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Relocating To Ireland

June 29, 2022

AGN EMEA Taxation Task Force (TTF) Newsletter

For a long time, Ireland has been considered a favourable location for International Groups considering incorporating a holding company or relocating part of their trading activities to Ireland.

Many midsized and smaller enterprises have also chosen Ireland as a location for their International operations when expanding overseas. In addition to the tax advantages of relocating to Ireland – read on for more detail, Ireland has consistently ranked highly on numerous ease of doing business ratings.

Non-Tax Reasons

The main non-tax reasons that companies relocate to Ireland include:

Ireland is a founder member of the OECD and a member state of the EU.
Ireland is the only English-speaking jurisdiction in the eurozone, apart from Malta.
Ireland is a common-law jurisdiction. And its legal concepts will be understood by most people.
A new company can be incorporated in a few days in Ireland.
There is the availability of a highly skilled and educated workforce.

Tax Reasons

The main tax advantages of relocating to Ireland are as follows:

Trading profits are taxed at the 12.5% rate of Corporation Tax.

If you are considering locating to Ireland, and wish to avail of the 12.5% tax rate, the company must have proper substance and has to have the human and technical resources on the ground in Ireland to be considered trading from Ireland to avail of the lower Corporation trading rate.

If the company is deemed to be a “Brass Plate” operation, the 25% rate of corporation tax applies to the profits on the basis that they arise from foreign trade and not from an Irish trade. Usually, Irish revenue will examine the company’s activities to ensure that key individuals are employed by the company in Ireland who have the seniority and skill capable of conducting the trade from Ireland.

It is also important to note that IP licensing is generally viewed as passive income in nature and liable to corporation tax at 25%. The trading rate applies where there is evidence to suggest that there are individuals employed in Ireland who are capable of developing the IP, actively looking for new markets for the IP and involved in managing the IP.
Intangible Asset Scheme

Ireland has a tax write-off scheme, i.e. a capital allowance scheme for trading companies that acquire Intellectual Property and intangible assets. The allowances are deductible for tax purposes over the accounting life of the asset. The intangible assets covered by the scheme include patents, copyrights, brand names and other rights, which are typically capitalized for accounting purposes in line with financial accounting principles.

There are restrictions on inter-group transfers in certain circumstances.
Research and Development Scheme

The Intangible Asset Scheme works well with the research and development regime, whereby relief is effectively allowed at a tax rate of 37.5% for qualifying research and development activities carried out by an Irish company. The research and development system allows a tax credit of 25% of the qualifying research and development spend. The tax credit is in addition to the corporate tax deduction available at 12.5% for qualifying expenditure. The tax credit can be repaid to the company over a 33-month period where there are insufficient tax liabilities to utilize the credit. The R&D credit, therefore, confers a real cash flow advantage on companies.

It is necessary to review a company’s activities to ensure that they qualify for research and development and meet the science and technology test. Many companies in various industries can qualify for the R&D credit, not just those involved in the Traditional Pharmaceutical and Technology Industries.

Capital Gains Tax exemption for Irish Companies on the disposal of shareholdings in trading subsidiaries located within the EU or one of the tax treaty countries provided at least 5% of the shareholding is held for a minimum of 12 months.
Minimum transfer pricing legislation.
Dividends can generally be paid gross to non-resident persons in treaty states without the need to withhold tax.
It is generally possible for a non-resident person to dispose of their shares in an Irish Company and not be liable to Irish Capital Gains Tax.
Dividends can be generally repatriated to Ireland without any tax being payable on the dividend in Ireland.
Treaty Network of over 73 Countries.