Last year, the Revenue Commissioners put several measures in place for businesses impacted by the COVID-19 pandemic, including concessions with regard to corporation tax. One such concession concerned the location of board meetings for tax purposes, which we reported on last year. Where "an employee, director, service provider or agent" was restricted from travel between tax jurisdictions because of COVID-19, Revenue agreed to disregard such presence for the purposes of corporation tax where the individual was:
- present in the State when they would have otherwise been present in another jurisdiction
- present in another jurisdiction when they would otherwise have been present in the State
This concession remains in place until 31 December 2021, at which time it will be withdrawn. This means that, from 1 January 2022, the normal rules for determining a company's tax residence will apply.
In general, companies incorporated in Ireland are treated as being tax resident in Ireland by virtue of incorporation (the transition period for companies incorporated before January 2015 ended on 31 December 2020). This is the case unless, under the provisions of a double tax treaty entered into between Ireland and another jurisdiction, the company is treated as tax resident in that other jurisdiction.
In addition to this 'place of incorporation' test of tax residence, Ireland also has a 'central management and control' rule, which focuses on where strategic control of the company is exercised. This rule is particularly relevant to companies incorporated outside of Ireland, but wishing to remain tax resident in this jurisdiction. The location of board meetings and directors' decision-making is a key factor in determining 'central management and control'.
While remote participation at board meetings is permitted under the Companies Act 2014 (subject to the company's constitution), the tax implications for companies of directors participating in board meetings and/or board activities from other jurisdictions must be considered carefully.
The ending of Revenue's concession will be of particular concern to non-Irish incorporated companies with directors located outside of Ireland, who may continue to be unable to travel freely as a result of the COVID-19 pandemic - whether as a result of official travel restrictions or personal health concerns.
Revenue may reconsider the expiration of the concession in light of recent events and continuing COVID-19 challenges, but companies affected by this issue should consider their plans for board meetings in 2022 in the meantime.
For further information in relation to this topic, please contact a member of our Corporate and M&A or Tax team.
