Contributor: Grace McCann, Director, International Tax, BDO
The complexity of the Irish corporation tax system continues to increase the cost of doing business and may impact Ireland’s competitiveness, particularly in light of Pillar Two and the reduced relative importance of Ireland’s headline corporation tax rate. In advance of Budget 2027, we would encourage consideration of targeted measures to simplify and modernise the corporation tax regime while continuing to support investment and substantive economic activity in Ireland.
Consideration should be given to simplifying Ireland’s interest deductibility provisions, where the interaction of the Interest Limitation Rules with existing legislation has increased complexity and compliance obligations for businesses.
Following the introduction of the participation exemption for foreign dividends, consideration could be given to further enhancing the regime by recognising equivalent equity interests and applying the exemption on a dividend-by-dividend basis. We would also encourage the introduction of a foreign branch exemption, aligning Ireland with comparable EU and OECD jurisdictions.
We believe there is merit in reviewing the substantial shareholding exemption under section 626B TCA 1997 to better align it with the participation exemption for foreign dividends while also revisiting the geographic limitations and trading requirement currently applying to the relief. Such changes would enhance Ireland’s competitiveness as a holding company location.
We would also encourage consideration of maintaining a proportionate transfer pricing regime. The existing domestic transaction exemption should be retained and any extension of transfer pricing obligations to SMEs should be balanced against the compliance costs involved.
Content adapted from Finance Dublin Irish Tax Monitor.