COVID-19 and Corporation Tax

24 March 2020

As part of its advice and guidance for taxpayers dealing with a range of difficulties caused by the impacts of the COVID-19 virus, Revenue have published their position on several Corporation Tax matters.

Corporation Tax Returns

Revenue have confirmed that the application of a surcharge for Corporation Tax returns for accounting periods ending June 2019 onwards (i.e. due by 23 March onwards) is suspended until further notice.

Corporation Tax and Travel Restrictions

In addition, Revenue have published their position on presence in the State or outside the State resulting from COVID-19 related travel restrictions.
In this context, the presence of an employee, director, service provider or agent of a company in a country is a relevant factor in determining the existence of a permanent establishment, or taxable presence of that company in the country.
Revenue have stated that where an individual is present in Ireland, and that presence is shown to result from travel restrictions related to COVID-19, they will be prepared to disregard such presence in Ireland for Corporation Tax purposes for the employer company.
Similarly, if an individual is present in another jurisdiction as a result of COVID-19 related travel restrictions, and would otherwise have been present in Ireland, Revenue will be prepared to disregard such presence outside Ireland for Corporation Tax purposes.
In both cases, the individual and company should maintain a record of the facts and circumstances of the bona fide relevant presence, in or outside of Ireland, for production to Revenue if evidence that such presence resulted from COVID-related travel restrictions is requested.


Other Potential Issues 

While the clarity offered by the above guidance is welcomed, there are a number of other Corporation Tax matters which companies may need to consider:
Payment of Liabilities
The published Revenue position refers only to a surcharge on the filing of Corporation Tax returns. A surcharge applies where a return is filed late. The late payment of the related tax liability will attract interest and;while Revenue has confirmed that it will not impose interest on the late payment of certain VAT and PAYE liabilities, it does not (currently) extend this suspension to Corporation Tax liabilities.
Foreign Taxable Presence
Whether or not the presence of an individual in a foreign jurisdiction triggers a taxable presence in that jurisdiction is primarily a matter for the tax authorities of the foreign jurisdiction (rather than the Irish tax authorities). Therefore, while the above guidance on the position of the Revenue is helpful, it will not be conclusive. It would be hoped that any foreign tax authority would take a pragmatic approach when considering presence under exceptional circumstances.
Corporate Residence
The main factor in determining the tax residence of a company is the jurisdiction in which the company is centrally managed and controlled. In general, management and control is demonstrated through the exercising of the key strategic decisions of the company taken at board meetings. However, current travel restrictions may prevent non-Irish resident directors from travelling to Ireland to attend board meetings. This may be problematic for some companies at a time when key decisions may need to be made in response to the impact of the current pandemic on the business. Again, it is hoped that both the Irish Revenue and foreign tax authorities would take a pragmatic approach and recognise the exceptional circumstances involved. Furthermore, once travel restrictions are lifted it would important that good tax governance practices resume. 

BDO Ireland is here to support you and your business through these unprecedented times. For any questions or assistance please contact your usual BDO tax contact or a member of our Tax team
As matters progress and develop, we envisage that further measures may be introduced. We will continue to keep you updated with the latest developments in this area through our dedicated Covid-19 hub.