gateway to europe
The vision of Gateway to Europe is to show US companies that are looking to expand into Europe that placing investment in Ireland is the best choice. 1, 033 international companies serve their European market from Ireland. These companies are involved in a wide range of activities and sectors including technology, pharmaceuticals, biosciences and manufacturing. The attraction of Ireland as an investment location can be attributed to the positive approach of successive Irish governments to the development of inward investment, its membership of the European Union (EU), a very favourable corporate tax rate and a skilled and flexible labour pool. The purpose of this publication is to provide an introduction to the major business and legal issues to be considered by foreign companies in establishing business operations in Ireland. The discussion under each heading is not intended to be an exhaustive analysis but rather to provide general observations and guidance to the many questions we have encountered from clients doing business in Ireland.
Martin Shanahan talks about “Ireland Gateway To Europe”.
Ireland has succeeded in attracting some of the world’s largest companies to establish operations here. The list of multinationals currently operating in Ireland includes some of the largest companies in the worldwide technology, pharmaceutical, biosciences, manufacturing and financial services industries. The key to Ireland’s success has been largely attributable to the following factors:
• Ireland’s low corporate tax rate – corporation tax on trading profits is 12.5 per cent
• Regulatory, economic and people infrastructure of a highly developed OECD jurisdiction
• Benefits of EU membership and of being an English – speaking jurisdiction in the Eurozone
• As a common law jurisdiction, our legal system is similar to that of the US and the UK
• Provision of a specific tax credit for research and development activity
• Limited transfer pricing rules; and
• An extensive and expanding double tax treaty network with 68 countries, including the UK and the US.
What can Squires Gilbride do for you?
At Squires Gilbride we can advise you in determining the most appropriate structure for your business with a view to maximizing tax incentives in Ireland and deferring/ minimizing home country taxation, keeping in mind your expected profit profile and long term objectives with respect to utilization or repatriation of profits.
We are also in a position to advise on some or all of the following:
• Location of a suitable holding company
• Appropriate financing structures
• R&D tax credit claims
• Tax efficient remuneration of expatriate employees
• Assistance with opening business bank accounts
• Assistance with grant applications
• Payroll services
• Employee benefits services
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Irish Corporation Tax
Ireland operates a self-assessment basis of taxation which means that it is up to a company to determine whether it is liable to Irish taxation.
The predominant business tax rate is 12.5% for active business income in almost all sectors. However, non-trading or passive income is taxed at 25%.
A company is tax resident in Ireland if it is managed and controlled here or if it is incorporated here. The following factors are indicative of management and control being in Ireland:
• Major policy decisions being taken in Ireland
• All board meetings being held in Ireland
• A clear majority of Irish resident directors on the board
Upon incorporation or when a company first comes within the charge to Irish tax it should register for taxes by filing a TR2 tax registration form.
Tax Incentives for Holding Companies
Since 2004, Ireland has become increasingly popular as a holding company location as a result of certain changes introduced to tax legislation in Finance Act 2004. Three changes were introduced:
• An exemption from capital gains tax in respect of the disposal by a company of shares in its subsidiaries in certain circumstances.
• Onshore pooling of tax credits on foreign dividends resulting in the tax-free repatriation of profits to Ireland.
• Reduction of the tax rate on foreign dividends to 12.5% in respect of dividends from trading profits of EU/Treaty subsidiaries.
Irish Government policy is to attract research and development activity to Ireland. Therefore, Ireland offers a range of tax incentives and financial assistance in the form of cash grants.
The document Ireland Gateway to Europe: Doing Business in Ireland provides more insight on which tax incentives and financial assistance a holding company can expect to receive when investing in Ireland.
Ireland’s workforce is known for being well educated, talented and possessing a strong work ethic. Its highly developed multi-cultural community provides global businesses access to a multi-lingual workforce.
The earnings of employees of an Irish company are subject to tax at source known as PAYE (Pay As You Earn). There are two income tax rates, 20% (standard rate) and 41% (marginal rate). Employees are also entitled to a tax credit deduction against their tax liability the amount of which depends on their personal circumstances.
Both employers and employees make contributions to Ireland’s social security system, PRSI (Pay Related Social Insurance), as a percentage of earnings and are obligatory for all employees aged 16 or over.
There are a number of tax efficient benefits available to individuals coming to work in Ireland such as:
• Certain relocation expenses can be reimbursed from the employer tax free
• Accommodation and subsistence costs for the first 12 months of an assignment that is expected to last more than 24 months can be paid or reimbursed tax free.
Employees are also entitled to receive benefit options provided by Irish employers such as pension plans, life assurance plans and health insurance plans
Gateway Value Added Tax
As a member of the EU, Ireland operates a form of consumption tax known as VAT (Value Added Tax) on the supply of most goods and services.
VAT exempt businesses (such as banking and insurance) are not required to charge VAT but equally cannot recover VAT on purchases.
The standard VAT rate in Ireland is currently 23%, with a reduced rate of 13.5% applying to the supply of certain services.