Concession

The concession allowed directors to participate in meetings remotely, which they otherwise would have attended in person absent COVID-19 related travel restrictions, without affecting the analysis of the company’s tax residence for Irish tax purposes.
Irish Revenue initially stated their intention to withdraw the concession from 31 December 2021 but on 23 December 2021 they confirmed that this treatment remained valid until 31 January 2022 and that the position would be kept under review to determine whether any further extension was required.
We understand that Irish Revenue have indicated that this concession will not be further extended given the recent lifting of most COVID-19 restrictions in Ireland.

Irish incorporated companies

The withdrawal of the concession may not have a significant impact on Irish incorporated companies which are intended to be tax resident in Ireland where directors are unable to travel to Ireland for board meetings (although the particular facts should always be assessed on a case-by-case basis). This is on the basis that since 1 January 2021, Irish incorporated companies are tax resident in Ireland.
There is an exception to Irish residence where the company is tax resident in another country under an Irish Double Taxation Agreement (“DTA”). Therefore, consideration should be given to whether the attendance at board meetings from outside of Ireland could trigger domestic residence provisions in other countries giving rise to dual residence which would require a resolution under the provisions of a DTA.
Where directors’ meetings are held in (or directors participate remotely from) countries which apply an incorporation test (such as the United States), we would not expect this issue to arise. However, care should be taken where directors’ meetings are held in (or directors participate remotely from) countries which have a central management and control or place of effective management test for determining residence of a company not incorporated in that country, such as the UK.
Where a company is dual resident, tax treaties can provide tie-breaker rules that seek to ensure that the entity is resident in only one of the states. If a company is resident in another country under a DTA, either under a treaty tie-breaker rule or as a result of a MAP, consideration should be given to location of post-31 January 2022 board meetings to avoid a possible dual residence situation.

Non-Irish incorporated companies

The withdrawal of the concession may, in practice, affect non-Irish incorporated companies which are intended to be tax resident in Ireland.  A non-Irish incorporated company is tax resident in Ireland if it is centrally managed and controlled in Ireland. The concept of central management and control is directed at the highest level of control of the business of the company where the high level policy and strategic decisions are taken, often exercised by the board of directors. The central management and control test should generally be applied by reference to the facts over a period of time, so consideration should be given at an early stage to meeting location.
A similar issue arises in respect of companies which are intended to be tax resident outside of Ireland but have some Irish located directors. Following the withdrawal of the concession, attendance by such Irish located directors at board meetings of such companies from Ireland will not be disregarded and Irish Revenue may assert that such companies have become Irish tax resident due to the central management and control test.

What happens next?

All companies which may be affected by this issue should consider their plans for board meetings from 1 February 2022 and should take advice to ensure that an unintended change of tax residence or the creation of dual residence and potential tax costs do not arise as a result.
The concession also applied to disregard an unintended taxable presence of a business in Ireland where an employee, director, service provider or agent of a company spent longer than intended in Ireland, due to travel restrictions resulting from COVID-19 measures and such businesses should also review their arrangements for 2022.
If you have any queries or would like to discuss this topic, please contact a member of the Arthur Cox LLP Tax Team.