The Feedback Statement

The feedback statement follows a public consultation held in November 2021 on the imposition of new withholding tax measures to prevent double non-taxation on the payment of royalties and interest or the making of distributions to associated entities in certain jurisdictions, namely those on the EU Blacklist and zero or no tax jurisdictions.

The legislative initiative originates from undertakings made by Ireland as part of their Proposal under the National Recovery & Resilience Plan submitted to the European Commission in 2021 in order to secure funding under the Recovery and Resilience Facility launched by the EU in the aftermath of the COVID 19 pandemic. The proposal sought to address country specific recommendations made by the Commission on aggressive tax planning opportunities in Ireland.

The feedback statement outlines that the existing withholding tax provisions will be utilised to give effect to the new measures. It further states that these new measures will only occur between associated entities where the recipient is in a no or low tax jurisdiction. In this regard, it states that this is not intended to apply to jurisdictions that provide a participation exemption, and it is not intended to renegotiate Ireland’s tax treaty network.

Draft legislation sets out proposed definitions for associated entities and a zero-tax jurisdiction. It also sets out a definition for what constitutes a supplemental tax, that will exempt the outbound payment from these withholding tax provisions for example, a foreign company charge, or a qualified top-top tax under Pillar 2.

It then sets out the legislative provisions for the imposition of withholding tax on payments of royalties and interest and distributions made to specified territories (EU Blacklisted territories or low tax jurisdictions as defined) that are not subjected to a supplemental tax as defined.

Summary of points raised by Arthur Cox LLP


Arthur Cox highlighted the myriad of new legislation that has been introduced since the commitments were made such as the introduction of CFC rules, interest limitation rules and the extension of transfer pricing rules, that more than adequately address the problem drivers which this legislation seeks to address. Therefore, the legislation is no longer necessary, particularly considering the transposition of the Pillar 2 Directive. 

Arthur Cox outlined that Ireland, unlike many EU counterparts (Germany, Luxembourg, Hungary), already imposes withholding tax on interest payments.  By introducing these new defensive measures, where other jurisdictions such as Luxembourg are thus far not doing so, puts Ireland at a competitive disadvantage and results in Ireland baring an unfair burden under the RRP process when it acts to address the concerns of the European Commission, but other Member States do not.

It cautioned that the additional measures on interest could be subject to an EU law challenge based on the Free Movement of Capital.   

Arthur Cox emphasised that these measures go beyond what is necessary to prevent double non-taxation and could lead to double taxation.


It recommended that the definition of zero tax jurisdiction be redrafted to clearly exclude jurisdictions with a remittance basis of taxation such as Singapore, and also to ensure that the text of the definition clearly gives effect to the intention of the Department that participation regimes will not bring payments within the scope of the no tax jurisdiction definition.

Arthur Cox has separately suggested to the Department, that a preferable approach would be for the definition of “zero tax jurisdiction” to refer solely to the taxation of corporate income in that jurisdiction, and not refer to taxation of the categories of payments specifically. This would clearly delineate a two-stage test – the first being that the new measures would only apply to “low or no tax jurisdictions” (in addition to EU Blacklist) and then subsequently outline the conditions for low or no taxation for each of the three categories of payments. This would allow the scope of the measures to be more specific and lessen the possibility of causing double taxation and unintended consequences.

It recommended that it be made expressly clear in the legislative wording for the definition of a supplemental tax that it includes any charges under the Pillar 2 regime, including those arising under the application of transitional safe harbours. It also should be made expressly clear that it encompasses taxes imposed under the GILTI regime in the U.S.

In relation to outbound payments of interest, we reiterated the points made in our previous submission that any measures should not apply to listed bonds or wholesale debt / commercial paper.

In relation to distributions, we outline that given there is no risk of double non-taxation due to the nature of the Irish tax system, this measure is therefore disproportionate and unnecessary and should be reconsidered.

The full statement is available to read here.