Ireland: Business hub of Europe. There’s never been a better time to start or to move a business to Ireland. There are many excellent reasons to relocate whether if it is the favourable low tax regime and supportive environment for start-ups, being a hub for digital workplace solutions, incentives to intellectual property to the availability of well-educated workforce. Ireland is the place to be.
Ireland’s performance as a hub for Foreign Direct Investment is unrivalled. It has also a proven track record as a successful location for world leading established and high growth multinational companies from around the world. One third of multinationals in Ireland have had operations in the country for over 20 years.
Favourable low tax regime
Ireland is an ideal place for companies to centralise their activities from both a business and tax perspective. In particular, companies based in Ireland can own and exploit intangible assets with a low effective tax rate.
The Organisation for Economic Co-operation and Development -OECD cites Ireland as the second most progressive for income tax among its 36 member countries, and the most progressive among its EU members.
In relation to business, Ireland has also some tax incentives such as:
- 12.5% corporation tax rate on active business income.
- A 25% credit on qualifying R&D expenditures; total effective tax deduction of 37.5%.
- Ability to exploit Intellectual Property at favourable tax rates.
- Accelerated tax depreciation allowances for approved energy efficient equipment.
- Ability to carry out investment management activities for non-Irish investment funds without creating a taxable presence in Ireland for such funds.
- An effective legal, regulatory, and tax framework to allow for the efficient redomiciliation of investment funds from traditional offshore centres to Ireland.
The low corporate tax rate, an enhanced IP rate, generous exemptions from dividend, royalty and interest withholding tax, a participation exemption, the absence of controlled foreign company legislation, and the existence of incentive packages that maximise EU financial assistance and efficient use of EU funds, make Ireland an extremely attractive jurisdiction in Europe.
Supportive environment for start-ups
New or start-up companies, which commence trading between 2009 and 2021 and set up and commence a qualifying trade between 1 January 2009 and 31 December 2018 may be eligible for start-up companies’ relief.
This relief is available for three years from the commencement of the trade. The relief takes the form of a reduction in the corporation tax liability relating to the new trade (including chargeable gains on assets used in the trade) and is capped at the amount of the employer’s social insurance contributions made on behalf of the company’s employees in the period.
In order to encourage job creation the value of the relief is linked to the amount of employers’ PRSI paid by a company in an accounting period, subject to a maximum of €5,000 per employee. The relief allows any unused relief arising in the first 3 years of trading due to insufficiency of profits to be carried forward for use in subsequent years, subject to certain conditions.
Incentives to Intellectual Property
Legislation provides for a tax deduction for capital expenditure incurred by a company, which is carrying on a trade, on the acquisition of qualifying IP assets. Tax depreciation is available for capital expenditure incurred on the acquisition of qualifying IP assets. The deduction is equivalent to the amortisation or depreciation charge on the IP included in the accounts. Alternatively, a company can elect to claim tax deductions over 15 years, at a rate of 7% per annum and 2% in the final year.
The definition of IP assets is widely drafted and includes the acquisition of, or the licence to use, the following:
- Patents and registered designs.
- Trademarks and brand names.
- Know-how (broadly in line with the OECD model tax treaty definition of know-how).
- Domain names, copyrights, service marks, and publishing titles.
- Authorisation to sell medicines, a product of any design, formula, process, or invention (and rights derived from research into same).
- Applications for legal protection (e.g. applications for the grant or registration of brands, trademarks, patents, copyright, etc.).
- Expenditure on computer software acquired for commercial exploitation.
- Customer lists acquired, other than ‘directly or indirectly in connection with the transfer of a business as a going concern’.
- Goodwill, to the extent that it relates directly to the assets outlined above.
Holding Company Location
Irish tax legislation provides for an exemption from capital gains tax for Irish resident companies on disposals made from qualifying shareholdings in other companies.
The exemption is subject to a number of conditions which include that:
- The investee company must be tax resident in Ireland, another EU Member State or a country with which Ireland has a double tax agreement.
- The investor company must have held not less than a 5% interest in the investee company for a specified period of time
- The business of the investee company itself or the investor company and any company in which the investor company holds a 5% interest must consist wholly or mainly of the carrying on of a trade or trades.
Well-educated workforce. Ireland is the place to be.
Ireland has one of the most educated workforces in the World. According to the OECD 52% of 25-34 year olds have a third level qualification; 10% higher than the OECD average. Source: OECD – Education at a Glance 2015
Ireland’s highly educated workforce is ideally suited to solving very complex problems for customers. Robotic process automation and other technologies facilitate them by freeing up time to spend on delivering those solutions.
The same workforce is continuing to upskill into higher-value roles, and this is helping to position Ireland as a globally recognised location where complex customer interaction and experience intersects with technology.
Hub for Digital Workplace Solutions
The technology incentives created by Irish policies has made the industry uniquely suited to the new world of work being created by the Covid-19 pandemic. The great majority of roles can be performed remotely with no impact on quality or productivity. This is an ideal environment for companies looking for global business services partners or to expand their own customer experience operations. Remember: Ireland, Business hub of Europe.
Irish companies are at the forefront of innovation in the digital workplace and are well-positioned to compete globally as companies seek new solutions to support employees digitally, preserve culture, automate process, and connect with their customer.