Financial services tax

In recent years, Irish financial services companies have faced a myriad of tax challenges, navigating an ever-evolving landscape shaped by international regulations and domestic economic policies. As a hub for global financial services, Ireland has attracted a significant number of multinational corporations, but this influx has also brought forth complex taxation issues.

BEPS and global tax reform

One of the prominent challenges for Irish financial services companies is the implementation of the Base Erosion and Profit Shifting (BEPS) framework initiated by the Organisation for Economic Co-operation and Development (OECD). BEPS aims to tackle tax avoidance strategies used by multinational enterprises by aligning taxation with the location of economic activity and value creation. Irish financial firms, particularly those with a global footprint, are grappling with the need to reassess their tax structures to comply with BEPS regulations.

The ongoing global tax reform efforts, such as the OECD's Pillar One and Pillar Two initiatives, pose significant challenges for Irish financial services companies. The proposed changes seek to reallocate taxing rights and establish a global minimum corporate tax rate. Irish firms are closely monitoring these developments, as they could impact their tax liabilities and require adjustments to existing structures.

Transfer pricing

Transfer pricing remains a focal point for Irish financial services companies. With an increasing emphasis on transparency and fairness, tax authorities are scrutinising intercompany transactions to ensure they reflect market conditions. This has prompted Irish financial firms to reassess their transfer pricing policies to align with international standards.

The challenge lies in establishing arm's length pricing for various financial transactions, such as intercompany loans and services. Striking the right balance between satisfying regulatory requirements and optimising tax efficiency poses a delicate challenge.

Digital taxation

The digitalisation of financial services has introduced a new layer of complexity. As Irish financial companies increasingly leverage digital platforms and technologies, tax authorities are grappling with how to appropriately tax digital transactions. The lack of consensus on international taxation rules for the digital economy adds uncertainty for Irish firms operating in this space.

Irish financial services companies are poised to experience a notable escalation in tax compliance costs due to the advent of digital taxation. The implementation of digital taxation measures necessitates a substantial overhaul of existing systems to accommodate complex reporting requirements. Financial institutions must invest in technologies to track and analyse digital transactions, thereby ensuring accurate reporting. The intricacies of digital taxation demand staff training programs and legal expertise to navigate evolving regulatory landscapes. Moreover, the need for meticulous documentation and audit trails to demonstrate compliance imposes additional resource burdens.

Brexit hangover

The United Kingdom's departure from the EU as of 1 January 2021, prompted numerous Financial Institutions to relocate their EU Head Offices from the UK to other EU jurisdictions like Ireland, ensuring continuity under the EU passporting regime. Some of these decisions were made swiftly, and now, three years post-Brexit, it may be prudent to pause and re-evaluate those choices, examining whether the implemented structures remain suitable for their intended purposes.

How we can help

Our experienced tax professionals work with a variety of financial services clients including banks, insurers, asset managers, securitisation vehicles and aircraft lessors. We are committed to providing our clients with effective solutions to tax planning and tax compliance, offering cost-effective support and minimising tax risk.

As a global network, Mazars is ideally suited to serve international financial services groups and domestic financial services groups looking to expand into new markets.

Our services

• Full suite of corporate tax compliance services.
• Advice on issues such as establishing in Ireland, mergers & acquisitions and withholding taxes.
• Risk analysis on global initiatives such as the OECD’s BEPS and EU’s ATAD such as Pillar Two.
• Advice in relation to operational tax obligations.
• Assistance with tax controversy and litigation.
• Advice in relation to foreign tax credits.
• Advice on cross border mergers and acquisitions.
• Determine the most tax-efficient way to structure your foreign offices.
• Structure the funding of your overseas business considering the different country’s tax laws.
• Manage your effective rate of tax and assist you with the timing of transactions.
• Guidance on the tax implications of worldwide mobility and employment.
• Transfer pricing.
• VAT and indirect taxes.
• Payroll services.
• Assistance with Research and Development Tax Credit claims.

Contact us today and let Mazars be your strategic partner in navigating this ever-changing tax environment.