Finance Bill 2024
Finance Bill 2024
What are the notable takeaways from Finance Bill 2024 for Ireland’s international financial services sector?
Participation Exemption
The very welcome Participation Exemption for Foreign Dividends was introduced in Finance Bill 2024. The purpose of the exemption is to simplify existing double taxation relief provisions by providing an alternative method of double tax relief for qualifying foreign dividends.
The Participation Exemption will be available for relevant distributions received on or after 1 January 2025 from subsidiaries in EU/EEA and tax treaty partner source jurisdictions. The parent company must hold at least 5% of the ordinary share capital of the foreign subsidiary for a continuous period of at least 12 months.
The entity in receipt of the distributions will have the option to claim the Participation Exemption or to continue to use existing relief under Schedule 24, by way of an election in the company’s annual corporation tax return.
Pillar Two
Finance Bill 2024 also aims to remove standalone investment undertakings (e.g. unit trusts, ICAVs, investment limited partnerships, or common contractual funds) from the scope of Ireland’s domestic top-up tax. Where an investment undertaking is not a member of any consolidated group it may fall outside the scope of Ireland’s domestic top-up tax, even where its revenues are above €750 million.
Also removed from the scope of domestic top-up tax are securitisation entities if there are other non-securitisation entities in the Irish group. However, if there are no other entities in the group, any top up tax due is to be borne directly by the securitisation entity.
Leasing amendments
Following the changes introduced in Finance Bill 2023, a number of amendments are introduced in Finance Bill 2024 with regards to leasing. These include clarification of the timing and value of balancing events, treatment of cross border leases for associated enterprises, as well as the introduction of general anti-avoidance tests.
Technical amendments to the outbound payment rules
Some technical amendments to the definitions contained in legislation have been made and are focussed on payments being made to entities that are treated as transparent for tax purposes.
Interest Limitation Rule (ILR)
There have been updates to certain definitions regarding lease payments which aim to address a potential mismatch following changes introduced in Finance Act 2023 for companies taxing the finance margin or deducting the finance element of lease. The updates to the definitions mean that the full taxable or tax-deductible amount of payments will be treated as an interest equivalent for the ILR.
There is also an update to the Interest Limitation Rule in relation to how foreign exchange is dealt with where there is a change of functional currency during accounting period or where amounts are carried forward in a foreign currency.
Stamp Duty – Extension of Revised Bank Levy
The Bill provides for the revised form of the bank levy introduced for 2024 to be extended to 2025.
Contributor: Yvonne Diamond, Senior Manager, Financial Services Tax
Participation Exemption
The very welcome Participation Exemption for Foreign Dividends was introduced in Finance Bill 2024. The purpose of the exemption is to simplify existing double taxation relief provisions by providing an alternative method of double tax relief for qualifying foreign dividends.
The Participation Exemption will be available for relevant distributions received on or after 1 January 2025 from subsidiaries in EU/EEA and tax treaty partner source jurisdictions. The parent company must hold at least 5% of the ordinary share capital of the foreign subsidiary for a continuous period of at least 12 months.
The entity in receipt of the distributions will have the option to claim the Participation Exemption or to continue to use existing relief under Schedule 24, by way of an election in the company’s annual corporation tax return.
Pillar Two
Finance Bill 2024 also aims to remove standalone investment undertakings (e.g. unit trusts, ICAVs, investment limited partnerships, or common contractual funds) from the scope of Ireland’s domestic top-up tax. Where an investment undertaking is not a member of any consolidated group it may fall outside the scope of Ireland’s domestic top-up tax, even where its revenues are above €750 million.
Also removed from the scope of domestic top-up tax are securitisation entities if there are other non-securitisation entities in the Irish group. However, if there are no other entities in the group, any top up tax due is to be borne directly by the securitisation entity.
Leasing amendments
Following the changes introduced in Finance Bill 2023, a number of amendments are introduced in Finance Bill 2024 with regards to leasing. These include clarification of the timing and value of balancing events, treatment of cross border leases for associated enterprises, as well as the introduction of general anti-avoidance tests.
Technical amendments to the outbound payment rules
Some technical amendments to the definitions contained in legislation have been made and are focussed on payments being made to entities that are treated as transparent for tax purposes.
Interest Limitation Rule (ILR)
There have been updates to certain definitions regarding lease payments which aim to address a potential mismatch following changes introduced in Finance Act 2023 for companies taxing the finance margin or deducting the finance element of lease. The updates to the definitions mean that the full taxable or tax-deductible amount of payments will be treated as an interest equivalent for the ILR.
There is also an update to the Interest Limitation Rule in relation to how foreign exchange is dealt with where there is a change of functional currency during accounting period or where amounts are carried forward in a foreign currency.
Stamp Duty – Extension of Revised Bank Levy
The Bill provides for the revised form of the bank levy introduced for 2024 to be extended to 2025.
Contributor: Yvonne Diamond, Senior Manager, Financial Services Tax