Multinationals still able to use ‘double Irish’ tax arrangement after 2020

Multinational companies will still be able to use the controversial “double Irish” tax arrangement after the final end date of 2020, Sinn Féin MEP Matt Carthy has said.

A number of tax experts have confirmed this is the case, though they have disputed whether the terms of which they will be able to do this will offer any tax advantages.

Mr Carthy, who raised the issue with Minister for Finance Michael Noonan in the European Parliament yesterday, pointed out that multinationals would still be able to use the “double Irish” using the terms of double tax agreements Ireland has with certain countries.

While Irish law says that no company set up here after 2015 can use the “double Irish” – and that those using it already must phase it out by 2020 – Mr Carthy points out that in some cases the terms of double tax treaties could override this domestic law.

The “double Irish” involves a multinational setting up two companies in Ireland. One is incorporated and tax resident here and the other is incorporated in Ireland but tax resident elsewhere. Typically the company’s intellectual property assets have been owned by the company not tax resident in Ireland and by levying a charge related to this the company has moved funds through Ireland without Irish tax being levied on much of it.

In turn this company has charged the main Irish company for the use of the intellectual property in selling in markets across Europe, allowing money to be moved out of Ireland.

In the 2015 budget, Mr Noonan announced the abolition of the “double Irish” for new companies coming here and the phasing out of the scheme by 2020 for companies already using it.

However, Mr Carthy says that double tax treaties will still allow the scheme to be used with countries with which Ireland has tax treaties which rule that tax is collected where the company’s management and control is located. This includes countries such as Panama, Malta, Hong Kong, the United Arab Emirates, the Netherlands and Belgium, he said.

By claiming its centre of management is in one of these countries, the company will be able to use the provisions of the tax treaty to effective overrule Irish domestic law and keep their tax residency elsewhere.

A number of tax accountants in Dublin said this loophole could be used, though as most of the countries with which Ireland had tax treaties had higher rates of corporation tax, they doubted how useful it would be in practice.

The old “double Irish” almost always involved one of the companies being tax resident in a tax haven such as Bermuda, the British Virgin Islands or the Cayman Islands.

In any case most companies were now moving away from tax havens and major firms such as Apple now located their intellectual property assets in Ireland, which was one of the factors boosting the tax take here, they said.