The tax accounting period normally coincides with a company’s financial accounting period, except where the latter period exceeds 12 months.
Corporation tax returns must be submitted within nine months (and no later than the 23rd day of the ninth month) after the end of the tax accounting period in order to avoid a surcharge (maximum of EUR 63,485) or a restriction of 50% of losses claimed (maximum of EUR 158,715).
Payment of tax
Corporation tax payment dates are different for ‘large’ and ‘small’ companies. A small company is one whose corporation tax liability in the preceding period was less than EUR 200,000. Interest on late payments or underpayments is applied at approximately 8% per year.
For large companies, the first instalment of preliminary tax totalling 45% of the expected final tax liability, or 50% of the prior period liability, is due six months from the start of the tax accounting period (but no later than the 23rd day of the month).
The second instalment of preliminary tax is due 31 days before the end of the tax accounting period (but no later than the 23rd day of the month). This payment must bring the total paid up to 90% of the estimated liability for the period.
The balance of tax is due when the corporation tax return for the period is filed (that is, within nine months of the end of the tax accounting period, but no later than the 23rd day of the month in which that period of nine months ends).
Small companies are only required to pay one instalment of preliminary tax. This is due 31 days before the end of the tax accounting period (but no later than the 23rd day of the month).
The company can choose to pay an amount of preliminary tax equal to 100% of the corporation tax liability for its immediately preceding period or 90% of the estimated liability for the current period. As is the case for large companies, the final instalment is due when the corporation tax return is filed.
Tax audit process
A system of self-assessment and Irish Revenue audits is in operation in Ireland.
Statute of limitations
Irish Revenue may undertake an audit of a company’s tax return within a period of four years from the end of the accounting period in which the return is submitted.
Topics of focus for tax authorities
Confronting non-compliance is one of Irish Revenue’s key strategic priorities. Irish Revenue has taken a number of steps to ensure that it is better enabled to identify and challenge perceived high risk taxpayers.
Central to this is the recent realignment of Irish Revenue’s operating structure, which has resulted in the establishment of five national divisions segmented by taxpayer type. Three of those Divisions deal with corporates (Large Corporates Division, Medium Enterprises Division, and Business Division) and two are responsible for the tax affairs of individuals (High Wealth Individuals Division and Personal Division).
One of the drivers of the realignment was to ensure a greater match of Irish Revenue’s resources to the risk segments across its case base. This led to an increase in resources allocated to the Large Corporates Division and Medium Enterprises Division, indicating that there will be a greater focus on larger corporates.
Irish Revenue’s sophisticated approach to risk profiling also continues to be the driver behind its compliance activity. Irish Revenue has long been adopting a risk-based approach to select cases for intervention to ensure that its resources are targeting those cases that will give rise to a yield on an audit. Central to Irish Revenue’s risk assessment is its extensive use of data, and it has invested significantly in its analytics capabilities to maximise the use of this information.
Another of Irish Revenue’s key aims is to make it easier and less costly for voluntary compliance through further use of digital channels and a range of initiatives to lessen the administrative burden for taxpayers.
Internationally, Irish Revenue have committed to further tax transparency and the exchange of information between authorities. Irish Revenue also emphasises a continued focus on transfer pricing issues both at an EU and global level.
General Anti-Avoidance Legislation
The general anti-avoidance provisions are designed to counteract transactions that lack commercial reality and are put in place with a view to reducing or avoiding a charge to taxation.
The impact of the general anti-avoidance rule is that where a person enters into a transaction and it would be reasonable to consider that the transaction is a ‘tax avoidance transaction’, Irish Revenue may, at any time, deny or withdraw the tax advantage. In order to deny or withdraw that tax advantage, Irish Revenue may:
- make or amend an assessment
- allow or disallow in whole or in part any credit, deduction, or other amount that is relevant in computing tax payable
- allocate or deny in whole or in part any credit, deduction, loss, abatement, relief, allowance, exemption, income, or other amount, or
- recharacterise, for tax purposes, the nature of any payment or other amount.
The assessment made by Irish Revenue will stand unless the taxpayer successfully appeals it to the Appeals Commissioners/Courts.
In a move to promote transparency between taxpayers, practitioners, and tax authorities, provisions relating to the disclosure of tax schemes are applicable. These require promoters of such schemes to provide information to the tax authorities within a specified time of having made the scheme available. A transaction that comes within the new law and must therefore be reported to Irish Revenue is not necessarily a tax avoidance transaction for the purposes of existing legislation. The rules are wide reaching and essentially cover all tax heads, including corporation tax, income tax, capital gains tax, stamp duty, VAT, customs duties, and excise duties.
Compliance intervention framework
Irish Revenue introduced a new compliance intervention framework with effect from 1 May 2022. The framework reflects Revenue's graduated response to risk and non-compliance, while providing taxpayers with a mechanism and incentive to voluntarily regularise any tax underpayments. The framework comprises three graduated ‘Levels': Level 1, Level 2, and Level 3.
Level 1 interventions are designed to support compliance by reminding taxpayers of their obligations and providing them with the opportunity to correct errors without the need for a more in-depth intervention. These include self-reviews, profile interviews, and engagements that fall under the Co-operative Compliance Framework (CCF) (see below). Taxpayers still have the option to make an unprompted disclosure in respect of tax underpayments when notified of a Level 1 intervention.
Level 2 interventions are used by Revenue to confront compliance risks based on the circumstances and behaviour of the taxpayers concerned. They could range from an examination of a single issue within a return to comprehensive tax audits. There are two types of Level 2 interventions: audits and risk reviews.
Taxpayers no longer have the option to make an unprompted qualifying disclosure when notified of a Level 2 intervention. They can, however, make a prompted qualifying disclosure up until the commencement of the intervention.
Level 3 interventions take the form of investigations. These occur in cases where Revenue has reason to believe that there has been serious tax/duty evasion or fraud on the part of a taxpayer. A taxpayer is not entitled to make a qualifying disclosure once notified of an investigation.
Finance Act 2022 provides a statutory basis for matters previously administered under the Code of Practice for Revenue Compliance Interventions, while also extending the time periods for certain actions to be taken in the tax appeal process.
Co-operative Compliance Framework (CCF)
The Irish authority has invited large businesses to partake in the CCF, which is seen as best practice internationally. The aim of the CCF regime is to continue to strengthen Ireland’s position as one of the top countries in the world for ease of doing business by promoting useful collaborative relationships between taxpayers and the Irish tax authority.
The main benefits of participating in thee CCF include access to a dedicated case-worker in the Large Corporates Division, a streamlined process for the release of tax refunds, and a reduction in audits and compliance interventions.
CCF participants are required to have a Tax Control Framework in place and to undertake periodic reviews of key tax risks. Irish Revenue will meet with participants annually to ensure that they are meeting their obligations and commitments under the CCF and to develop relationships.
The Irish tax authority has recently concluded a review of CCF, which involved surveying participating taxpayers. The findings of the review were broadly positive and concluded that CCF was operating effectively.