The European Commission has formally requested Ireland to amend provisions which impose an exit tax on companies when they cease to be tax residents in Ireland. According to the Commission, such provisions are incompatible with the freedom of establishment as provided by the Treaty and the European Economic Agreement. The request takes the form of a “reasoned opinion”. Ireland may be referred to the EU's Court of Justice on the expiration of two months if the Commission is not satisfied with the defence of this provision or proposals to amend it.

The provision under scrutiny by the Commission appears to be section 627 TCA97. This addresses the position where a company disposes of assets after ceasing to be resident in the State and may not incur a liability either to corporation tax or capital gains tax. The provision does not apply where the assets continue to be used in Ireland by a branch or agency of the migrating company or where the company is ultimately controlled by residents of a tax treaty partner country.

According to the Commission, such taxation serves as a discriminatory penalty on companies wishing to transfer their place of central management abroad and interfere with the right of freedom of establishment as laid down in Article 49 of the Treaty on the Functioning of the European Union and Article 31 of European Economic Agreement.

The Commission sent a letter of formal notice to the Irish Authorities in November 2009.

The Commission had already decided to refer Portugal, Denmark, the Netherlands and Spain to the EU's Court of Justice for similar exit tax rules (see IP/09/1460 and IP/10/1565) and sent a reasoned opinion to Belgium (IP/10/299).

For full details see http://europa.eu/rapid/pressReleasesAction.do?reference=IP/11/78&format=HTML&aged=0&language=en&guiLanguage=en