The key large corporates measures introduced in Finance Bill 2024 include:
The introduction of a participation exemption for foreign dividends;
Amendments to Pillar Two legislation;
Technical amendments to the outbound payments regime and interest limitation legislation;
The increase of the first year research and development (R&D) payment threshold from €50,000 to €75,000;
Amendments to tax exemptions applying to national sporting bodies to facilitate long-term investments for the purposes of future capital projects;
The introduction of tax relief for expenses incurred in connection with a first listing on an Irish or European stock exchange, subject to a cap of €1 million;
Amendments to tax reliefs applying to Ireland’s audiovisual sector (film relief and unscripted productions); and
Miscellaneous legislative updates.
Participation exemption for certain foreign distributions
Effective from 1 January 2025, Finance Bill 2024 seeks to introduce a participation exemption for foreign dividends into Irish tax legislation. This has been a highly anticipated development for large corporates, which aims to provide a simplification of double tax relief through a corporation tax exemption for qualifying foreign dividends and other distributions.
As outlined in the Bill, the participation exemption should be applicable in respect of foreign dividends or other distributions received as income from EEA/Treaty-resident companies where certain conditions are met. The treatment available under the new regime is optional and is available upon election (on an accounting period by accounting period basis) into the regime. Exclusions to the tax relief may apply in certain instances.
Please refer to our participation exemption insight for more detailed analysis.
Pillar Two
The introduction of Pillar Two rules in last year’s Finance Act has undoubtedly had a significant impact for Irish-based large corporates. Finance Bill 2024 outlines a number of key Irish legislative provisions to take into account guidance published by the OECD.
The updates to the Pillar Two rules mainly relate to legislating for elements of the Pillar Two GloBE Administrative Guidance released on 18 December 2023 and the Pillar Two GloBE Administrative Guidance released on 17 June 2024, along with clarifying the operation of certain aspects of of the Domestic Top-up Tax calculation.
Outbound payments
The Bill outlines a number of technical amendments to the outbound payments legislation that was initially introduced in Finance (No. 2) Act 2023. This legislation provided for the removal of certain exclusions from the obligation to deduct withholding tax on payments of interest, royalties and distributions to associated entities situated in jurisdictions on the EU list of non-cooperative jurisdictions, and no-tax and zero-tax jurisdictions in certain instances.
The Finance Bill amendments remove unnecessary duplication in certain definitions and ensure the measures operate as intended, particularly in respect of payments to entities that are treated as transparent for tax purposes.
Interest limitation rules
The Finance Bill contains a number of technical amendments to finance lease definitions to account for changes in the classifications of leases as introduced in Finance (No. 2) Act 2023. The Bill also provides clarification on the treatment of amounts carried forward in a foreign currency. These amendments are applicable to accounting periods commencing on or after 1 January 2025.
Research and development tax credit
Finance Bill 2024 provides for an increase in the first year R&D instalment minimum payment from up to €50,000 to up to €75,000. The amendment shall apply in respect of accounting periods commencing on or after 1 January 2025. This change is targeted at small- and medium-sized companies to assist them in increasing the amount to be paid in their first instalment claims where they have an R&D tax credit claim not exceeding €150,000.
Deduction for stock exchange listing expenditure
The Finance Bill seeks to legislate for a tax deduction for expenditure incurred by a company wholly and exclusively in relation to a first listing on a stock exchange in the EEA. The deduction is subject to an overall cap of €1 million and is available in respect of listings occurring from 1 January 2025 to 31 December 2029.
Donations as part of the Charitable Donation Scheme
Finance Bill 2024 contains a number of minor changes to current tax exemptions applicable to charities. Section 16 of the Bill seeks to remove the current two-year waiting period for eligibility for approved bodies to receive tax relief on donations under the Charitable Donation Scheme. The Finance Bill also increases the period a charity can retain its tax exemption so long as it applies its income for charitable purposes within five years of receiving the income.
Exemption for certain sporting national governing bodies
Finance Bill 2024 makes a number of positive legislative changes relating to the taxation of sporting national governing bodies.
The Bill provides that certain national governing bodies (NGBs) can have an exemption for income (capped at €100 million), which it invests for up to ten years. This exemption applies so long as the income is ultimately applied for certain qualifying purposes, including capital projects, to purchase certain sporting equipment, to support elite athletes in competitive sport, and to support the participation by women and people with disabilities in sport.
