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Unless relieved or exempted by virtue of a tax treaty or EU law, Ireland imposes a withholding tax on specified payments to non-residents. Note that Irish domestic law provides for broad exemptions from withholding tax.

The Finance Act 2023 inserts new defensive measures with regard to outbound payments of interest, royalties, and distributions (including dividends) to associated entities resident in jurisdictions on the EU list of non-cooperative jurisdictions, as well as no-tax and zero-tax jurisdictions. The measures are meant to ensure the prevention of double non-taxation and essentially restrict domestic withholding tax exemptions in respect of captured payments, and require the reporting of such payments. An "excluded payment" will not be subject to the defensive measures. An "excluded payment" generally means a payment where there is no double non-taxation, including in cases where a payment is subject to a supplementary tax, such as a qualified IIR, UTPR, or domestic top-up tax. The new defensive measures generally apply for payments made from 1 April 2024. However, the measures apply from 1 January 2025 for payments made in respect of arrangements that were in place on or before 19 October 2023.

Dividends

A withholding tax applies on dividends distributed in cash or in the form of additional shares to non-resident companies. If shares are given, the tax base is the cash equivalent amount. The withholding tax rate is 25% (increased from 20% effective 1 January 2020).

Effective 1 April 2024, dividend payments made to associated entities resident in jurisdictions on the EU list of non-cooperative jurisdictions, as well as no-tax and zero-tax jurisdictions, are subject to new defensive measures to ensure the prevention of double non-taxation and essentially restrict domestic withholding tax exemptions in respect of captured payments and require the reporting of such payments.

The dividend withholding tax also applies to the following distributions from Real Estate Investment Trusts (REITs):

Property income dividends; and
Distributions paid out of the proceeds of the disposal of a property used in the property rental business from a REIT.

The withholding tax does not apply where an Irish resident company (the paying company) makes a relevant distribution to an authorized withholding agent or qualifying intermediary (AWA/QI) on behalf of the ultimate beneficiary. This is regardless of whether the ultimate beneficiary is liable to withholding tax as the withholding agent takes over the responsibility of the paying company in respect of the dividend withholding tax.

The exemption from dividend withholding tax may be applied directly by the payor or AWA/QI at the time of payment of the dividends, on condition that the recipient had filed a declaration that it is exempt from dividend withholding tax. Where the recipient is a qualifying non-resident person other than a company, the declaration form must be certified by the tax authority of the country of residence to the effect the person is resident there for tax purposes.

The certificates referred to above are generally effective or a period of six years.

If withholding tax is applied at the time of payment whilst an exemption is available, a refund of the withholding tax may be subsequently claimed.

Exemptions under Domestic Law

Ireland provides for a very broad dividend withholding tax exemption. Indeed, there is no withholding tax under domestic law on dividends paid to:

Entities resident either in an EU Member State or in a country with which Ireland has an applicable double tax treaty, including treaties that have been signed but have not yet become effective (these are referred to as “relevant territories”). The exemption applies if the entities resident in relevant territories are not controlled by Irish residents;
Non-resident entities that are ultimately controlled by residents of a “relevant territory”;
Non-resident companies or 75% parent companies of non-resident companies, whose principal class of shares is substantially and regularly traded on a recognized stock exchange in a “relevant territory” or any other stock exchange approved by the Minister of Finance for the purposes of the dividend withholding tax scheme; and
Non-resident companies which are wholly owned by two or more companies whose principal class of shares is substantially and regularly traded on a recognized stock exchange in a “relevant territory” or any other approved stock exchange.

Exemption under EU Parent Subsidiary Directive

In application of the EU Parent-Subsidiary Directive, dividends paid to corporate recipients located in another EU/EEA Member State or Switzerland are exempt from withholding tax if the following conditions are met:

The parent company is resident in an EU or EEA Member State or Switzerland, is subject therein to one of the taxes listed in the Directive, and takes one of the legal forms listed in the Directive; and
The parent company holds at least 5% of the capital or voting rights in the Irish subsidiary for at least two years (25% in case of Swiss recipients).

The withholding tax exemption is denied to an arrangement or series of arrangements that have been put in place for the main purpose or one of the main purposes of obtaining a tax advantage.

Interest

A withholding tax applies on interest payments to non-resident companies at the rate of 20%, but broad exemptions from the withholding tax are available under domestic law.

Effective 1 April 2024, interest payments made to associated entities resident in jurisdictions on the EU list of non-cooperative jurisdictions, as well as no-tax and zero-tax jurisdictions are subject to new defensive measures to ensure the prevention of double non-taxation and essentially restrict domestic withholding tax exemptions in respect of captured payments and require the reporting of such payments.

Exemptions under Domestic Law

Interest payments to non-residents are exempt from withholding tax if the interest is:

Paid by a bank in the ordinary course of a banking business carried out in Ireland;
Paid by a certified International Financial Services Centre (IFSC) company, a certified Shannon company, or a specified collective investment undertaking;
Paid by a company to an investment undertaking that is within the gross-roll-up taxation regime;
Paid on Government securities and securities issued by certain State-sponsored bodies;
Paid by companies authorized by the revenue authorities to pay such interest without withholding any taxes;
Paid by a company or an investment undertaking to a company resident either in an EU Member State or in a country with which Ireland has an applicable double tax treaty, including treaties that have been signed but have not yet become effective (these are referred to as “relevant territories”);
Paid by a special purpose securitization company to a person resident in the relevant territory;
Paid by finance and other companies that make loans but are not licensed banks or building societies (subject to certain conditions); and
Paid by the National Asset Management Agency (NAMA) to a person resident in a relevant territory (except companies in certain cases).

