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This is the question posed by a recent discussion paper by Prof. Jim Stewart. This paper argues that the tax routine in Ireland that allows companies incorporated in Ireland to be non-resident for tax purposes, is exceptional. Some issues around the Irish rules of tax home for companies were talked about in a prior post.

The post consists of a summary of ten countries which exclusively apply the test of management and control as the foundation for identifying the taxes residency of corporations. Altogether there remain 20 countries which adopt such a system, though these countries are in the minority with most countries also applying the test of incorporation.

Although not explicitly defined a central feature of the Stewart article is the idea of “bi-location”. This seems to arise when a ongoing company is incorporated in a single country but tax citizen in another. There are more than 20 countries who’ve residency rules that produce that possible. On that basis Ireland will not look like exceptional, is in the minority though. If an organization is managed and controlled in Ireland it will be tax resident in Ireland unless the provisions of a double tax agreement with a treaty country deem it to be otherwise – the ‘treaty’ exception.

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If a company is incorporated in Ireland it’ll be tax resident in Ireland unless it is a ‘relevant’ company – the ‘trading’ exclusion. See this note from the Revenue Commissioners. Under Irish law it is possible for a company to be “bi-located” in the sense it is used in the Stewart article. Of course, under the rules of permanent establishment (PE) it’s possible for an organization (through branches) to be located in many countries.

A company can have a PE in virtually any country where it operates, at the mercy of the rules for determining PE. If an organization has a PE in virtually any country it will be subject to commercial income tax for the reason that country on the profits earned through the permanent establishment. Permanent establishment is not analogous to residence though the Stewart article seems to conflate both. Thus both subsidiaries seems to meet the test of ‘permanent establishment’ in Ireland for corporate tax purposes. The actual fact that they are not so deemed gives these and other ‘bi-located’ companies an extremely valuable tax advantage.

It holds true that some of Apple’s subsidiaries have functions in Ireland that meet up with the test of permanent establishment in Ireland. And they’re treated as long lasting establishments for corporate taxes purposes in Ireland. There may be no benefit for these businesses never to being regarded as permanent establishments in Ireland because they’re.