1. Akshay Masand's Avatar

    Ireland’s government is expected to announce changes to its tax residency policies after the European Union’s antitrust watchdog pressured freeform. The new policies are set to phase out the popular multinational tax loophole which is employed by Apple to save billions of dollars. According to sources who claim to be familiar with the matter, Ireland will be “phasing out” the well-known “Double Irish” tax arrangement large US corporations like Apple and Google use to save billions of dollars on international profits.

    The government is set to make the announcements alongside a 2015 budget hearing this upcoming Tuesday. The planned changes involve tax residency for international corporations which up to this point have taken advantage of complex international laws, in specific the intra-state EU arrangements, to sidestep high tax rates.

    For those of you who didn’t know about the “Double Irish with a Dutch Sandwich” scheme, many large companies such as Apple relied on the Irish law that views a company as a tax resident of the country from which it is managed, not incorporated. For Apple, the company used the tax law and concessions made by the Irish government to declare its Cork headquarters as not being a tax resident of any country in particular. Applied to Apple’s international operations, profits are directed to a subsidiary in Ireland. The 12.5% Irish tax rate therefore isn’t applied ASI (which is what Apple’s business entity in Cork, Ireland) because it isn’t managed by Apple corporate in the US. This also means that the US and other countries are unable to levy taxes on Apple’s Irish operations because ASI is out of their jurisdiction.

    When it comes to the European side, Ireland has treaties with other EU countries that allows funds to pass across borders, tax-free. The Cupertino California company uses these arrangements to route international profits through the Netherlands back to ASI or another registered subsidiary as payments for assigned royalties. The last destination is a company registered in Ireland but a tax resident of a tax haven such as the Caribbean.

    Ireland as a country has at least made a showing of closing loopholes with a Finance Minister, Michael Noonan, vowing to make the necessary amendments to the country’s tax code after John McCain and Carl Levin called for a reform. Since then Noonan made it illegal for corporations to not claim a tax domicile but kept open a loophole that allows the companies to choose a resident country that fit their needs.

    With the new rule change, Ireland is set to automatically classify companies operating within its borders as tax residents “over time.” The exact timeframe wasn’t mentioned but it is being speculated that companies already operating within Ireland will be granted a set period in which to rearrange accounting methods.

    We’ll have to see what ends up happening as a result of all the impending changes.

    Source: Reuters via AppleInsider

    Twitter: @AkshayMasand
    2014-10-14 10:36 PM