If a legal entity receives dividends from another company in which it has a certain percentage of shares, then it will not pay tax on these dividends. This step is necessary to encourage investment and avoid double taxation.

The roadmap presented by the government includes technical advice and invites stakeholders to answer 53 questions regarding the development of a dividend participation regime. These questions are divided into four main areas:

  • Structural considerations (for example, the optionality of the existing tax-plus-credit regime).
  • Indirect consequences (for example, alignment with existing benefits for foreign subsidiaries).
  • Anti-avoidance rules (eg potential modification of Ireland’s anti-hybrid provisions).
  • Any other issues that must be taken into account when registering participation in foreign dividends.

The current corporate tax system, which provides double tax relief on foreign dividends, often does not result in an increase in Irish tax.

As a result of consultations, the drafting of the bill is expected to be completed by the end of March 2024, and the law itself will be introduced in the fall of 2024 and come into force in 2025.

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