Revenue, the agency for Irish tax and customs, has confirmed that if a company director is unable to get to Ireland as a result of Covid-19-related travel restrictions, it could disregard this for corporation tax purposes.
The inability of directors to physically attend board meetings in Ireland would typically pose a risk that the place of effective management is deemed to be in a country other than the State.
For companies that list their place of effective management as Ireland, it could mean they would lose out on the 12.5pc corporation tax rate and risk paying more tax elsewhere.
According to law firm Walkers, companies wishing to establish themselves as a resident for tax purposes in Ireland will generally ensure that their central management control and their place of effective management are both located here.
A firm would do this by making sure that all decisions affecting matters of policy, strategy and overall management of the company’s affairs were taken at directors’ meetings in Ireland.
Accordingly, directors of Irish-resident businesses are typically required, where possible, to attend board meetings in person here to ensure that the company remains Irish tax-resident. Recently, Revenue issued a note confirming that if an individual is present in another country as a result of Covid-19-related travel restrictions – and would otherwise have been present in Ireland – it would be prepared to “disregard such presence outside the State for corporation tax purposes”.
As reported in last week’s Sunday Independent, it also confirmed this would be the case for individuals stuck inside the State for personal tax purposes.
A spokesperson for Revenue said that those affected by travel restrictions must ensure that they maintain a record of the “facts and circumstances” of their presence inside or outside of Ireland for evidence, should it be required.
Revenue added that it is not expected the guidance “will have any material impact on corporation tax liabilities, whether for companies resident in Ireland or for non-resident companies trading here through a branch”.
The statement continued: “Instead, this guidance seeks to ensure that, as for other OECD countries, tax liabilities are determined by the relevant underlying situation rather than temporary, involuntary, pandemic-related circumstances affecting large companies and SMEs alike.”
Revenue also said that it is “likely” company profits and corporation tax will be adversely affected by the pandemic-related economic disruption. It was unable to provide any estimates for such impacts on tax take at this stage.