Companies like Apple, Google, Amazon, and Microsoft have been using what is termed as a Double Irish arrangement to reduce their tax liability. In addition to the low corporate income tax rates in Ireland, this arrangement has been beneficial because of differences in the tax residency laws applicable to corporations in Ireland and the United States. Corporations in the U.S. are tax residents where they are incorporated. Irish residency is based on the location of their central management and control. Because of this difference, some corporations avoid being tax residents of either country.
In response to much pressure from the United States and the European Union, the Irish Department of Finance has now agreed to change their tax residency laws to close this loophole. Companies that have their central management and control will continue to be considered residents of Ireland for tax purposes. Additionally, companies that are incorporated in Ireland will also be treated as residents for tax purposes. While the new restrictions have already begun to affect corporate decision makers, it will not put an end to the Double Irish arrangement immediately. Companies that are registered in Ireland are given a six year grace period to adjust their accounting practices. Given the ongoing changes to the global tax environment, it is important to continuously revisit the reasoning for the corporate structure being implemented and the accounting principles being utilized.
