Ireland-US Double Tax Treaty

The first treaty for the avoidance of double taxation between Ireland and the United States of America was signed in 1997. The agreement was enforced a year later by both countries. The Ireland – USA double tax agreement was signed with the purpose of avoiding the double taxation of both legal entities and natural persons who are tax residents of the two states.

Our specialists in company formation in Ireland can provide you with more information on the provisions of the tax agreement, as well as on the tax advantages that natural persons and legal entities can benefit from. Our consultants can assist companies with in-depth information on any of the tax exemptions prescribed under this treaty. 

Taxes covered by the Ireland-US double tax treaty

The treaty signed by the two states covers the next taxes: the federal income tax and the federal excise taxes in the United States and the income, the corporate and the capital gains taxes in Ireland. The agreement also applies to similar taxes levied in both countries.

Special provisions apply to permanent establishments which are deemed as business sites where an US or an Irish company will carry out their activities. Branch offices are considered permanent establishments. The treaty prescribes the types of business establishments that fall under the definition of a permanent establishment and the conditions a foreign enterprise must respect in order to be considered a permanent establishment. 

Taxation under the Ireland-USA double tax convention

According to the double taxation treaty between Ireland and the US, business profits of a company will be taxed only in its residence country, except for permanent establishments whose profits will be taxed in the country they are carrying out their activities. Shipping and air transport activities will also be taxed in the country where the company carrying out those activities is registered. Income derived from immovable property will be taxed in the country the property is situated in.

Are there any reduced taxes under the Ireland-USA tax treaty? 

Where the avoidance of double taxation cannot be imposed, the treaty between Ireland and the United States provides for reduced taxes, as it follows: a 5% rate applies to dividend payments if the recipient owns at least 10% of the shares in the company paying the dividends and a 15% tax rate in all other cases, a 0% rate applies to interest payments and a 0% tax rate applies to royalties payments.

How is residence defined under the Ireland – USA tax treaty? 

• • a resident of a contracting state refers to a person who is liable to taxation in the respective state, based on his or her domicile or residency;
• • at the same time, residency refers to a place of management, the location where a company is incorporated or to any other means that could define the residency of an entity;
• • a resident of a contracting state also refers to the qualified institutions of the respective state;
• • the term also takes into consideration pension funds or similar vehicles that are created with the purpose of administering retirement of employment benefits;
• • residency also includes business vehicles registered as regulated investment companies or real estate investment trusts (in the case of the United States of America);
• • in the case of Ireland, it refers to funds registered as collective investment undertakings. 

If you need legal services in USA, we can put you in touch with our local partner lawyers.

For complete information about taxation under the agreement with the United States, do not hesitate to contact our Irish consultants in company formation. Our specialists can provide investors with information on the taxation system applicable to companies operating in Ireland, as well as on the tax compliance procedures necessary for each business type.