The Bill also amends Section 847A TCA 1997, which provides a scheme of tax relief for donations to “approved sports bodies” for the funding of certain capital projects. The changes mean that individuals (both chargeable persons who pay income tax under self-assessment, and non-chargeable persons who pay income tax via the PAYE system) can opt either to take a deduction for a relevant donation (which must be at least €250 in a year of assessment) against their total income, or to surrender the relief associated with the donation to the approved sports body. It is also proposed that a similar scheme of tax relief be extended to certain NGBs where the donations are used for qualifying projects.
Audio-visual initiatives
Ireland has emerged as a centre of creative vibrancy in recent years and the Government has demonstrated its support to the audio-visual sector through a number of legislative changes in the Bill.
The Finance Bill introduced Section 487A TCA 1997, a new corporation tax credit related to unscripted production. The tax credit is available at 20% of the lowest of (i) eligible expenditure, (ii) 80% of the total cost of production or (iii) €15 million per project. As with the Section 481 Film Tax Credit relief, Section 487A relief is available to projects that pass a cultural test and certification by the Minister for Tourism, Culture, Arts, Gaeltacht, Sport and Media is required in advance of Irish production. The relief is proposed to run until 31 December 2028.
The Bill additionally seeks to provide for an 8% uplift to the film tax credit in Section 481 TCA 1997. Where certain conditions are met, qualifying projects will be eligible for tax relief at 40%. Qualifying films include feature films and animated films of feature length productions with a maximum qualifying expenditure of less than €20 million. These films are also required to meet certain qualifying criteria related to employment in key creative roles that form part of the cultural certification provided by the Minister for Tourism, Culture, Arts, Gaeltacht, Sport and Media.
The incentives will require state aid approval from the European Commission before they can commence.
Green action
The Bill has extended accelerated capital allowances relating to gas and hydrogen powered vehicles for a further year (i.e. 31 December 2025). The Bill further seeks to propose an amendment to the classification of low-emitting company cars and applies to expenditure incurred from 1 January 2027 except in certain instances.
DAC7 - Mandatory Exchange of Information for Digital Platform Operators and return of certain information by Reporting Platform Operators
Section 103 of the Bill amends Section 891J TCA 1997 to ensure appropriate transposition of the OECD Model Rules for Reporting by Platform Operators with respect to Sellers in the Sharing & Gig Economy. The Model rules were initially transposed in Finance Act 2022. It provides for circumstances where a reporting platform operator fails to meet its obligations under the rules and also outlines the requirements for platform operators to impose restrictions in cases where reportable sellers fail to provide the relevant information to the platform operator.
Clarification of Revenue’s powers in joint audits
Section 104 of the Finance Bill amends Section 891L TCA 1997 to clarify the rights and obligations applicable to Irish officials participating in a joint audit with another Member State. The amendments outlined are intended to align Irish legislation to the EU DAC7 Directive.
Repayment of tax in the case of a ceased company: double taxation relief
The Bill inserts a new section, 826B, into the TCA 1997. This new section provides that where a correlative adjustment or mutual agreement reached gives rise to a repayment of tax, this section — subject to the satisfaction of all the relevant conditions — allows for that repayment of tax to be made to another group company in instances where the company that would have been entitled to the repayment has ceased to exist. This ensures that Ireland can give effect to outcomes arising from certain specified procedures that are provided for in Ireland’s double tax treaties and other relevant instruments. This amendment applies to repayments of tax arising from a correlative adjustment determination made by Revenue or mutual agreement reached on or after the date of passing of Finance Act 2024.
Miscellaneous
The Bill seeks to introduce a number of technical amendments, including:
Amendments related to the taxation of leases, particularly regarding the timing of balancing events;
Amendments to Schedule 13 TCA 1997 in respect of entities that are accountable persons for professional services withholding tax; and
Updates to existing legislation to account for changes to the EU list of non-cooperative countries for tax purposes.
We are here to help you
Finance Bill 2024 comes at a time when businesses are daunted with changes particularly in the international tax landscape. The Bill contains many important changes that will have implications for domestic and international corporations, particularly the introduction of a participation exemption for foreign dividends into the Irish legislation.
Our tax team is available to help you understand how these changes will impact your business. Get in touch today.
