Ireland has built a strong reputation globally as a leading destination for foreign direct investment (FDI). This is evidenced by the long-standing presence of a large number of multinational companies in a variety of sectors including technology, manufacturing, life sciences and financial services. Ireland is often ranked in the top 15 best countries for business.
The attraction of Ireland as an investment location can be attributed to low corporate tax rates, a strategic location, and a robust legal and regulatory framework. Ireland’s attractive business environment also provides many advantages for companies seeking expansion opportunities.
Ireland is the gateway to Europe
Ireland is in a strategic location for companies interested in doing business in the European market. The country serves as a “gateway to Europe” and is a global business hub. Many companies use Ireland as their EMEA headquarters as it provides access to over 700 million customers.
Following Brexit, Ireland is now in a unique position in that it’s the only European country that has EU membership, Eurozone membership and English as a native language of the territory.
“Many companies use Ireland as their EMEA headquarters as it provides access to over 700 million customers.”
Attractive tax environment
The base corporate tax rate in Ireland is currently set at 12.5%. The government charges a low corporate tax rate of 6.25% for revenue that is tied to a business’s patent or intellectual property, where the related R&D has taken place in Ireland.
Ireland provides a business-friendly tax environment. Tax initiatives are designed to foster support for business activities, especially those in research and development and innovative projects. Key elements of the Irish corporate tax regime that make Ireland one of the most attractive jurisdictions in which to do business include:
• Tax amortisation for qualifying intellectual property in respect of capital expenditure incurred on the acquisition of intangibles that is deductible against taxable income derived from such intangibles.
• A refundable R&D tax credit regime that gives enhanced tax relief to businesses that carry out R&D in Ireland. R&D tax credits are available to reduce taxable income and credits can also be surrendered to key employees engaged in R&D activities in certain circumstances. R&D credits may also result in cash refunds.
• An attractive holding company regime that includes a substantial shareholder’s exemption from capital gains tax on qualifying disposals of shares in subsidiaries.
• Dividend receipts from Irish tax resident companies are exempt from tax and a nil effective Irish tax rate can generally be achieved on dividends received from non-Irish subsidiaries as a result of the 12.5% tax rate for dividends paid out of trading profits and availability of foreign tax credits which can be pooled and carried forward.
• Broad exemptions from withholding tax on interest, royalties and dividends. Generally, no withholding obligation will arise where the recipient is located in a tax treaty country or an EU member state.
• An extensive and expanding double tax treaty network that includes most of the world’s largest economies. Ireland has signed comprehensive tax treaties with 76 countries and has implemented the multilateral convention to implement tax treaty-related measures to prevent base erosion and profit shifting (MLI).
• Attractive tax regimes for international financial services operations. Ireland has special tax regimes for regulated investment funds and unregulated securitisation companies that are efficient, clear and certain.
“Dividend receipts from Irish tax resident companies are exempt from tax and a nil effective Irish tax rate can generally be achieved on dividends.”
Research and development
Ireland’s pro-business infrastructure is reflected in the fact that one-third of companies supported by the IDA have been in Ireland for 20 years or more. IDA is a semi-state agency, meaning it is a state-owned enterprise that is technically commercially run. The organisation partners with potential investors to establish operations in Ireland. Funding and grants are also available to those considering foreign direct investment.
Skilled workforce
Ireland is home to one of the most skilled workforces worldwide. A large percentage of young adults complete postsecondary education, and advanced education is more common in the region than in other parts of the world. The country’s education system ranks in the top 10 globally and Ireland has one of the youngest populations in Europe.
Brexit
The exit of the UK from the EU has presented numerous challenges for UK businesses that want to expand in Europe. UK businesses have found Ireland a good place to act as their base of EU trading so that they have access to the Single Market. Ireland also has a comparable legal and tax system to the UK.
Structure
If a business is expanding into Ireland, it will need to choose the type of corporate structure it wishes to adopt: Private Company Limited by Shares (LTD); Designated Activity Company (DAC) Limited by Shares; Company Limited by Guarantee (CLG) having a Share Capital; and External Company (Irish Branch).
At least one of the directors must be a resident of a member state of the European Economic Area (EEA) unless the company has a prescribed form of bond or the CRO certificate.
While it is usually preferable to establish a separate legal entity in Ireland, in some cases, the establishment by a foreign company of an Irish branch may be the better option.
Holding Company structure has many advantages to businesses, particularly at the expansion stage of the business life cycle. When the business is branching into new sectors, locating in a new geographical area, or offering new products or services, it needs to give regard to how that expansion will be funded and how to protect the current business from the risks associated with new enterprises.
This structure enables companies to protect the existing business, create a Special Purpose Vehicle for new ventures, utilise the contacts and goodwill of the existing business, manage tax efficiently and access retained earnings in the company for expansion and investment.
