Insurance Tax Webinar

Tax Policy & Legislative Update

Deloitte Ireland | Tax | 14 December 2021
Tax Policy & Legislative Update
Our Speakers Today

Conor Hynes
Partner | Head of Financial Services Tax
chynes@deloitte.ie | 01 417 2205

Ronan Connaughton Edel Webb Reenen Du Preez Richard McDaid

Director | Corporation Tax Senior Manager | Corporation Tax Senior Manager | Transfer Pricing Director | VAT
rconnaughton@deloitte.ie | 01 417 2854 edwebb@deloitte.ie | 01 417 2767 rdupreez@deloitte.ie | 01 417 2398 rmcdaid@deloitte.ie | 01 417 2409

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 Corporation Tax Update
Update on legislative change and future direction..

Transfer Pricing
Update on recent legislative change, documentation requirements and
update on Revenue audits.
Tax Policy & .

Legislative Update
Agenda VAT
Update on EU VAT reform and recent ECJ Caselaw.

Questions
Some questions to Panel Members.

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 Corporate Tax

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Tax Policy & Legislative Update
Recap - Continuing Change

BEPS Actions Final Report

EU ATAD Directive
Publication of Ireland’s CT Roadmap

BEPS 2.0 and Pillar 1 and Implementation of Pillar 1

Pillar 2 – Ireland signs up. And Pillar 2 of BEPS Project
Update to Ireland’s
Transfer Pricing Law

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Tax Policy & Legislative Update
Corporate Tax Update
BEPS 2.0
Pillar One
➢ New taxing right to allocate a proportion of profits to
market jurisdictions in certain circumstances
➢ Exclusion for Regulated Financial Services
Pillar Two
➢ Development of a global minimum effective tax rate
➢ Ireland has signed up to the agreed minimum effective
tax rate of 15%
➢ On Pillar 2 the Global anti-Base Erosion Rules (GloBE)
rules will apply to multinational enterprises that meet
the €750 million threshold as determined under BEPS
Action 13
➢ Pillar Two consists of: (i) an Income Inclusion Rule (IIR);
and (ii) an Undertaxed Payment Rule (UTPR)
➢ Next Steps:
➢ Further detail on the implementation of Pillar 2
expected this week.
➢ Ambitions implementation date of 2023 remains.
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Introduction of Public CbC Reporting
Expected to be effective by Mid 2024
➢ The European Parliament formally adopted the Public
CbC reporting Directive on 11 November 2021 and the
Directive was published on 1 December 2021.
➢ Businesses will likely need to be complying with the
Directive by mid-2024 for publication.
➢ Will require multinationals (either EU-parented groups
and their subsidiaries or non-EU-parented groups with
large EU subsidiaries or branches) with annual global
consolidated revenue exceeding EUR 750 million that are
active in more than one EU member state to publish
certain tax information on a country-by-country and
annual basis
➢ Member states will need to clarify the terms in the
Directive and give local guidance.
➢ Key consideration for companies is to assess what may
be published and the narrative in respect of same.
Covid related measures
Concessions
➢ Revenue have put several measures in place for
businesses impacted by the COVID-19 pandemic.
➢ The concessional treatment whereby Revenue will
disregard presence in the State or presence in another
jurisdiction for corporation tax purposes, where such
presence is due to Covid-19 travel restrictions, will
remain valid up to 31 December 2021.
➢ We expect an e-brief may issue shortly on this matter
and expiration dates given new Omicron variant.
➢ If reliance is placed on this concession the individual and
the company must maintain a record of the facts and
circumstances of the bona fide relevant presence in, or
outside, the State.
➢ This record must be given to Revenue, if requested, as
evidence that the presence resulted from COVID-19
related travel restrictions.
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Interest Limitation Rules
OECD BEPS Action 4 as part of EU Anti-Tax Avoidance Directive

Interest Limitation
Rules (“ILR”)

Objective:

➢ Limit net interest deductions to 30% of EBITDA with limited exceptions.

