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Brussels, 30 March 2007

Direct Taxation: Commission requests Ireland to end discriminatory taxation of income sourced in the United Kingdom and asks the United Kingdom for information about similar rules applied in its territory

By a reasoned opinion under Article 226 of the EC Treaty, the European Commission has formally requested Ireland to amend its legislation concerning remittance base taxation. Ireland normally does not tax income received by non-domiciled persons from money invested abroad if the interest is left on the foreign bank account. 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. If Ireland does not reply satisfactorily to the reasoned opinion within two months the Commission may refer the matter to the European Court of Justice. At the same time the European Commission has decided to send a request for information in the form of a letter of formal notice to the United Kingdom about similar remittance base taxation rules, which in turn appear to discriminate against income sourced in Ireland.

"The Commission does not advocate remittance base taxation, as it may lead to double non-taxation." said EU Taxation and Customs Commissioner László Kovács, "Nonetheless, where it exists, the Single Market requires that it is at least applied in a non-discriminatory manner".

Ireland applies remittance base taxation to foreign sourced income of persons who are not Irish domiciled, or who are Irish citizens who are not ordinarily resident in Ireland.

Remittance base taxation means that income from money invested abroad is only taxed in so far as the income is paid to the State of residence. So, for instance, interest received on a foreign bank account is not taxed, as long as the interest is not paid ("remitted") to the State of residence, but is left on the foreign bank account.

However, Ireland excludes income sourced in the United Kingdom from remittance base taxation. This dissuades non-domiciled and not ordinary residents living in Ireland from investing their money in the United Kingdom. Equally, it is likely to make it more difficult for providers of capital investment opportunities in the United Kingdom to attract capital from these persons. The exclusion of income sourced in the United Kingdom thus constitutes a restriction of the free movement of capital as protected by Article 56 EC and Article 40 EEA. The Commission sees no justification for the restriction.

The Commission also decided to send a request for information in the form of a formal notice to the United Kingdom on its remittance base taxation rules. The United Kingdom rules are similar to the Irish, but exclude income sourced in Ireland. The United Kingdom is asked to reply within two months. A letter of formal notice is the first step of the infringement procedure of Article 226 of the EC Treaty.

The Commission's case reference numbers are 2005/4950 for Ireland and 2007/2003 for the United Kingdom.

For the press releases issued on infringement procedures in the taxation or customs area see:

For the latest general information on infringement measures against Member States see:

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