Since 2003, Healy Consultants Group PLC has been efficiently and effectively assisting our Clients with i) Irish business registration ii) business licensing iii) Irish business banking solutions iv) visa options and staff recruitment strategies and v) tax planning solutions.
Ireland resident companies of all sizes enjoy the following tax incentives:
The Ireland corporation tax rate is 12.5%, the second lowest in the EEA after Bulgaria. It is possible to further reduce the annual tax bill by up to 25% by deducting R&D costs;
For the 1st year of business, trading profits can be reduced by expenditure incurred in the three years prior to the commencement of trade. Furthermore, for the first 3 years, annual income up to €320,000 is legally tax exempt;
There is no withholding tax for Irish companies on outbound payments to 72 double taxation signatory countries and the EU including dividends, interest and royalties. Also, there is a capital gains tax exemption on disposal of international subsidiaries;
An Irish LLC is exempt from VAT, if at least 75% of sales turnover arises from the export of goods;
Irish SMEs are not subject to i)annual audit (if the group has annual turnover less than €8m and hires less than 50 employees) and ii) transfer pricing provisions;
The Irish Tax Authorities welcome email and phone communication from business owners. Tax officers are helpful providing timely written advance tax rulings and clarifications re tax laws.
Irish companies may also receive following cash benefits from the Government:
An Irish LLC receives a cash grants of €10,000 for each staff member hired from the long term unemployed pool. Free re-training and re-skilling courses for these employees;
An Irish LLC receives an annual cash grant of €10,748 for each employee with a disability;
Large MNCs doing business in Ireland through a subsidiary enjoy countless benefits including:
An effective corporation tax rate of 0%, usually after Group relief. Also, if the Irish company is properly structured, investment income including i) subsidiary dividends ii) interest, royalty and patent income and iii) foreign branch profits is legally tax exempt;
Access to i) low cost Government owned industrial parks with purpose-built factories and ii) low cost greenfield sites for industrial usage. Investors can custom-build factories without the need for local planning permission;
Excellent Group relief incentives including i) exemption from filing consolidated tax returns ii) inter-company transfer of trading losses, excess management expenses and excess capital allowances;
Stamp duty relief is available for transfers arising from corporate reorganisations and reconstructions;
Trading losses may be i) carried forward indefinitely against future trading profits ii) carried back for one year or iii) allocated within Group companies or iv) offset against capital gains tax liabilities;
Lastly, MNCs will also likely to benefit as there are no ‘Controlled Foreign Company (CFC)’ and ‘Thin Capitalization rules’ in Ireland. Furthermore, there is a limited transfer pricing legislation for large multi-national companies registered in Ireland.
Foreign employees relocating to Irish companies enjoy low Irish income tax because:
Ireland has the youngest population in Europe, 55% under the age of 35. The young workforce has shown a particular aptitude for the efficient collection, interpretation and dissemination of research information;
Currently, 1 million people are in full time education in Ireland. In 2016, approximately 48% of 25 – 34 year olds are third level qualified;
Approximately 520,000 Irish residents speak a foreign language including Polish, French, Lithuanian, German, Russian, Spanish and Romanian;
European Economic Area (EEA) nationals and Swiss nationals are allowed work in Ireland without a work permit or visa.
Ireland is a rich source of highly skilled talent in science, technology and engineering. As a result, the country is the largest exporter of software in the world;
Annual net profits enjoy an expense deduction for the cost of IP amortised over a 15 year period;
The Government offers a portfolio of Business & Technology Parks in strategic locations. Furthermore, the country has a vibrant business angel and venture capital environment;
The close link between multi-national companies and Irish universities encourages leading-edge research.
Ireland does not impose corporate income tax and capital gains tax on hedge funds. As a result, Ireland is home to 40% of global hedge funds, which cumulatively account for €1.9 trillion in assets;
An Irish company is legally tax exempt and classified as non-resident if i) no business is done in Ireland ii) if the majority of shareholders and directors reside overseas iii) the entity neither has staff nor premises nor a corporate bank account in Ireland;
An international tax haven company is allowed to migrate the entity to Ireland. This is attractive to Clients who wish to abandon the use of tax haven companies, choosing instead to trade through reputable zero tax entities like an Irish LLC. For example, a BVI entity can elect to be an Irish resident or non-resident Irish company, keeping the same name and international corporate bank account. The BVI LLC will thereafter no longer exist.
Disadvantages to Irish business set up
An Ireland registered company suffers Irish VAT on imported goods and services, ranging from 0% to 23%. Goods imported into Ireland from outside the EU suffer customs duties;
An Ireland registered company also suffers 25% corporation tax on annual net profits arising from passive income including i) local rents ii) local investment income or iii) income from oil, gas and mineral exploitations. A properly structured Irish LLC receiving international investment income enjoys the lower rate of 12.5%;
The employer employee relationship is complicated by:
The obligation to pay compensation to employees dismissed for reasons of redundancy;
Employees frequently force employers to attend Employment Appeals Tribunals re unfair dismissals;
In addition to income tax, employees of Irish companies suffer a punitive unpopular Universal Social Charge of 7% of gross remuneration.
A small tax resident Irish LLC suffers a surcharge of 20% on the undistributed investment and rental income. Professional services companies suffer a surcharge of 7.5% on undistributed trading income. Healy Consultants helps our Client legally eliminate this tax;
Unfortunately, Irish parent and subsidiary companies must submit annual financial statements to independent statutory audit; regardless of sales income levels.