➢ Legislated for in Finance Bill 2021

Scope:

• Applies to accounting periods commencing on or after 1 January 2022.

• De-minimis threshold of €3m for Exceeding Borrowing Costs (“EBC”)
• Subject to exemptions / exclusions

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Interest Limitation Rules
Important Concepts
1. Relevant Entity
• Company by Company
• Interest Group
• Standalone Entities
• Single Company Worldwide
Group 2. EBITDA

• Not an accounting concept

• Tax adjusted concept
3. Interest Equivalent • Potentially complex
• Interest
• Any amount reasonably
economically equivalent to
interest
• Guarantee fees / arrangement
4. Exemptions / Limitations
fees / commitment fees • €3 million threshold
• Premiums / Discount • Legacy Debt
• Long Term Public Infrastructure
5. Compliance Projects
• Equity Ratio Rule
• Group Ratio Rule
• Interest spare capacity
• Elections
• Carry forward amounts
• Reporting obligations

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 Transfer Pricing

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Irish Transfer Pricing
2021 – Recap, Lessons Learned and Hot Topics - Documentation
Contemporaneous Local File
• Prepared at the time of filing the tax
return
• Protection from tax-geared penalties in
the event of a TP adjustment
(reasonable efforts)
Counterparty/Group TP
Documentation
• Lack of adequate local information
• Functional analysis not customised
Debt Capacity
• New requirement in Ireland
• Not conclusive given limited
Revenue guidance
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Align with 2017 OECD TP
Guidelines
• ‘Accurate Delineation’
• New Risk Framework - six step
Financial Reconciliation process to analyse risk
• Reconciliation to local stat accounts
• Lack of readily available information
Benchmarking Studies
• New benchmarking studies every (3)
years
• Jurisdiction specific information
Insurance specific learnings
• The use of quotes Covid Impacts
• CUP method – should be highly
• Impact on margin and pricing
comparable
• Analyse comparables’ data to
• Country files
enhance COVID comparability
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Irish Transfer Pricing
Revenue Focus Areas

Substance /
Loss making companies
Characterisation

Change in structure / Selection of method /

Transfer pricing policy Benchmarking

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Irish Transfer Pricing
Finance Bill 2021
Section 27 Finance Bill 2021 – Two Conditions to be Satisfied – Qualifying Person
SUPPLIER (LENDER) SIDE
• Chargeable to tax under Schedule D
(other than Case I & II) in respect of
profits, gains or losses arising from the
arrangement with Acquirer.
• Means either:
• Consideration receivable directly
taken into account in arriving at
Schedule D profits, gains or losses
(other than Case I & II); or
• Would be so taken into account if
any consideration receivable by the
Supplier.
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ACQUIRER (BORROWER) SIDE
• Chargeable to tax under Schedule D in respect of profits,
gains or losses arising from the arrangement with
Supplier.
• Means either:
Option #1
Qualifying • Consideration payable directly taken into account in
Person arriving at Schedule D profits, gains or losses; or
would be so taken into account if any consideration
payable by the Acquirer.
Option #2
• The profits, gains or losses of the Acquirer arising
directly or indirectly from the relevant activities of
the Acquirer are (or would be) chargeable to tax
under Schedule D (or would be absent provisions of
Section 129 TCA 1997).
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Irish Transfer Pricing
Finance Bill 2021
Section 27 Finance Bill 2021 – Two Conditions to be Satisfied – Qualifying Person
SUPPLIER (LENDER) SIDE ACQUIRER (BORROWER) SIDE
• Chargeable to tax under Schedule D • Chargeable to tax under Schedule D in respect of profits,
(other than Case I & II) in respect of gains or losses arising from the arrangement with Supplier.
profits, gains or losses arising from the
arrangement with Acquirer.
• Means either:
• Means either: Option #1
• Consideration receivable directly Qualifying • Consideration payable directly taken into account in
taken into account in arriving at arriving at Schedule D profits, gains or losses; or
Person
Schedule D profits, gains or losses would be so taken into account if any consideration
(other than Case I & II); or payable by the Acquirer.
• Would be so taken into account if Option #2
any consideration receivable by the • The profits, gains or losses of the Acquirer arising
Supplier. directly or indirectly from the relevant activities of
Relevant activities is defined in Section 835A TCA 1997: “relevant activities” in
the Acquirer are (or would be) chargeable to tax
relation to a person who is one of the persons between whom an arrangement is under Schedule D (or would be absent provisions of
made, means that person’s activities which comprise the activities in the course Section 129 TCA 1997).
of which, or with respect to which, that arrangement is made and shall include
activities involving the disposal and
acquisition of an asset or assets
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Irish Transfer Pricing
Finance Bill 2021
Section 27 Finance Bill 2021 – Two Conditions to be Satisfied – Eligible Person
SUPPLIER (LENDER) SIDE
• Chargeable to tax under Schedule D
(other than Case I & II) in respect of
profits, gains or losses arising from the
arrangement with Acquirer.
• Means either:
• Consideration receivable directly
taken into account in arriving at
Schedule D profits, gains or losses
(other than Case I & II); or
• Would be so taken into account if
any consideration receivable by
the Supplier.
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ACQUIRER (BORROWER) SIDE
• Chargeable to tax under Schedule D (other than Case I & II)
in respect of profits, gains or losses arising from the
arrangement with Supplier.
• Means either:
• Consideration payable directly taken into account in
Eligible arriving at Schedule D profits, gains or losses (other
Person than Case I & II); or
• Would be so taken into account if any consideration
payable by the Acquirer.
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Irish Transfer Pricing
Finance Bill 2021
Section 28 Finance Bill 2021 – Formal Adoption of OECD Authorised Approach (AOA)