Exemption under EU Interest and Royalty Directive

The EU Interest and Royalty Directive provides for a withholding tax exemption on interest paid to companies resident in the EU or Switzerland if:

The recipient company directly owns at least 25% of the Irish payer for at least two years;
The Irish payer company directly owns at least 25% of the recipient company for at least two years; or
A third company owns at least 25% of both the recipient company and the Irish payer for at least two years.

In circumstances where a person would, under a tax treaty, be entitled to a full or partial refund of any withholding tax deducted, the person may make a self-certification (in Form 8-3-6 Interest) to the person making the interest payments in order that withholding tax is applied at the appropriate tax treaty rate. The self-certification will expire after a period of 5 years or upon any material change in the facts and circumstances of the payee.

Where there is a delay in receipt of the self-declaration documents (i.e., certified or uncertified Form 8-3-6 Interest) and the tax residency certificate by the person making the interest payment (payer), and there is a contractual obligation to make the payment prior to the receipt of the completed forms, then the payer may rely upon information obtained in relation to the recipient as per the anti-money laundering regulations to establish a prima facie case that the recipient is resident in a territory with which Ireland has a tax treaty in force. Once the prima facie case is established, the interest can be paid after withholding tax as per the applicable tax treaty for 90 days, commencing from the date of the first payment of interest to the recipient.

The recipient of the payment must complete and certify the forms required, obtain a tax residency certificate, and send the relevant documentation to the payer within the 90-day period. Where the requirement is not met:

The payer must account for and pay any withholding tax that should have been withheld under Part 8 of the Tax Consolidation Act 1997; and
Tax must be withheld at the standard withholding tax rate for all future interest payments until the self-certification declaration and tax authority certification/residence certificate are provided.

Royalties

No withholding tax applies on royalty payments except patent royalties and royalties qualified as “annual payments”, which may potentially attract withholding tax at the rate of 20%. A royalty qualifies as an “annual payment” if it is recurring in nature and the recipient earns it without having to incur any expenses.

Effective 1 April 2024, royalty payments made to associated entities resident in jurisdictions on the EU list of non-cooperative jurisdictions, as well as no-tax and zero-tax jurisdictions, are subject to new defensive measures to ensure the prevention of double non-taxation and essentially restrict domestic withholding tax exemptions in respect of captured payments and require the reporting of such payments.

Exemptions under Domestic Law

In the limited scope wherein a withholding tax applies, an exemption is available under domestic law if:

The royalties are paid in respect of foreign patents or under a licensing agreement which is executed in a foreign territory and is subject to the law and jurisdiction of the foreign territory;
The payment of royalties is made in the ordinary course of a trade or business carried on by the Irish company, and is not paid to the non-resident recipient in connection with a trade or business it carries out in Ireland through a branch or agency;
The company in receipt of the royalties is resident in an EU Member State or in a tax treaty partner country;
That country in principle assesses, to tax foreign-source royalties received therein by its residents; and
The payment of the royalties is made for bona fide commercial reasons and does not form part of a tax avoidance arrangement.

Any paying company choosing to apply the above exemption under administrative practice is required to notify the revenue authorities before filing its annual return for the accounting period in which the royalty is paid. In case a non-resident company sells Irish patent rights, the purchaser is required to withhold taxes on the gross sale proceeds (without deduction of the seller’s acquisition cost) as if it were a payment of royalties.

Exemption under EU Interest and Royalty Directive

The EU Interest and Royalty Directive provides a withholding tax exemption on royalties paid to companies resident in the EU or Switzerland if:

The recipient company directly owns at least 25% of the Irish payer for at least two years;
The Irish payer company directly owns at least 25% of the recipient company for at least two years; or
A third company owns at least 25% of both the recipient company and the Irish payer for at least two years.

Service Fees

There is no withholding tax on service fees paid to non-residents.

Capital Gains

A withholding tax at the rate of 15% applies on capital gains realized by non-residents on the disposal of the following assets:

Land, minerals, or exploration rights in Ireland or the Irish continental shelf;
Unlisted shares deriving 50% or more of their value from the above assets;
Unlisted shares issued in exchange for shares deriving 50% or more of their value from the above assets; and
Goodwill of a trade carried on in Ireland.

A withholding tax exemption applies on capital gains if the consideration for the assets does not exceed EUR 500,000 or where the non-resident obtains a tax clearance certificate from the tax authorities. A tax clearance certificate is granted to the seller if capital gains tax is not payable or has been already paid by the seller.

Rent

A withholding tax at the rate of 20% applies on rent paid to non-resident companies.

Effective 1 July 2023, the tenants or collection agents are also required to file a rental notification to the tax authorities in the Non-resident Landlord Withholding Tax (NLWT) system, providing specified details in respect of the non-resident landlords to whom the rent income is paid net of withholding tax.

Detailed guidance on the new NLWT system may be accessed here.

Professional Services Withholding Tax (PSWT)

Tax is withheld at the rate of 20% on the gross amount of professional service fees paid to non-resident corporate recipients. The withholding tax applies to services rendered by professionals, i.e., specified persons to accountable persons. Accountable persons include government departments, local authorities, authorized health insurers, and commercial and non-commercial semi-state bodies.

Relevant Contracts Tax (RCT)

The tax is withheld at the following rates on the gross amount paid by principal contractors to non-resident subcontractors for the work carried on in Ireland in connection with ‘relevant operations’:

A 0% rate applies if the subcontractor has an up-to-date tax compliance record;
A 20% rate applies if the subcontractor has a substantially up to date tax compliance record; and
A 35% rate applies if the subcontractor has a poor tax compliance record or is not registered with the tax authorities.

The relevant operations include construction, forestry, and meat processors.

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