Procedures against Ireland and Other Member States
IRELAND
Patent Royalties
The Commission has requested Ireland to end discriminatory rules on tax treatment of patent royalties. The issue revolves around the restriction on the availability of exemption of patent income to where work which resulted in the patent had been carried on “in the State”.
One cannot help but wonder why such a request was made by the Commission when Ireland has already commenced procedures for ending the discriminatory rules-the provisions introduced at Report Stage of the Finance Bill 2007 provide that the work must be carried out in the EEA (i.e. an EU Member State or Iceland, Liechtenstein and Norway) rather than in the State. Presumably once the Finance Bill has been enacted, the issue will be resolved.
Remittance basis of taxation
In addition, the Commission has requested Ireland to end discriminatory taxation of income sourced in the United Kingdom, i.e. the remittance basis of taxation.
Ireland normally does not tax income received by non-domiciled persons from money invested abroad unless that money is remitted into the State. The Irish legislation excludes from this rule income sourced in the UK and thus treats such income less favourably than income arising elsewhere in the EU. The Commission considers that this is contrary to the EC Treaty and to the EEA Agreement, as it restricts the free movement of capital. FA 2006 had amended the remittance basis to exclude foreign employment where such income is attributable to duties carried on in the State.
If Ireland does not reply satisfactorily to the above reasoned opinions within two months the Commission may refer the matter to the European Court of Justice.
Other Member States
The Commission has also requested
- Germany to end discriminatory rules applied to non-resident tax payers, whereby a withholding tax is applied at source on income paid to certain categories of non-residents; and
- Austria to end discriminatory rules on personal income tax, whereby under certain conditions resident taxpayers with foreign income cannot benefit from full tax deduction of personal expenses while residents with domestic income can.
In addition, the Commission has commenced VAT infringement procedures against Italy and Sweden; and taxation of electricity infringement procedures against Poland.