High Court finds errors in Tax Appeals ruling on Accenture foreign withholding tax deductions

The High Court has found that the Tax Appeals Commission made errors of law in a case concerning the Irish tax treatment of foreign royalty withholding tax incurred by Accenture Global Solutions Limited.

The judgment was delivered by Ms Justice Marguerite Bolger on 12 May 2026, concerned an appeal by the Revenue Commissioners against a June 2024 determination of the Tax Appeals Commission. The original determination had found in favour of Accenture, allowing the company to deduct foreign royalty withholding tax as a trading expense for Irish corporation tax purposes. The High Court found errors of law in the Commission’s analysis on all but one of the questions referred to it.

The case is significant because it addresses the boundary between two different forms of tax relief: a deduction for trading expenses under section 81 of the Taxes Consolidation Act 1997, and relief for foreign tax under Ireland’s double taxation regime, principally Schedule 24 of the same Act. The Court held that the foreign royalty withholding tax at issue could not be converted into a deductible trading expense simply because the company was unable to obtain an effective foreign tax credit in the relevant accounting periods.
Accenture Global Solutions Limited is an Irish incorporated and Irish tax-resident company within the Accenture group.

According to the judgment, the company held and centrally controlled the group’s intellectual property assets and licensed those assets to operating entities in various foreign jurisdictions. Those local operating entities paid royalties to Accenture for the use of intellectual property rights. In several jurisdictions, local tax law required tax to be withheld from the royalty payments before they were remitted to Ireland.

The foreign withholding tax was deducted at source from the gross royalty payments. The judgment noted that the rate and mechanism varied by jurisdiction. In some cases, such as Argentina, withholding tax was imposed by reference to a presumed net income amount, producing an effective withholding rate of 31.5 percent on the gross royalty. In other jurisdictions, withholding tax was applied directly to the gross royalty at a rate of 10 percent.
During the relevant accounting periods, Accenture was loss-making for Irish corporation tax purposes and therefore did not pay corporation tax in the State for those years. As a result, the statutory calculation under Schedule 24 gave rise to a foreign tax credit of zero. Accenture did not claim credit relief under Schedule 24. Instead, it claimed the foreign withholding tax as a deductible trading expense under section 81 of the Taxes Consolidation Act 1997. If allowed, that treatment would have increased its trading losses available to carry forward or surrender within the group.
Revenue rejected the deduction. It argued that foreign royalty withholding tax was a tax on income and that the Taxes Consolidation Act already contained a specific regime for relief from such foreign tax through Schedule 24 and related provisions. On Revenue’s case, section 81 could not be used as an alternative route where Schedule 24 produced no effective relief.
The Tax Appeals Commission had taken a different view. It accepted that the withholding tax was in the nature of a tax on income, but concluded that this did not automatically prevent it from being deductible under section 81 in the circumstances. The Commissioner found that the withholding tax was an economic cost of carrying on Accenture’s trade in the relevant jurisdictions and that it was incurred wholly and exclusively for the purposes of that trade.

The High Court disagreed with that analysis. Ms Justice Bolger held that the specific statutory regime for foreign tax relief could not be bypassed by treating the same foreign tax as a general trading expense. The Court placed weight on the wording of section 81, which is expressly “subject to the Tax Acts”, and on the structure and purpose of Schedule 24. The judgment stated that double taxation relief is a “carefully drafted regime” and that its limitations cannot be circumvented by moving to a section 81 deduction claim.
The Court also rejected the view that a taxpayer’s election not to claim a credit under Schedule 24 opened the door to a section 81 deduction. The judgment held that paragraph 10 of Schedule 24 allows a taxpayer to elect not to take a credit within the double taxation arrangements. It does not permit the taxpayer to step outside the double taxation regime entirely and claim the foreign tax as a trading expense.
A central issue was whether the withholding tax was incurred for the purpose of earning profits or whether it was an application of income or profits after they had been earned. The Court held that the Commissioner had focused too heavily on the timing of the withholding tax and on the fact that it was imposed on gross receipts. The correct test, according to the judgment, was whether the payment was made to earn the profit or whether it was an application of profit or income once earned.

Ms Justice Bolger concluded that foreign withholding tax, as a tax on income, was not an expense incurred to earn the royalty income. It was charged after the royalty payments had been earned. The judgment distinguished this from costs such as rates, stamp duty or employer PRSI, which may be deductible because they are incurred before income is earned and in the course of carrying on the business.
The Court also considered whether Accenture had no practical alternative but to incur the withholding tax. The Tax Appeals Commission had found that the foreign withholding tax was part and parcel of Accenture’s business activity and that the company could not conduct its trade in the relevant jurisdictions without incurring it. The High Court found there was no evidence to support that conclusion. The judgment noted that, had Accenture chosen to operate through permanent establishments in the relevant jurisdictions, the foreign withholding tax would not have been charged in the same way.
Ms Justice Bolger emphasised that Accenture was entitled to choose its business structure. However, that choice had tax consequences. The Court stated that the withholding tax became an irrecoverable foreign tax because of Accenture’s decision to license intellectual property into jurisdictions where it did not have a permanent establishment, and because it was not paying Irish corporation tax in the relevant periods.

The judgment also dealt with earlier case law cited before the Tax Appeals Commission. The Court distinguished Harrods (Buenos Aires) Ltd v Taylor-Gooby, a case concerning an Argentine tax that was deductible because it was charged on capital and had to be paid in order to continue trading in Argentina. The High Court found that the position was different in Accenture’s case, where the withholding tax was a tax on income and arose from the structure chosen for licensing intellectual property abroad.
The Court was also unwilling to place reliance on an older decision of a Hong Kong Inland Revenue Board, which the Tax Appeals Commission had regarded as relevant. Ms Justice Bolger said the High Court had little or no understanding of the law applied by that Board, its similarity to Irish statutory provisions, or its status in the relevant legal hierarchy.
On the Argentinian tax issue, Revenue argued that the Commissioner had made an unsupported finding that the withholding tax was applied on gross royalties. The High Court rejected that part of Revenue’s challenge. Ms Justice Bolger held that Accenture had presented expert evidence that Argentinian withholding tax could be described as an effective rate of 31.5 percent on the gross amount, and that the Commissioner’s summary of that evidence was fair.
The result is that the Court found errors of law in relation to questions 1 and 3 to 11 referred in the case stated, but not question 2. The matter was listed to return before the Court on 21 May 2026 to allow the parties to make submissions on the appropriate orders arising from the judgment.
The case will be closely read by tax advisers and companies with international royalty structures. It confirms, at High Court level, that the unavailability of an effective foreign tax credit does not necessarily allow a company to recast foreign withholding tax as a deductible trading expense. It also reinforces the importance of Ireland’s Schedule 24 regime as the primary mechanism for relief from foreign tax on income. Schedule 24 is described in tax guidance as setting out the mechanics for determining the amount of foreign tax credit against Irish tax, subject to limits including the Irish tax attributable to the relevant income.
For multinational groups, the judgment underlines that the Irish tax consequences of foreign withholding taxes may depend not only on the foreign tax charged, but also on the structure through which international activities are conducted, the availability of Irish taxable profits, and the limits of Ireland’s statutory foreign tax relief regime. The Court’s reasoning is also likely to matter in future disputes where taxpayers seek to distinguish between a tax on income and a deductible cost of earning income.