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New HQ incentives in Bill Back  
Irish companies will now be able to pool the tax paid by its branches around Europe before they have to pay any Irish tax, which should make Ireland more attractive as a headquartering jurisdiction, following a provision introduced in this year's Finance Bill published on February 1st.
According to David Smyth, head of tax with Ernst & Young Tax Services, this is a 'fantastic development, it is the ideal complement to the 12.5 per cent corporate tax rate, as it will encourage industrial and financial services groups to establish pan-European operations from Ireland'.
The provision removes an anomaly between the Irish tax treatment of dividends and branch profits. Pooling was available for the former but not for the latter; this is now changed. However, a company can still carry forward excess credits on dividends but not on branch profits. It is unclear why this carry forward was not made available for branch credits. The new relief will apply for accounting periods ending on or after 1 January 2007.

The Bill also introduced amendments to legislation governing foreign currency matching, which will remove a timing mismatch, allowing share capital value movement to be taken into account in matching corresponding amounts in a related loan, and to cater for companies whose functional currency is non-euro.

Also in the Bill were provisions regarding the exit tax introduced to life policies in 2006, with the 12 year rule now being abolished; intermediary relief has replaced stamp duty on dealings in Irish shares by ISE member firms; changes in the payment of preliminary corporation tax; application of the European Court of Justice's ruling in the Marks and Spencer case; and a change in the tax treatment of certain offshore funds established in the EU or OECD countries with which Ireland has entered into a double tax agreement.

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