COVID-19 Practical Considerations: Corporation Tax
On 23 March 2020 Revenue released “Covid19 Information and advice for taxpayers and agents” which deals with a number of tax issues arising as a result of the current COVID-19 outbreak.
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As discussed in our briefing “COVID 19 Practical Considerations Board Meetings and Tax Residence” companies may be required to hold board meetings during the outbreak of COVID-19 and, in many cases, it will be necessary for directors to attend by telephone or video conference from different jurisdictions. The location of board meetings is important in determining tax residence for currently Irish tax resident companies wishing to retain Irish tax residence and for currently non-Irish tax resident companies wishing to remain non-Irish resident. There is no guidance or case law in respect of the location of a meeting where directors attend remotely from different jurisdictions.
An additional issue may arise for businesses where an employee, director or agent of a company spends longer than intended in a jurisdiction, due to travel restrictions resulting from COVID 19 measures and thereby creates an unintended taxable presence for the company in that jurisdiction e.g. a branch or agency under domestic law or a permanent establishment under a double tax treaty.
Irish Revenue issued the following statement on 23 March 2020 :
“Corporation Tax and presence in the State or outside the State resulting from COVID-related travel restrictions
Where an individual is present in the State and that presence is shown to result from travel restrictions related to COVID–19, Revenue will be prepared to disregard such presence in the State for corporation tax purposes for a company in relation to which the individual is an employee, director, service provider or agent. In addition, and where relevant, if an individual is present in another jurisdiction as a result of COVID-related travel restrictions, and would otherwise have been present in the State, Revenue will be prepared to disregard such presence outside the State for corporation tax purposes for a company in relation to which the individual is an employee, director, service provider or agent. The individual and the company should maintain a record of the facts and circumstances of the bona fide relevant presence in the State, or outside the State, for production to Revenue if evidence that such presence resulted from COVID-related travel restrictions is requested.”
This Revenue confirmation is welcome so that companies can minimise disruptions to business, while ensuring compliance with public health recommendations regarding containment of the virus.
In particular, it should be possible for directors to participate in meetings remotely during the COVID-19 outbreak, which they would otherwise have attended in person in Ireland, without affecting the analysis of the company’s tax residence for Irish tax purposes. It is recommended that it is documented (and where possible evidenced) that such meetings would usually/were scheduled to take place in Ireland and that remote attendance was due to COVID-19 travel restrictions. Similarly, a foreign company employee, director or agent of a company who spends longer than intended in Ireland, due to travel restrictions resulting from COVID 19 measures should not create an unintended taxable presence for the company in Ireland.
It should be noted that Irish Revenue’s statement deals only with the Irish tax aspects of these situations and it will be necessary to consider (where relevant) any foreign tax implications.
For further information on this topic, please contact a member of the Arthur Cox tax team.