UK Companies In Ireland May Challenge 'Tax Haven' Decision

by Jason Gorringe, Tax-News.com, London

01 November 2002

The Irish Department of Finance announced this week that UK companies with subsidiaries based in the Republic are considering launching a legal challenge to measures recently introduced by the UK taxing profits earned by the subsidiaries at British corporation tax rates.

Earlier this year, the UK government invited comment from British companies likely to be affected by the move, but despite their objections, and concerns expressed by Ireland's Finance Minister, the Revenue Commissioners, and Irish diplomats, went ahead with its plans, which culminated in the replacement of the low Irish corporate tax rate with the 30% British rate for companies with UK parents just over ten days ago.

Reporting on Thursday, the Irish Independent revealed that: 'It is understood the UK companies are contemplating taking legal action in British courts to block the move'.

Sweden is also understood to be considering the introduction of similar measures, levying Swedish corporate tax rates on profits accrued by the subsidiaries of Swedish companies, if those subsidiaries are deemed to be operating in 'tax haven' countries.

Although this has sparked fears in the media that a precedent may have been set for other EU countries, a spokesman for the Irish Department of Finance appeared relatively unconcerned by the Swedish proposals, claiming that profits accrued by Swedish companies with subsidiaries based in the Republic will likely be covered by the double taxation agreement between the two countries.

'We understand it is a general change and not specific to Ireland and the measures would not impact on any Irish-based Swedish subsidiary. It is unrelated to the actions taken by the UK,' he told the newspaper.

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