Taxation benefits of investment in Ireland
Ireland is recognised in Europe and around the world as a major inward investment location. Ireland has a leading reputation as an onshore EU OECD white-listed location. It is a key EMEA hub for the financial services, information technology, e-commerce, gaming and pharmaceutical sectors. It has a growing profile as the holding company EU location of choice and a location from which to own intellectual property. In the financial
sector, Ireland is a world-leading location for asset and structured finance, insurance and investment funds.
In common with all other EU Member States, Ireland uses a sophisticated toolkit of tax rates, exemptions, allowances, credits and reliefs to attract various activities to its shores. At the epicentre of this regime is a 12.5% corporation tax rate for almost any trading activity carried out in the State, an exemption from tax for certain investment funds and share portfolio income, and an ability to structure cross-border transactions, including big ticket leasing, through Irish corporate and other vehicles so as to utilise Ireland’s extensive double tax treaty network.
Ireland currently has signed comprehensive double taxation agreements with 68 countries, of which 61 are in effect. The countries outside the EU with which Ireland has a double taxation agreement are: Albania, Armenia, Australia, Bahrain, Belarus, Bosnia Herzegovina, Canada, Chile, China, Croatia, Egypt, Georgia, Hong Kong, Iceland, India, Israel, Japan, Republic of Korea, Kuwait, Macedonia, Malaysia, Mexico, Moldova, Montenegro,
Morocco, New Zealand, Norway, Pakistan, Panama, Qatar, Russia, Saudi Arabia, Serbia, Singapore, South Africa, Switzerland, Turkey, United Arab Emirates, United States of America, Uzbekistan, Vietnam and Zambia.
A company which is tax resident in Ireland is liable to tax at 12.5% on trading activities carried on in the State and in respect of dividends from certain foreign trading subsidiaries. A system of onshore pooling of foreign tax credits enables credit for foreign tax, including withholding taxes on profits out of which dividends have been paid, to eliminate the incidence of Irish tax. A 25% corporate tax rate applies to passive income, certain land dealing and oil, gas and mineral exploitation. Non-trading activities subject to tax at 25% are typically outside the scope of the new Irish transfer pricing regime.
With increased globalisation, competition has intensified between jurisdictions to attract and maintain mobile investment projects. Managing a group’s effective tax rate is a key tool in driving shareholder value. Although a wide range of non-tax factors inform taxpayers’ investment decisions, straitened economic circumstances have led to renewed focus for multi-nationals on managing, and where possible reducing, the group’s effective tax rate. Ireland’s pro-business and low tax regime play a significant part in this. Set out in this document are various examples by which Ireland’s tax regime may be used for differing businesses and activities.
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