One of the basic reasons for which investors choose to open an Irish holding company refers to the country’s corporate taxation system. Ireland has signed over the years numerous double taxation treaties and it now has an extended network of agreements on the avoidance of double taxation; besides this, the country provides one of the lowest corporate tax rates in Europe, which makes it an ideal business destination for starting a holding company.
Also, as an EU and OECD (Organization for Economic Co-operation and Development) member state, Ireland provides a well-regulated jurisdiction for holding companies. Due to the participation exemption, Irish holding companies may dispose of their shares in any other company within the European Union or a country Ireland has a treaty with, thus obtaining a from a capital gains tax exemption.
This exemption applies if at least 5% of the ordinary shares have been held for minimum a year and if the trading condition is respected. For complete information about the participation exemption for holding companies you can ask our specialists in company incorporation in Ireland. No matter the way you choose to start a business in Ireland, our team is at your disposal in order to help you comply with all the legal requirements available in this country.
Furthermore, our local consultants invite you to watch this useful video about the holding companies in this country:
Registering a holding company in Ireland
There are two ways to incorporate a holding company in Ireland: as an Irish private limited companyoras a public limited company. The main advantage when registering an Irish holding company as private limited company is that there are no minimum share capital requirements.
Why is Ireland chosen by investors for starting a holding company?
We have presented at the beginning of the article some of the basic reasons for which investors generally prefer to invest in Ireland through a holding company or through another type of company. Ireland has become the home of numerous international businesses due to a set of financial advantages, some of which are presented below:
•Ireland applies the capital gains participation exemption (which is available for holding companies);
• it is also a country that applies the foreign tax credit system;
•Ireland is a member state of the European Union (EU), which offers a set of benefits for business purposes;
• it has signed an extensive network of double tax treaties (more than 70);
• the dividends paid by a company to another company are generally exempted from taxation;
• the taxation of dividends for companies which are not based in the EU or which are not regulated by a double taxation treaty is done at a rate of 12,5%, which represents one of the lowest corporate taxes in Europe;
• the Irish administrative system applicable to companies is very simple compared to other countries.
What are the accounting requirements for Irish holding companies?
The holding company in Ireland must respect a set of regulations with regards to its accounting system. The company’s financial statements have to be prepared in accordance with the regulations of the Generally Accepted Accounting Practice (GAAP), as well as with the regulations of the Companies Act 2014.
As Ireland is the home of large multinational companies, including US companies, it is necessary to know that the local tax legislation was harmonized in such a way that US companies can use the US GAAP for theirsubsidiaries operating in Ireland. However, this can be done in specific conditions, which can be detailed by our team of consultants in company registration in Ireland.
The taxation of holding companies in Ireland
As presented earlier, the corporate tax rate applied in Ireland is one of the lowest in the European countries. Irish holding companies are subject to a 12,5% corporate tax rate on the profits resulted from a trading activity. All other passive income earned by an Irish holding company is taxed at a rate of 25%. Capital gains that do not qualify for the participation exemption are applied at a 33% tax rate. With regards to the taxation of the holding companies in Ireland, the following are also available:
•the exemption on the payment of the capital gains tax is applicable if the holding company owns at least 5% of the company’s ordinary share capital;
•the regulation is available if the holding company is entitled to at least 5% of the annual profits;
•these 2 conditions have to be met for a continuous period of at least 12 months;
•the disposal of shares can be done in a period of 2 years;
•the regulation can also be applied if the company owns less than 5% of the shares, in certain conditions.
Investors must also be aware that holding companies registered in Ireland can benefit from financing through debt, which can be used for the purpose of acquiring shares in companies which operate as one of the following: trading company, real estate company or a holding company that owns shares in other trading companies or real estate companies.
As a general rule, it is necessary to know that the holding company in Ireland will not be liable to the payment of the value added tax (VAT). This is applied as long as the holding company’s main purpose is to acquire shares. This means that the company will be exempted from registering for VAT purposes.
Still, the obligation to register for VAT (and pay VAT) can arise in specific conditions, even in the case of holding companies. For example, the company needs to be registered with the Irish institutions for VAT when referring to the acquisitions of goods or when employing the services of various types of entities, such as the services provided by lawyers, accountants, consultants, but only as long as such entities are represented by persons from abroad.
When referring to the obligation to register for VAT, the holding company may be required to register for this tax if it has a direct or indirect role in the management of companies registered as subsidiaries. This obligation applies if the holding company charges a fee for the respective management services; for more information related to the obligation to pay VAT, we invite you to address to our team of consultants in company registration in Ireland.
When it comes to the repatriation of dividends, the Finance Act of 2013 introduced a tax credit for certain foreign dividends received by an Irish resident company. In all other cases, the withholding tax on dividends is levied at a 20% tax rate. For details about the taxation of holding companies, please contactour experts inIrish company formation.
Our representatives can also present the procedures that have to be followed upon theliquidation of a holding company registered in Ireland; investors can request information on the distribution of the company’s shares during the liquidation of a holding company operating here.
Paul Sheridan is one of our company formation specialists. He can help you establish your company in Ireland fast and easy.
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