Tax

Finance Act 2024

The Finance Act 2024 contains the changes to the Irish tax legislation that generally apply from 1 January 2025. The Finance Act contains a number of key business taxation measures. In our Finance Bill 2024 Briefing we highlight the key changes, including the introduction of the participation exemption, changes to Irish Pillar Two legislation, particularly relating to its application to securitisation entities, changes to stamp duty rates on residential property and the introduction of Pillar One Amount B transfer pricing simplification.

Ireland’s New Participation Exemption

After a lengthy consultation process, long-awaited legislation for the introduction of a participation exemption for non-Irish dividends and distributions came into effect on 1 January 2025.

Arthur Cox engaged with the Department of Finance and Revenue on the new Irish legislation and while we welcome the new legislation, we will continue to engage with the Department to request improvements to aspects of the new exemption, such as expanding the territorial scope of eligible jurisdictions.

For details of the new legislation please see our Participation Exemption Briefing.

Review of the Tax Treatment of Interest in Ireland

As part of the reform and modernisation of the Irish tax system, the Irish Department of Finance launched a public consultation on the Tax Treatment of Interest in Ireland in September 2024. Arthur Cox is engaging with the Department of Finance in 2025 on this vital reform and although the Department of Finance refer to it as a multi-year review, it is hoped that some simplification changes can be made in the Finance Bill 2025.

Reform of Share Options

As part of Budget 2025, the Department of Finance published the Review of the Taxation of Share-Based Remuneration conducted by Indecon International Research Economists.

The Review makes a number of recommendations regarding the future of share-based remuneration in Ireland. Arthur Cox advocated for the introduction of Employee Ownership Trusts, and welcome this as a key recommendation of the Review.

For more information on the key recommendations see the Arthur Cox Employment Group's Briefing.

EU Tax and Fiscal State Aid Agenda 2025

2024 ended with the Economic and Financial Affairs Council of the EU (ECOFIN) reaching final agreement on the new EU Directive on Faster and Safer Relief of Excess Withholding Taxes (the FASTER Directive) and political agreement on the future VAT in the Digital Age (ViDA) Package of measures which seeks to modernise VAT for the digital age. More details are available in our Briefing: Council of the EU reaches agreement on the FASTER Directive.

Poland and Denmark hold the EU Presidencies for 2025. A key change in the new Commission is that the tax portfolio is now held by the Commissioner for Climate, Net-Zero and Clean Growth. We therefore expect that after a long period of focus on EU legislation on direct taxation, the focus of the Commission will shift. The new Commissioner, Wpoke Hoekstra, has indicated to the EU Parliament that he would focus on tax simplification and decluttering tax legislation. He also reiterated the ongoing work of the Commission on tackling shell companies, (which will now likely take the form of an exchange of information directive, rather than an anti-tax avoidance directive).

With a Trump U.S. Presidency, it is now most likely that the OECD Pillar 1 Amount A providing for the reallocation of taxing rights to market jurisdiction for very large multinationals will fail, and therefore all eyes will be on whether the EU acts alone. On the OECD Pillar 2 project, the application of the undertaxed profits rule (UTPR) against US companies will be a topic of much discussion in 2025.

Finally, despite the success of the EU Commission in its case that Ireland granted illegal State aid to Apple, this judgment is seen as an outlier and the Judgment of the CJEU in the UK CFC case, underpinning the fiscal autonomy of Member States will likely make it increasingly difficult for the Commission to take fiscal state aid cases in 2025. For our analysis of the Apple tax case see our Apple Tax Case Briefing and on how it compares with the UK CFC case see this UK CFC Briefing.