Irish Trading Company
The Irish government is keen to promote an environment which is attractive for foreign investment. The low corporate tax rate for trading profits of 12.5%, coupled with exemptions from many taxes and incentives to invest, make Ireland a very attractive jurisdiction.
Tax reliefs form an important part of the total incentive package available to overseas companies establishing a business in Ireland. These reliefs establish Ireland as a favourable location for corporations to base themselves. Incentives for the establishment of a trading company in Ireland include:
• Holding company regime; no capital gaind tax on disposal of shares in a subsidiary company;
• Research and development (R&D) credit;
• Capital allowances for expenditure on intangible assets;
• Low (if any) tax on certain foreign dividends;
• Tax allowances for Intellectual Property
• EU parent subsidiary directive;
• Credit for tax on foreign branch profits;
• Capital Gains Tax (CGT) exemption on share disposal;
• Intellectual property stamp duty exemption; and
• No thin capitalisation or CFC rules.
For a company to be considered as “trading”; the company should be:
Carrying on business activities from which its income derives;
Employing people with the skill and authority necessary to carry out the activities;
Where outsourcing is involved, the company must provide details of how it conducts, manages and controls the outsourced part of its business.
Able to show a distinction between trading and investment (if any investment is undertaken).
Tax exemption for Irish trading companies
Companies that start to carry on a trade in Ireland before 31 December 2014 will be fully exempt from corporation tax on trading profits and chargeable gains on the disposal of assets used for the new trade for the first 3 years where the total amount of corporation tax does not exceed €40,000. It is proposed that the scheme will be extended until the end of 2015, and this will be announced in the forthcoming budget in December 2014.
At the current rate of corporation tax i.e. 12.5% this equates to €320,000 of profits per year. Therefore, the company could shelter from tax up to €960,000 of trading profits over a three year period.
Where corporation tax for the year is between €40,000 and €60,000, marginal relief will apply. No relief is available where tax exceeds €60,000 per annum.
Incorporating a foreign company in Ireland
An EU based company trading in pharmaceuticals wanted to establish itself in Ireland, because its supplier companies were in Ireland and the UK, and they required an English speaking base from which to operate the business.
We incorporated an Irish Limited company, sourced an Irish director to oversee the company at boardroom level and appointed an employee from our own firm to operate the logistics for consignments to its customers based abroad.
The company was registered for VAT by us and this meant that the company could move goods through the various customs much faster.
It was registered for international supplies under the EORI system, and it could obtain certificates of origin for supplies to non EU countries quickly.
We also assisted the company to open its Irish bank account and therefore the parent company had full control over payments and receipts via online banking, from abroad, which made transacting quicker.
The corporate structure we recommended was an agency trading company in Ireland operating on behalf of a principal holding company in Cyprus.
Commercially the company operated from an English speaking country with a very good business reputation in Ireland, whilst it had all the tax benefits of repatriating the profits back to the principal, sometimes using Cyprus.
This structure allowed the company to have an overall corporate tax rate of less than 2% on its profits.
In this scenario, we set up the trading structure in Ireland and managed the day to day functions of the company from Ireland, thereby assisting the company to establish itself in Ireland from abroad, without the need to be in Ireland throughout the process.
The benefits of having a bespoke International corporate structure operating from Ireland, include:
A much lower rate of tax, this can be 95% lower
Trading profits taxed at 12.50%
English speaking country in the Eurozone
No transfer pricing – so lower compliance costs and easier to dictate prices without added tax
Strong business image and developed business infrastructure