Abuse by non-resident firms targeted

Company and tax law has been tightened in the Finance Bill in an effort to curb the abuse of Irish-registered non-resident companies (IRNRs).

Under the new measures IRNRs will have to have an Irish resident director or provide a bond to the value of £20,000 (€25,395) as a surety against its failure to comply with the new company law and tax requirements.

The number of directorships that any one person can hold will be limited to 25, which should cut down on the number of nominee directors which feature in hundreds of these companies. And when applying to incorporate an IRNR company, the promoters must demonstrate to the authorities it proposes to operate a business in the Republic.

The tax treatment of IRNRs will also be brought in line with the position in other EU states, with the companies deemed to be resident for tax purposes in the Republic once registered here. Related companies operating in the Republic or those which are ultimately controlled by residents of an EU member-state or tax treaty, or where they are quoted on a recognised stock exchange, will continue to be exempt from tax here. This amendment will apply immediately to new companies which are incorporated here and for existing companies from October 1st, 1999.

IRNRs will also be obliged to provide information on their affairs to the Revenue Commissioners. A company which is, for instance, incorporated in the Republic but not tax-resident in the State will be obliged to identify where it is resident and state whether the company or a related company is trading in the Republic. And in a new departure, these companies will be required to reveal the beneficial owners to the Revenue. The Revenue Commissioners will in turn be obliged to supply details of any companies which fail to comply with these requirements to the Registrar of Companies who may, where appropriate, strike them off.

Further measures to stamp out abuses of this structure will be added to the Finance Bill at committee stage.

An amendment will provide that where a company fails to pay any penalties for failure to supply information or to file tax returns, these penalties may be recovered from the secretary of the company. If the secretary is not resident in the State, the penalties may be recovered from an Irish resident director of the company. And as a final resort any penalties will be recovered from the £20,000 bond.

The Government will be hoping the new measures will trigger a marked decrease in the number of IRNRs. Industry sources estimate that more than 40,000 are currently registered here, many of which are used as vehicles to evade tax and launder money. The beneficial owners of these companies have to date been heavily disguised through the use of nominee directors. Some IRNRs are legitimately used by Ireland's multinational sector but there were growing concerns that an increasing proportion were masquerading as companies operating at Dublin's IFSC.