Introduction to the Irish Holding Company Regime

Due to changes in Irish government fiscal policy over several years, Ireland has become a favoured location for holding companies for many US & UK international trading corporations.  Our low corporate tax rate has gained many news headlines in Europe, particularly during Ireland’s IMF/EU financial structuring deal. However, our low corporate tax rate is only one of many reasons to locate your corporation here.

Key Benefits of Locating Holding Company in Ireland

1. Low corporate tax rate of 12.5% on trading profits, without limit.
2. Finance Act 2011 introduced an extension to 0% corporate tax rate for new start-up companies for the first three years of trading. The tax benefit has been capped to the amount of employers PRSI paid on the employees’ salaries, to aid job creation.
3. No dividend withholding tax (DWT) on payments made to individual shareholders resident in either an EU or double tax treaty country.
4. No DWT applies where they are paid to a non-resident company shareholder where that company is not controlled (50% or more shareholding) by Irish residents
5. Dividends received by an Irish holding company from trading profits of a subsidiary are generally taxed at 12.5% corporation tax.
6. Limited transfer pricing legislation which only applies to large companies with a turnover of  more than €50M, employees of more than 250 and, assets over € 43m
7. Capital Gains tax exemption for disposal of shares in a subsidiary company. There is a minimum share holding requirement of 5% and shareholding period of 1 year, plus other conditions.
8. Double tax treaty network with 55 countries in effect and 7 more waiting to be implemented which simplify the distribution of profits internationally and provides some clarity to our direct tax system and how it applies in conjunction with an EU or DTT country.
9. Membership of the EU and Euro currency gives Ireland an advantage when trading with fellow EU countries
10. The ability to combine trading activities with its holding company function i.e. charging fees for managing a foreign subsidiary would be deemed to be an economic trading activity and the profits of such an activity would attract low corporation tax.
11. No ‘Controlled Foreign Company (CFC)’ or ‘Thin Capitalization rules’ are currently in force in Ireland
12. There is a favourable approach by the Irish Government to foreign owned holding companies
13. Low capital start up costs for investing in an Irish limited company
14. Remittance taxation system available for non-domiciled Irish resident individuals provides a tax incentive to foreign individuals re-locating to Ireland
15. Abolition of employers PRSI on share based remuneration in Finance Act 2011 significantly reduces employers costs and is a significant benefit in deciding on whether to locate in Ireland.

If you are considering locating a holding company in Ireland and require further advice on these issues please see O’Mahony Donnelly Contact details