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Benefits of Establishing an Irish Company


Contributed by Fusion Formations
February 6, 2019



Ireland is one of the most popular jurisdictions for international corporations seeking to expand into the European market. In addition to many larger multinationals who have set up operations, we work with a large and diverse range of small and medium sized firms who have decided to utilise Ireland as their European headquarters or to use Ireland for their business and investment requirements. These companies are involved in a wide range of activities in sectors such as ecommerce, professional services, financial services, pharmaceuticals, IT, software development, manufacturing and retail.

One of the main reasons for Ireland's attractiveness as an investment location is the range of tax incentives which are potentially available.

We have experience dealing with many of the tax structures favoured by business owners who are considering investing in Ireland and we are members of international network of solicitors, Accountants and Tax Advisors who we can collaborate with on cross border planning matters.

All companies incorporated in Ireland are regarded as tax resident in Ireland unless it is considered a tax resident of another county under the terms of a double tax treaty agreement made with Ireland.

I set out below a summary of some of the main reasons why Ireland is viewed as an attractive location for companies looking for a base from which to expand into the European market and outlines some of the main issues which arise for foreign investors when considering incorporating an Irish company.

12.5% Corporation Tax

Ireland's 12.5% corporate tax rate on trading income is obviously one of the main contributing factors for many companies deciding to establish operations in the Irish jurisdiction. In addition there are a variety of additional reliefs which (if applicable) can significantly reduce the effective rate of tax below 12.5% and in some cases can result in an effective rate of 0%. A tax rate of 25% applies to non-trading income such as investment income, foreign dividends, rental income and profits from foreign trades.

Corporation Tax Start Up Exemption

A three year exemption from corporation tax is available for start-up companies (depending on the level of the company's corporation tax liability, employer's social insurance paid and the nature of the business carried out by the company). Any unused relief arising in the first 3 years of trading due to insufficiency of profits can be carried forward for use in subsequent years. This relief was due to expire by the end of 2014 however it has been extended to companies commencing a qualifying trade in 2015.

Participation Exemption and Holding Company regime

Ireland has what is referred to as a participation exemption for gains tax arising on the disposal of shares in trading companies. There are certain conditions which must be met to claim this exemption. As such it is important that a Company's investments and the timing of various disposals are managed correctly to satisfy these conditions.

Grants and Incentives Available for Overseas Investors

The Irish Government is dedicated to developing long-term, sustainable FDI relationships with international businesses. This is evident in the variety of grants and funding schemes available from Irish government entities for new companies seeking to incorporate in Ireland. The Industrial Development Agency (IDA) and Shannon Development are the primary grant-awarding bodies. There are many grants available to companies incorporating in Ireland including Capital Grants, Employment Grants, Training Grants and Research and Development Capability (R&D) Grants.

The IDA provides advice and support to both new and existing companies. It also owns numerous offices and large sites throughout Ireland which it offers to start-up companies and will guide the company in relation to where the best location is to fit its business objective. Rent remissions and rent allowances may also be available.

Ireland's R&D Regime

Ireland has one of the most generous R & D regimes in the world allowing a tax credit of 25% on qualifying R & D expenditure.

Ireland's IP Regime

Relief in the form of capital allowances against trading income is available for capital expenditure incurred by companies on a wide range of intellectual property and intangible assets acquired for use in a trade. The scheme applies to a broad range of intangibles (including assets acquired from group companies).

Withholding Tax

Irish tax legislation provides for a 20% rate of withholding tax in respect of dividends, interest and patent royalties. However, due to the availability of a board range of exemptions, Irish resident companies can normally pay dividends, interest and patent royalties to non-residents free of any Irish withholding tax.

Double Taxation Agreements

Ireland is continuously expanding its tax treaty and agreement network so as to reduce barriers to cross-border trade and investment.

Transfer Pricing Rules

Ireland's transfer pricing legislation applies in respect of trading transactions only. The Irish rules impose an arm's length standard on trading transactions between related parties. Small and medium sized enterprises are excluded from the scope of Irish transfer pricing legislation.

Key Employee Incentives

Ireland's has a Key Employee Engagement Programme (KEEP) which is a tax-advantaged share scheme for small and medium-sized enterprises in Ireland designed to allow for the tax efficient granting of share options by SMEs in order to retain their key employees.

Ireland has a Special Assignment Relief Programme which applies to employees assigned to work in Ireland. Subject to certain conditions, 30% of an employee's income in excess of €75,000 is exempt from Irish income tax and an employer can cover the cost of flights home and school fees on a tax free basis.

Ireland introduced a Foreign Earnings Deduction scheme providing for a deduction from income tax for individuals who carry out the employment duties in BRICS countries.  Other countries to which the scheme applies include Algeria, the Democratic Republic of the Congo, Egypt, Ghana, Kenya, Nigeria, Senegal and Tanzania, Bahrain, Chile, Indonesia, Japan, Kuwait, Malaysia, Mexico, Oman, Qatar, Saudi Arabia, Singapore, South Korea, Thailand, United Arab Emirates and Vietnam.

 

We a trusted provider of company incorporation and related corporate services in Ireland. We offer fast, efficient, simple and reliable company formation service and we have an unrivalled reputation for quality and excellence.

We can provide every service you will need to set up your business in Ireland. You choose the most appropriate combination to suit your needs and with our many contacts and partners, we also can offer our clients access and advice in relation to other disciplines such as accounting, tax, legal and logistics/office space.

Please do not hesitate to contact us if we can be of assistance at info@fusionformations.ie.

 

Tags: Ireland | tax | business | investment | Tax | trade | dividends | services | Europe | legislation | transfer pricing | interest | royalties | corporation tax | withholding tax | employees | manufacturing | Algeria | Bahrain | Chile | Egypt

 

 

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