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Ireland as a base for your business

Jul 14, 2016

Since the UK’s unexpected vote to leave the EU there has been significant media focus on how Ireland will fare once the UK triggers Article 50 which sets in motion their exit.

While Ireland will face some difficulties in terms of exports with volatile exchange rates and the potential re-introduction of economic borders, there are also opportunities for Ireland post Brexit.

In the wake of Brexit the Irish political establishment has been vocal with regard to Ireland’s ongoing commitment to the “EU project”. Given the uncertain economic and political landscape globally, stability will be a key consideration for companies looking to establish in foreign markets. Political and economic stability coupled with Ireland’s favourable Taxation regime and its unique standing as potentially the only English speaking country in the EU, will undoubtedly give Ireland a competitive advantage.

Some of the key attractions to the Irish Taxation regime are as follows:

Corporation Tax

  • One of the lowest statutory rates in the world
  • Applies to Irish trading activities
  • Irish trading income is taxed at 12.5%

The Knowledge Development Box

  • Tax Rate of 6.25% on profits arising from certain Intellectual Property Assets which are as a result of qualifying R&D activity carried out in Ireland
  • In effect since 1 January 2016
  • Encourages companies to develop IP in Ireland
  • The first and only Knowledge Box/Patent box in the world to meet the OECD’s “modified nexus” standard

Favourable Intellectual Property (IP) regime

  • Tax depreciation on a broad range of trade related IP
  • Depreciate over accounting life or 15 years, at the discretion of the Company
  • No claw back if IP retained for at least 10 years
  • Can result in effective Irish rate of 2.5% on IP exploitation income
  • Deduction for licensed IP
  • No Irish stamp duty on acquisition of IP

Attractive Research and Development regime

  • Tax credit of 25% for qualifying R&D expenditure
  • In addition to 12.5% deduction - effective value is 37.5%
  • For new companies (post 2003) - relief is volume based
  • Credit used to reduce CT liability or refundable in certain cases
  • R&D tax credit may be “above the line” - directly reducing R&D cost
  • Credit can be converted into tax efficient bonuses for R&D team

Holding Company regime

  • Ireland frequently used as regional or global headquarters
  • Irish Capital Gains Tax (CGT) exemption for gains on sale of domestic and foreign trading companies (EU and treaty countries)
  • Tax exemption for Irish dividends
  • Effective exemption for foreign dividends (thru use of foreign tax credits)
  • Extensive domestic law withholding tax exemptions
  • No thin capitalisation or Controlled Foreign Companies (CFC) rules

Manageable Transfer pricing regime

  • Finance Act 2010 introduced transfer pricing (“TP”) rules to IrelandEnhances Ireland’s well regulated tax regime
  • Assists Irish Revenue challenges to Multi-National companies from other jurisdictions
  • Already has ‘wholly and exclusively’ test
  • Imposes Arms Length Pricing (ALP) to understatement of Irish trading profits and overstatement of Irish trading expenses

As well as our favourable Taxation regime Ireland is still seen as a business friendly country, as evidenced by recent studies where Ireland ranks as number four in the world as the best country to do business and number one for flexibility and adaptability of our workforce.

If you are considering Ireland as a base for your business please do not hesitate to contact a member of our team who can assist you.

Images: Shutterstock

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