As a potential country in which to set up a business, Ireland is arguably one of the best. This can be affirmed by its being voted the easiest place in Europe to start a company. The company registration timetable is just a week, and the minimum required share capital for forming a Private Limited Company (Ltd) is just €1. Additionally, the highly developed and evolving Irish tax system is incredibly beneficial for both foreign and domestic investors. Ireland also excels in terms of its workforce, with highly qualified, technically skilled and multilingual local workers.
The rapid timescale for company registration in Ireland contrasts to the lengthy procedures of other European countries; once papers have been filed the process can be completed within a week. Physical presence before a Notary Public is not required for administrative changes, unlike most other European countries. Setting up an Irish bank account is also not a required aspect of the incorporation process. This makes administration of the company easily accessible and manageable.
The “Doing Business” Report produced by the World Bank endorses Ireland’s tax regime, accrediting it the most business friendly of any country throughout Europe and the Americas. The highlight of Irish taxation is the 12.5% Corporate Tax rate; this is one of the lowest in Europe and when compared to the 41% in Japan, is exceptional. All profits from corporate trading qualify for Corporate Taxation.
An extensive network of double taxation treaties has been established in accordance with Ireland, numbering 63 in total. These ensure that entrepreneurs are protected from paying double tax on their foreign business activities. Direct taxes in Ireland such as Income Tax, Corporation Tax and Capital Gains Tax are covered by these treaties.
Tax relief is also available for income on foreign dividends. Although income from foreign dividends is usually liable for tax, companies can use various methods to avoid any Irish tax on this matter. These methods include: foreign tax credit pooling, the EU Parent – Subsidiary Directive, and double taxation agreements.
In conjunction with its beneficial tax regime, Ireland also boasts an advantageous regime for holding companies. The adoption of new legislation puts Ireland on a par with countries such as Luxembourg and the Netherlands. Primarily this allows Irish companies to act as a European holding or intermediate holding company would in terms of foreign dividends and capital gains.
Unlike many other international holding company countries, Ireland does not administer any Controlled Foreign Company (CFC) regulations. Generally CFC regulations place restrictions on the countries in which companies can invest, but Irish companies are free to hold shares in companies outside of Ireland’s jurisdiction.
Just as with CFC regulations, Ireland is relaxed about its rules on thin capitalization. These rules are usually enforced to restrict the company’s expansion of operations, by limiting its borrowing to certain countries and making part finance through equity a requirement. As Ireland does not partake in thin capitalization rules, international holding companies can be completely financed through debt. However, exemption from these regulations depends on the chargeable interest being maintained at an acceptable rate. This can also be beneficial for companies with a nominal share capital as their business operations can be funded through unlimited and constant borrowing, the interest of which is completely tax deductible.
Research and Development Tax credits are available for companies that are Irish tax residents in the EEA, with a tax credit up to 25% to be claimed back from any expenditure into Research and Development. Buildings with a minimum of 35% Research and Development usage over four years qualify for these tax credits. The same goes for up to 10% of the Research and Development expenditure from any work that is sub-contracted to unconnected companies – 5% of this may be outsourced to European universities.
As a location for intellectual property management, Ireland is incredibly beneficial, with the Irish government boasting exemption from stamp duty on all transfers of intellectual property.
The country is also an advantageous location for international businesses with regard to transfer pricing. There are no rules on this subject and consequently no regulations on deliberately moving income to a low Corporation Tax country from a higher one.
Ireland’s reputation for flexibility and innovation precedes it, making the country the perfect location for businesses that are unique or inventive.
The range of benefits and incentives that Ireland offers to both foreign and domicile investors suits almost every type of business. Although the tax regime is one of the most favorable aspects, advantages such as the lack of CFC regulations, the benefits for holding companies, and the tax relief for Research and Development all contribute to the appeal of the country. With incorporation costs and procedures also being extremely facilitated, Ireland is an excellent location for any business entrepreneur to set up a company.
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