Tax Appeals Commission Determinations – August 2025

In this month’s selection of Appeals Commission determinations, we bring you another two cases, 157TACD2025 and 164TACD2025. In 157TACD2025, the Appeals Commissioner considered the availability of a deduction for foreign royalty withholding tax under the general provisions of section 80 TCA 1997. In 164TACD2025, the Appeals Commissioner considered a case against a refusal to grant an Irish VAT registration.

157TACD2025

  • This case concerned deductions for foreign royalty withholding tax (“RWHT”) which the Appellant had treated as a deductible expense in calculating its adjusted taxable trading income for the relevant period resulting in trading tax losses. The determination purported to deny future claims in respect of the trading losses which the Appellant could claim in calculating its corporation tax liability in future years. The total amount of the determination under appeal is €6,677,815.
  • The Appeal Commissioner had previously issued a determination in favour of the Appellant, regarding appeals against notices of determination which had refused the same deduction for foreign RWHT, in respect of the accounting periods ending 31 December 2015 to 31 December 2018 inclusive. The case stated is currently awaiting a hearing before the High Court.
  • As part of carrying out its trade, the Appellant licensed its database to customers, which included both affiliated entities and third-party customers, in foreign jurisdictions. This arrangement was governed by way of licence, sub-licence and distribution agreements for the specific jurisdictions concerned.
  • The Appellant did not have a branch or permanent establishment for corporation tax purposes in any of the relevant foreign jurisdictions.
  • During the relevant period, the Appellant could not avail of a credit pursuant to Schedule 24 TCA 1997, for foreign RWHT withheld on its royalty income as it was in a loss-making position. As a result, the Appellant claimed a deduction for the foreign RWHT it suffered as a deductible expense under Section 81 TCA 1997.
  • As the foreign RWHT is applicable to gross receipts, the Appellant contended that it was not a tax on the profits of the trade, but rather an unavoidable cost of selling its products/services in the relevant jurisdictions and was incurred wholly and exclusively in carrying out its trade.
  • Revenue argued that that foreign RWHT is specifically dealt with in in accordance with section 826 TCA 1997 and Schedule 24 TCA 1997 and the general provisions in section 81 TCA 1997 were therefore not available to relieve the imposition of the foreign RWHT incurred by the Appellant. Revenue further argued that it was wrong in principle to adopt an approach which disregards a specific legislative regime for the provision of relief from foreign tax suffered, in favour of seeking to apply the general provision in relation to deductibility of trading expenses.
  • The Appeal Commissioner concluded that foreign RWHT was a tax on income, but that fact did not preclude it from being considered a deductible expense, in accordance with section 81 TCA 1997. However, that being the case, it was still necessary to satisfy the wholly and exclusively for the purposes of the trade test for determining deductibility.
  • The Commissioner was satisfied that when arriving at business profits assessable to tax, a taxpayer must first look to section 81 TCA 1997 to determine what expenses are deductible.
  • The Commissioner noted that there are many compulsory deductions imposed that are permissible as a deduction pursuant to section 81 TCA 1997, such as Irish and foreign stamp duty, Irish and foreign irrecoverable VAT, rates levied on commercial property, local authority charges, and employer’s PRSI. The test of deductibility is that the expense must be made for the purposes of earning the profits of the trade, such that if a cost was incurred on the journey to profit it is capable of being a deductible expense.
  • The Commissioner concluded that the Appellant was entitled to treat the foreign RWHT suffered, as “an expense incurred wholly and exclusively for the purpose of its trade”, where the Appellant could not derive any benefit from double taxation relief under Schedule 24 TCA 1997 in relation to the foreign RWHT it suffered.
  • In arriving at the determination, the Commissioner considered the following relevant facts:
    1. The Appellant was not entitled to avail of relief for double taxation under Schedule 24 TCA 1997,
    2. The tax was calculated prior to the ascertainment of profit and the tax was applied to gross royalty income,
    3. The tax was calculated irrespective of whether the Appellant made a profit or a loss, and
    4. There was a nexus between the expense and the earning of profits for deductibility.

164TACD2025

  • This case concerned an appeal against a rejected application for VAT registration.
  • The Appellant, a limited liability company, had been registered for VAT, however the registration was subsequently cancelled following an intervention by Revenue.
  • In July 2024, the Appellant re-applied for VAT registration and the application was denied by Revenue.
  • The Appellant who had registered with the Central Registrations Office (CRO) in 2009 and who was managed and controlled by a director located outside of Ireland, contended that it conducted substantial business activities within Ireland that necessitated VAT registration.
  • The Appellant paid corporation tax in Ireland, and had engaged two contractors, the first of whom provided design services was engaged under a consultancy agreement and the second, being the Appellants agent, provided support services. The Appellant’s books and records were held at its registered business address which was the same address as the Appellant’s Agent. The VAT inclusive annual rent of €369 was paid to the Appellant’s agent for the registered business address and an office desk space was also leased from the agent.
  • In January 2025, the Appellant employed an administrative assistant to carry out administrative tasks.
  • The Appellant contended it had a significant economic presence in the State, including contracts and partnerships with local Irish companies. The Appellant’s agent submitted that this involvement in the Irish market obligated the Appellant to register for VAT under the provisions of the VATCA 2010. The Appellant submitted that it conducted taxable business activities from Ireland and had business relationships within the EU.
  • Revenue denied the application for registration on the grounds that the Appellant was not an “accountable person”, pursuant to the provisions of sections 5 and 9 VATCA 2010. Revenue contended that the Appellant did not provide objective evidence of trade or of the capacity to trade in the State. It stated that the Appellant lacked either a physical or technical presence in the State, such as employees or equipment, and that its directors were non-residents of the State. The Appellant’s registered business address was considered insufficient to prove the existence of a fixed establishment or significant business activity in Ireland.
  • Revenue stated that it expected to see invoices and regular trade receipts, such as payments between a business and its customers to illustrate what transactions were occurring in the State to evidence business activity herein.
  • The Appeal Commissioners commented that the issue in this appeal was whether the Appellant has provided sufficient evidence that it was a “taxable person” and involved in economic activity within the State.
  • The Appeal Commissioners stated that it is the Appellant who bears the burden of proving it is a taxable person. Unless the Appellant succeeds in so doing, the Appellant cannot be said to fall within the definition of an “accountable person” under VATCA 2010, entitled to registration in accordance with section 65 VATCA 2010.
  • The Appeal Commissioner agreed that the Appellant has not produced evidence that it had carried out economic activity, in accordance with section 5 VATCA 2010 or to show that the Appellant was engaged in intra-community acquisitions, in accordance with section 9 VATCA 2010.
  • The Appeal Commissioner held that Revenue had correctly refused the Appellant’s application for a VAT registration.