AOA Approach

Apoption of AOA Approach

➢ Non-resident companies trading in Ireland through a branch or agency are chargeable to corporation tax in accordance with Section 25 TCA 1997.

➢ New Section 25A TCA 1997 to be introduced for accounting periods beginning on/after 1 January 2022 to bring existing domestic legislation in line with the international
best practice in this area – AOA approach.

➢ The AOA for the attribution of income to a PE or branch is included in Article 7 of the OECD Model Tax Convention, with additional guidance provided in the OECD’s 2010
Report on the Attribution of Profits to PEs.

➢ The preferred OECD interpretation of Article 7 is that the principles contained in the OECD TP Guidelines which apply to transactions between separate enterprises, should
be applied by extension to transactions within an enterprise.

➢ The AOA seeks to attribute to a PE or branch the profits that it would have earned at arm’s length if it were a legally distinct and separate enterprise performing the same
or similar functions under the same or similar conditions.

➢ Certain exemptions apply; e.g. “small” enterprises; “medium” enterprises where branch income is less than €250,000.

➢ Documentation rules apply – “relevant branch records”. Due by tax return filing date.

➢ Penalty regime where a PE or branch fails to provide relevant branch records to Irish Revenue within 30 days - €4,000 / €25,000.

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Irish Transfer Pricing
Year End Considerations and what next in 2022

Year end 2021 2022

• At the OECD
• Implementation of policies • Pillar 1 and 2 and TP impact
• CBCR notifications and annual reports • In Europe
• Documentation for the auditors • Public CBCR
• Dispute related deadlines • In Ireland
• Updated TP guidance
• Audits of FY20

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 VAT

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VAT
Domestic Considerations

01 Finance Bill 2021

02 Aspect Queries: Revenue Positions & Quantum of Documentation

03 VAT Deductions: Premiums & Investment Income

04 Current State of VAT Exemptions

05 Brexit Benefits: UK as a Non-EU country but also a Third Party

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VAT
EU Considerations

01 Revenue Position on CEJU Caselaw: Insurance Related Services

02 VAT Committee Working Papers on Danske Bank / VAT Groups

03 End of VAT Grouping for Managers and Captive Insurance Companies?

04 One to Watch: Challenge to Spanish Branch – Possible Contagion

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 Questions

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