Ireland – A place to do Business

Introduction

Ireland is currently ranked fourth in the world on Forbes list of best countries to do business.

Some companies who have made Ireland their European home include Google, Facebook, PayPal, Microsoft, eBay, LinkedIn, Twitter, Airbnb, Intel, Apple and Pfizer.

Why Ireland? Top 10 Reasons

When making a decision to invest in a country, companies consider a number of factors. Companies look for a location with the right mix of available talent, a competitive tax environment, a supportive pro-business eco system in terms of incentives and a cost competitive place to live and work.

The Top 10 reasons why companies choose Ireland as their European home are:

1. Ireland is ranked first in the world for availability of skilled labour, flexibility and adaptability of workforce and attitude towards globalisation
2. Low tax, pro-business environment with 12.5% corporate tax rate and 73 Double Tax Treaties in place
3. Ireland ranks in the top ten in the Global Innovation Index 2017 and supports this with generous Research and Development Tax Credits of 25%
4. Ireland is ranked 1st in the world for inward investment by quality and value and 2nd in Europe for the number of inward investment jobs per capita. Ireland is also top for R&D activities. Ireland is ranked in the top 10 best educated countries in the world
5. Long-established Member State of the EU and soon to be the only English-speaking jurisdiction in the Eurozone.
6. Ireland offers barrier free access to over 500m consumers in Europe – the world’s largest single market
7. A study carried out by the Heritage Foundation has found that Ireland currently has the freest economy in the whole of the eurozone
8. Ireland is included in the top 10 easiest places in the world to do business
9. Irish businesses are feeling more optimistic about the economic outlook than they were 12 months ago and have increased expectations of investing more in their businesses and hiring new staff this year.
10. The Irish economy is the fastest growing in the Eurozone and the youngest populating in Europe with one third under 25 years of age and almost half the population under the age of 34.

Ireland’s Attractive Corporate Tax Regime

The highlights of Ireland’s competitive tax regime are:

• Tax certainty: Ireland has consistent and transparent tax policies.
• 12.5% Corporation Tax Rate: Ireland has the lowest rate in Western Europe. The 12.5% rate applies to trading income of Irish resident companies and Irish branches of foreign companies
• Holding Company Regime: Ireland has an attractive holding company regime. There is tax exemption from Irish capital gains tax on the sale of subsidiaries (EU and treaty countries) and tax exemption for Irish dividends and effective exemption for foreign dividends (Foreign Tax Credit available). Furthermore, the lack of ‘controlled foreign company’ rules and thin capitalisation rules makes Ireland an attractive location for holding companies.
• Extensive Tax Treaty Network: Ireland has tax treaties with 73 countries which facilitates the reduction in foreign taxes and withholding taxes on cross border payments
• Research & Development Tax Credit: 25% Tax credit available on qualifying R&D expenditure, This credit is additional to the 12.5% deduction available for R&D spend. The credit reduces corporation tax or is re- fundable over 3 years if the company is loss making.
• Knowledge Development Box: A 6.25% rate may apply if a company id undertaking R&D in Ireland and developing patents or copyrighted software.
• Intellectual Property Allowances: Tax depreciation allowances are available on the acquisition of a wide rage of intangible as- sets such as patents and software
• Start UP relief: There is a 3-year exemption for new businesses where profits are less than €320k, with marginal relief where profits are below €480k.
• 25% Tax Rate: This rate applies to non-trading income.

Ireland’s Attractive Personal Tax Regime

Companies must operate payroll taxes through the PAYE system in respect of cash payments, benefits in kind and certain equity-based remuneration.
The rates of personal tax and social security for an Irish based employee in 2018 is set out in the table below

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The employee may be entitled to claim various credits and reliefs depending on their personal circumstances.

There are a number of personal tax reliefs and incentives available to individuals. The key ones are:

• Special Assignee Relief Programme (SARP) : if certain conditions are met SARP reduces seconded employees taxable income over €75,000 by up to 30%.
• Remittance Basis – An Irish resident, non-Irish domiciled individual will be in taxable in Ireland on their Irish source income/gains and on their foreign income/gains to the extent that they are remitted into Ireland. Income/gains that arise outside of Ireland will not be taxable unless they are remitted to Ireland.
• Relocation expenses – such as shipping, storage costs and costs incurred in connection with the purchase of a new home can be reimbursed tax free
• Accommodation and subsistence expenses: for the first 12 months of an assignment that is expected to last less than 24 months can be paid or reimbursed tax free
• Key Employee Engagement Programme (KEEP): is a share option incentive scheme aimed at start ups and small companies to help them recruit and retain employees in Ireland. Under the terms of the scheme, an employee can be granted and then exercise options of up to €100,000 in year, or €250,000 in any 3 consecutive years of assessment. The qualifying options will be taxed at 33% rather than at income tax rates of up 52%.
• The Employment and Investment Incentive Scheme (EII Scheme): is a tax relief incentive scheme which provides an income tax relief to individual investors for in- vestments in certain qualifying small and medium sized companies. Relief is granted at a rate of 40% on investments of up to €150,000 per year.
• Entrepreneurs Relief: provides a reduced rate of capital gains tax for entrepreneurs disposing of certain business assets. It pro- vides that a 10% rate of CGT in respect of a chargeable gain up to a lifetime limit of €1 million, compared to the normal rate of 33%.
• Employee Pension Contributions: to a Revenue approved scheme are deductible for income tax purposes subject certain in- come and age related limits.
• Employer pension contributions: to a Revenue approved occupational scheme are exempt from tax. This exemption can be extended to foreign employer pension schemes in certain cases.

Company Set Up

Most fast growing businesses choose to operate in Ireland through a company.

Irish companies are registered with Companies Registration Of ce (CRO) and can be formed having public or private status and with limited or unlimited liability.

A company must have at least one shareholder, either an individual or corporate entity, a minimum of two directors or one director and one secretary in certain cases. At least one director must be resident in a EEA Member State except a where there is a bond in place for €25,395 or more.

The establishment of a company in Ireland is a relatively quick and simple process. The formation will be completed within 5 days and would typically cost less than €500.

State Support

IDA Ireland provides advice, assistance, grant aid and incentives to attract companies to Ireland. A wide range of supports are available from capital, employment and R&D grants, to support recruiting talent and finding of ce space. Further information is available at www.idaireland.com

 

Audrey Lydon – Tax Partner
audreylydon@barrpomeroy.ie

Barr Pomeroy
Chartered Accounts & Registered Auditor
21 Herbert Place, Dublin 2
Tel: +353 1 676 1166 – Fax: +353 1 661 8859