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Last orders for the 'Single Malt'!

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The Irish Revenue Commissioners have recently published details of an agreement reached with their Maltese counterparts which will in effect prevent multinational companies using the so-called “Single Malt” structure and benefiting from double non-taxation.

By way of brief background, Irish corporate tax residency rules changed in 2015 such that Irish incorporated companies could no longer be “stateless”.  Irish incorporated companies became stateless in circumstances where they were not Irish tax resident by virtue of being centrally managed and controlled in another jurisdiction and due to anomalies between the Irish and other jurisdiction’s tax laws, were not tax resident in any country.  This change was introduced in an effort to prevent the use of the traditional “double-Irish” structure.

However, following this change to the Irish corporate tax residency rules, it was still possible to achieve a similar structure in circumstances where an Irish incorporated company relocated their central management and control, and consequently their tax residence, to a jurisdiction with which Ireland had a double tax treaty, such as Malta.  As a result of that double tax treaty, the company was not subject to Irish tax because it was deemed to be resident in Malta.  However, the company was only taxable in Malta if it remitted its income to Malta.  Accordingly, it was possible that the company’s income may not be taxed in Malta or in Ireland.  This produced a double no-tax arrangement.

The OECD’s Multilateral Instrument (the "MLI"), of which Ireland and Malta are both signatories, has provided Tax Authorities with the opportunity to ensure that double tax treaties do not facilitate double non-taxation. The Irish and Maltese Tax Authorities have now agreed for the purposes of avoiding double non-taxation that in effect an Irish incorporated company which uses the "Single Malt" structure will be deemed to be Irish tax resident.  The relevant changes as a result of this agreement will come into effect for taxable periods beginning after a period of six months on which the MLI enters into force in both Ireland and Malta.  In this respect, the Irish Government intends to ratify the MLI in early January 2019, while Malta has already ratified same.  As such, based on the proposed timetable for Irish ratification of the MLI, we expect that the changes targeting such structures will come into effect in respect of taxable periods beginning in July 2019.

Multinational groups should now review the effect that this change could have on their international structures. In this respect, please contact Alan Connell, Partner and Head of Tax (details below) or another member of the Irish Tax Team to discuss in more detail.

This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full terms and conditions on our website.

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