Strategizing International Tax Best Practices – by Keith Brockman

Ireland GAAR: New rules

Ireland’s new Finance Bill has introduced a new General Anti-Avoidance Rule (GAAR), effective as of 23 October 2014.

The GAAR rule provides that where a taxpayer enters into a transaction, the tax authority may invoke the GAAR rule if it would be reasonable to consider that it is a “tax avoidance” transaction resulting in a tax advantage.  Accordingly, any reduction in tax payable is disallowed, in addition to a 30% surcharge.

PwC’s recent summary of Ireland’s tax developments is included for reference, including the GAAR rule on page 20:

http://download.pwc.com/ie/pubs/2014-pwc-ireland-budget-finance-bill.pdf

Key observations:

  • No time limit for raising a GAAR assessment.
  • A “protective notification” procedure is provided, protecting the taxpayer from the surcharge.
  • The taxpayer is obliged to furnish all documentation pertaining to the transaction along with an opinion as to why they believe the transaction does not fall within the GAAR provisions.

The GAAR rules are imposing additional arenas of uncertainty, dependent on the subjective interpretations and conclusions of the tax administration.  For Ireland, there is no time limitation and significant penalties are imposed for such assessments.

Due diligence procedures should be provided as an internal governance process to identify and review GAAR rules, domestic and/or treaty application, and possible avenues of appeal for transactions that may be affected.  (Note, details of the EU Parent-Subsidiary Directive GAAR provisions are provided in the 11 December, 2014 post)

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