Ireland as a Base for European Business

Irish Tax Incentives Attracting Overseas Investment

Ireland’s taxation system contains many incentives used in attracting overseas Investment to Ireland some of which make it easier to do business here;

Corporate Taxation

Ireland has for many years had a flat 12.50% corporate tax rate applicable to Irish trading profits. This has been augmented by the introduction of a 0% rate for new companies for the first three years of trading, who were both incorporated and begun trading in 2009 (Limited to profits of € 320,000 p.a.). This has been a strong indicator of the importance government places on FDI and the above 0% rate has been extended in the 2010 budget announced on December 9th 2009.

Personal Taxation

Ireland retains the benefits of remittance taxation basis so that non-Irish domiciled individuals are taxed only on foreign income and gains remitted here.

With effect from 01 January 2008 ‘foreign income’ includes income arising in the UK.

Previously UK income and gains arising were taxed in Ireland irrespective of whether they were remitted to Ireland.

Double Taxation Treaties with Ireland

Ireland currently holds and continues to negotiate a network of double tax treaties which eliminate the need to pay tax twice on the same income/gains of international companies. There are currently agreements with 55 countries, of which 46 are in effect.

Employment Taxes

Ireland operates a PAYE system (pay as you earn).

The responsibility is therefore on the employer to deduct and account for taxes and PRSI (pay related social insurance) to the revenue commissioners.

Value Added Tax (VAT)

This is a consumption tax assessed on the value added to a product or service. It applies to most goods and services that are bought or sold in the EEC. Goods and services that are exported are normally not subject to VAT. However to keep the system fair for EEC producers, VAT normally applies to the importation of goods and services.

The taxable person is obliged to charge and account for VAT on a periodic basis, normally bi-monthly, to the revenue commissioners. They can deduct VAT suffered on purchase of goods and services which have been used to make their own taxable supplies.

VAT is charged at different rates depending on the type of business you are running, where the supply is made and whether the buyer of the good or service is a private individual or another business.

Dividend & Interest Withholding Tax

Withholding taxes normally apply to payments of dividend and interest by an Irish corporation.

There are certain ‘excluded’ persons where the payment is made within Ireland.

If the payment is made to a ‘qualifying non-Irish resident person’ then exemption from the requirement to deduct withholding tax may be made. The recipient normally has to be located in an EEC or double tax treaty country to be qualify.

This aids the repatriation of profits to overseas jurisdictions giving the foreign shareholder a significant cash flow benefit.

Capital Gains Tax (CGT)

A significant exemption applies to the disposal of shares held in subsidiary companies. This benefits and provides incentive to parent companies to locate here:

For the exemption to apply certain conditions must be satisfied at the time of disposal.

• the investor company is a parent of the investee company or was a parent within the two year period prior to the disposal.

• (i) the investee company’s business consists wholly or mainly (wholly or mainly means greater than 50%)of the carrying on a trade or trades or

(ii) the business of the investor company, each company of which the investor company is the parent, the investee company (if the investor company is not its parent) and any company of which the investee company is the parent company, taken together consists wholly or mainly of the carrying on of a trade or trades.

• the investee company must be resident in an EU Member State or a country with which Ireland has a tax treaty.