Ireland announces plans to simplify corporate tax code

DUBLIN (Reuters) - Ireland announced plans on Thursday to simplify its corporate tax code around how foreign-sourced dividends are levied, a move sought by foreign multinationals that Finance Minister Michael McGrath said would boost the country's competitiveness.

Ireland has long relied on a low corporate tax rate of 12.5% to help to attract big companies to set up major operations in the country. It will lose some of that edge next year when a minimum rate of 15% is introduced as part of a global tax overhaul.

Lobby groups, including American Chamber of Commerce Ireland, warned that with the new rules likely to prompt some companies to reevaluate how they operate in Ireland, the Irish government needed to bring its regime in line with all other European Union states by moving towards a so-called territorial system of taxation.

McGrath said he would do so by introducing a participation exemption for foreign-sourced dividends, a double taxation relief measure that once implemented in 2025 would neither increase nor decrease the annual corporate tax take.

"It's a more straightforward and more administratively simpler way of getting to the same destination," McGrath told reporters.

"It has been a consistent ask of the foreign direct investment community in particular, and we've had to get the timing right because we've had to deal with so much change in this area over the last number of years."

While the minimum tax rate is on course for implementation, the other pillar of the global tax overhaul on sharing taxing rights on the 100 biggest, most profitable multinationals is at risk of collapsing.

McGrath said the outcome on that pillar remained uncertain and that there has been considerable discussion about potential problems in the U.S. passing tax legislation and what the electoral cycle there might lead to.

He said that Ireland remained on track for a forecast 7% year-on-year increase in its corporate tax take despite a surprise dip in receipts last month.

(Reporting by Padraic Halpin. Editing by Jane Merriman)