Ireland has cut back on the level of assurance it gives multinationals about their tax affairs as the European Commission begins an inquiry into the Revenue's dealings with Apple.
New guidelines from the Revenue Commissioners mean that multinationals will not be getting as many “letters of comfort” from the Irish authorities telling them that the tax structures they have put in place are unlikely to be challenged.
The provision of such letters is an important part of Ireland’s efforts to attract foreign direct investment from the US as they are highly valued by multinationals when making long-term decisions as to where they will locate foreign subsidiaries.
Unforeseen bills
The Revenue provides the letters to multinationals so that the companies can feel secure that they will not be hit with large, unforeseen tax bills in the future. However, the tax authorities have said multinationals and other large corporate taxpayers must from now on rely more on their tax advisers and on information in the public domain. They have set a seven-year lifespan on the letters.
Details of the Revenue’s new guidelines have emerged as the European Commission opens inquiries under state aid rules into letters and rulings given to Apple, Fiat and Starbucks by the tax authorities in, respectively, the Republic, the Netherlands and Luxembourg.
The development comes in the context of a drive at European level to force revenue authorities to “doff their national jerseys” and is being seen as having the potential to affect Ireland’s efforts to attract foreign direct investment.
The Revenue’s new guidelines say there should be only a “very limited” number of circumstances where companies would need letters of comfort.
“Generally, requests will not be accepted where the matter is straightforward and the taxpayer is simply looking for a letter of comfort from Revenue of a position or issue which can be readily established from existing published information,” the guidelines state.
Tax adviser
It is important to bear in mind, the Revenue said, that it will “not take on a role which is primarily that of the tax adviser in relation to the taxpayer”.
While the Netherlands and Luxembourg give rulings on the arrangements put in place by multinationals, Ireland gives slightly less binding “opinions”. The opinion issued to Apple, possibly decades ago, is to be subjected to examination by the European Commission.
A Revenue spokeswoman said the guidelines reflect restructuring and changes to the law since 2002.
However, in a briefing note to clients, the head of tax and legal services at Deloitte, Pádraig Cronin, links the new guidelines to developments in Europe. He said the guidelines outline how, if the Revenue revises an earlier opinion, it will notify the taxpayer and not seek to apply any tax retrospectively. This provides certainty, he said, in “what is now a fast-moving tax environment”.