Ireland tax reporting considerations
VAT registration is necessary if annual sales will likely exceed €75,000 in respect of supplying goods and €37,500 in respect of supplying services;
VAT rates range from 0% to 23% depending on the type of product or service;
An Irish LLC is allowed to register for VAT if it makes taxable supplies.
Irish companies pay corporation tax on their worldwide income and capital gains. In case the company is resident in a treaty country, liability will depend on whether the company carries on a trade in Ireland through a permanent establishment (PE);
An Irish LLC can reduce it tax bill by foreign tax paid on the same income. Excess foreign tax credits can be i) carried back to the previous years, ii) claimed a cash payment from the Government or iii) offset against payroll taxes;
A company registered in Ireland must file a corporation tax return within 10 months of the accounting year end;
If a company incurred tax liability of less than EUR 200,000 in the previous year, it will be required to pay either i) preliminary tax of 100% (based on previous year’s liability) or ii) 90% of the current year liability by the 21st of the month prior to the year end. The balance of the tax is payable on the date the return is due to be filed;
For companies with a tax liability exceeding EUR 200,000, 2 instalments will be payable – the 1st in the 6th month and 2nd in the 11th month after accounting period. The instalment amounts will be either i) 50% of the preceding year’s liability or ii) 45% of the current year’s liability. The balance of the tax is payable on the date the return is due to be filed.
Tax Credits and exemptions
A tax credit of 25% of the incremental R&D expenditure can be offset against a company’s corporation tax liability in the year in which it is incurred. Any remaining excess can be carried forward indefinitely for use against future corporation tax liabilities;
Irish companies can claim tax credit equivalent to 25% of the cost for construction or refurbishment work carried out on a building used for qualifying R&D activities. This amount may be claimed in full in the year in which the expenditure is incurred;
Irish companies can secure tax exemption on income derived from ‘qualifying patents’. Furthermore, the shareholders of a company receiving dividends from patent income may also enjoy “tax-free status”;
International dividends will be tax exempt if i) the foreign subsidiary is tax resident in the EU or a Treaty Country and ii) the dividends are paid out of ‘trading’ profits of the foreign subsidiary which was subject to at least 13% foreign corporation tax or withholding tax.
Other tax considerations
Business registered in Ireland does not have capital duty or net wealth taxes;
Capital expenditure for the purchase or acquisition of patent rights may be written off in equal amounts over 17 years or the remaining life of the patent, whichever is shorter.
An Irish LLC suffers 33% capital gains tax on gains arising from the disposal of capital assets;
Stamp duty of 1% applies on the transfer of common stock of an Irish company. Transfers of most other forms of property suffer duty of 2%;
To promote renewable energy sources, an Irish LLC suffers a carbon tax rate is €20 per tonne of CO2 emitted and is added to the cost of fuel.
Group companies include i) entities in Ireland and in EU member states ii) entities in a treaty country and iii) a company quoted and traded on a recognized stock exchange. Group relief applies to subsidiaries at least 75% owned;
A balance sheet total of less than EUR 3,650,000 and
An average number of employees fewer than 50
This small company audit exemption does not apply to:
Parent companies and their subsidiaries
Banks and financial institutions
Any company that files a late annual return.
Legal and compliance considerations
As a common law jurisdiction, the Irish legal system is similar to that of the US and the UK. Ireland is also a member of the OECD;
Intellectual property (IP) is often a company’s most valuable asset. In Ireland, it is important for the Client to use the intangible asset for at least 10 years to avoid triggering a clawback of the relief obtained. It comprises:
patent, registered design, design right, copyright or invention;
trade mark, trade name or trade dress;
brand or brand name;
domain name, service mark or publishing title;
authorisations to sell medicines, etc.
customer lists, except where acquired as part of the transfer of a business as a going concern;
any licence in respect of, and any goodwill attributable to, the above;
costs associated with applications for certain legal protection.
Ireland is a signatory to the European Patent Convention (EPC) and the Patent Cooperation Treaty (PCT). Therefore, our Clients may choose to submit their applications for a patent at the Irish Patents Office; if approved, the patent will be recognized in all 36 member countries of the EPC. Similarly, a PCT application will also be deemed applicable in all EPC countries;
The Irish company’s directors are responsible for its daily operations and must act in the best interests of the shareholders within the confines of the Companies Act and the common law. An Irish company is required to appoint at least 2 directors;
Basic research (experimental or theoretical)
Work performed with aim of acquiring knowledge, which may or may not be used to develop a practical application in the future;
Experimentation performed in order to achieve scientific or technical advancement which may be used to produce/improve new/existing material or devices. To secure tax credit, it must be shown the project achieves advancement or resolves current uncertainty.
Ireland has established a Labour Relations Commission (LRC) and Labour Court to assist with finding resolutions to labour related disputes in an effective and efficient manner;
In Ireland, the maximum average work week is 48 hours; however, in the collective agreements, the week is often reduced to 39 hours. Also, included in the collective agreements will be the rates of overtime pay; for example, the current registered employment agreement for the construction industry provides for overtime rates of pay of time-and-a-half until midnight Monday to Friday and double time thereafter.
Did you know about Ireland?
The Irish Government is very welcoming of multi-national companies because
Almost 1,500 companies have chosen the country as their base to do business, not just those from throughout Europe, but worldwide.
Overseas companies located at present account for approximately 88% of all Irish exports.
For additional information on our business registration services in Ireland, please email us at email@example.com. Alternatively please contact our in-house country expert, Mr. Petar Chakarov, directly: