US tax reform and its impact on Ireland

Tax reform is high on the agenda in the United States

What might the changes mean for Ireland and Irish business?

There have been multiple attempts to overhaul the US tax system since the last major reform in 1986. In the intervening period, there have been dramatic changes in the global business and tax environment.

The current US tax system can be viewed as uncompetitive when compared with other major countries. It is widely acknowledged that a new tax system is needed to help create jobs and drive economic growth in the US.

Ireland is a small, open economy and one of our most important relationships has been, and continues to be, with the US. Any fundamental changes to the US tax system could have implications for US FDI investment in Ireland and the Irish economy as a whole.

US tax reform and its impact on Ireland — PwC Ireland


Where does US tax reform currently stand?

Timing of tax reform

On 2 November 2017, House Ways & Means Committee Chairman Kevin Brady released the “Tax Cuts and Jobs Act of 2017” bill which provides detail on what US tax reform could look like.  Both the House and Senate’s objective is to hold a vote on a US tax reform bill by 20 November. If both the House and Senate can achieve sufficient votes, then the House and Senate will need to reconcile differences between each of their bills and re-vote to pass compromise legislation. The Republicans intend for this to be a fast-paced process given both the Trump Administration and Republican House and Senators obtained alignment on the core principles of tax reform when the Join Framework was released.  

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The proposed changes

The “Tax Cuts and Jobs Act of 2017” bill proposes to lower business and individual tax rates and adds a number of provisions with an intent to modernize US international tax rules. Elements included in this bill include:  

  • A reduction in federal corporate tax rate to 20%
  • A partial limitation on the deductibility of interest expense
  • Transition to a territorial tax system with 100% exemption of foreign dividends
  • Mandatory deemed repatriation of untaxed foreign earnings
  • Excise tax on payments made by US companies
  • Rules around “high return CFCs”

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Considerations for Irish business

  • The proposed changes need to be carefully monitored by Irish FDI and domestic companies
  • Corporate tax rate reduction may not directly have significant impact on Irish business but should be considered in totality with all provisions
  • Mandatory deemed repatriation could lead to short-term activity and repatriation to the US

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What should Irish businesses do now?

  • Consider the impact of potential US tax reform on existing projects, investments, supply chain and planned reorganisations
  • Model the potential cost and effective tax rate impacts of the various tax reform proposals
  • Understand business cash needs and ability to repatriate earnings to the US while considering the potential upcoming mandatory deemed repatriation
  • Monitor further developments and any draft legislation that emerges
  • Contact PwC Ireland to discuss your organisation's position and planning ahead of US tax reform

 

Latest US tax reform insights

Contact us

Liam Diamond
Partner
Tel: +353 1 792 6579
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Harry Harrison
Partner
Tel: +353 1 792 6646
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Susan Roche
Director
Tel: +353 1 792 6290
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Anthony Falkowski
Senior Manager
Tel: +353 1 792 8784
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