Your move in the right direction - Investing in Ireland - Deloitte
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Your move in the right direction Investing in Ireland
Brochure / report title goes here |
Section title goes here
Ireland: Top of the class 4
Why Deloitte? 5
Companies based in Ireland 6
Recent investment 7
World class across a variety of industry sectors 8
High value-add operations based on knowledge and skills 10
Ireland’s cost competitiveness 12
The investment climate 14
Key features of Ireland’s attractive tax regime 15
A snapshot of Ireland's competitive tax regime 16
Tax overview 17
Foreign investment incentives 20
Ireland as a holding company location 24
Other taxes 26
Indirect taxes 29
Labour environment 30
Ireland – not just for business 31
Deloitte Ireland contacts 32
IDA Ireland contacts 33
02
Your move in the right direction | Investing in Ireland
Over 1,000 multinational corporations have chosen Ireland as their strategic
European base, attracted by our pro-business environment, low corporate tax
rate, track record of success and a young, highly skilled workforce.
In recent times, Ireland has continued to attract significant high end Foreign
Direct Investment (FDI) with total employment in Ireland at international
companies at a record high in January 2017, just short of 200,000. FDI in
Ireland comprises of both continued and first time investment, and many of
the world’s leading companies regularly demonstrate their commitment to
remaining established in Ireland by continuing to invest.
Ireland’s low corporate tax regime has been a vital part of Ireland’s industrial
policy and despite the changing global tax landscape, the Irish Government
remains committed to the 12.5% corporate tax rate.
The U.K.’s decision to leave the European Union along with a changing Global
political landscape are likely to result in some economic impact in the near
future. Despite this, Ireland remains well placed to ensure that the future of
FDI in Ireland remains bright.
As the largest professional services firm in the world, our global reach and
vast industry experience leave Deloitte Ireland ideally placed to assist you,
whether you are considering a first time investment or continuing to invest.
We look forward to working with you.
Brendan Jennings
Managing Partner Deloitte Ireland
03
Your move in the right direction | Investing in Ireland
Ireland: Top of the class
1st for most competitive 1st for youngest 1st in Europe for
country in the Eurozone population in ease of paying
(Source: IMD World Europe, with one business taxes
Competitiveness third under 25 (Source: World Bank/
Yearbook, 2016) years old (Source: PWC ‘Paying Taxes
Eurostat, 2016) 2016: The Global
Picture’)
Ireland also achieved first
in a number of sub-factor
rankings as part of the IMD
World Competitiveness
Yearbook, 2016 as follows:
1st for
flexibility & the national culture finance skills are foreign investors investment
adaptability of is open to foreign readily available are free to acquire incentives are
people are high ideas control in domestic attractive to foreign
when faced with companies investors
new challenges
04
Your move in the right direction | Investing in Ireland
Why Deloitte?
Our teamwork approach
We draw from our global network of member firms located in 150
countries to offer you world-class capabilities and the insight you
need for your most complex business challenges. We also ensure
that your experience with us is seamless and consistent whether
you talk to us in Dublin or Dubai.
Our experience and expertise
Our record speaks for itself. We serve 91% of the 53 FG500 TMT
companies, 89% of the 119 FG500 Financial Services companies
and 83% of the 23 FG500 Life Science and Health Care companies.
International Tax Review ranks Deloitte Ireland as TIER 1
Advisors.
Deloitte Ireland were recognised as Ireland Transfer Pricing
Firm of the Year 2016 and European Transfer Pricing Firm of
the Year 2016 by the International Tax Review.
Our breadth of services
Audit Enterprise Risk Taxation Services Corporate Finance Management Corporate and
Services Services Consultancy Legal Services
Services
External audit, Risk management, Offers the full range M&A advisory, Financial Company law,
accounting and corporate of tax services, both project finance and management advisory services,
financial reporting, governance, internal direct and indirect economic consulting, technology company secretarial
compliance and audit, control taxes including financial modelling, consulting, human as well as certain
regulatory audits, assurance services specialisms in areas due diligence capital management, other legal services.
treasury and financial including IT security such as R&D, M&A and post merger supply chain
services, as well related services. and transfer pricing. integration services. management, and
as accounting and enterprise resource
assurance advisory planning.
services.
05
Your move in the right direction | Investing in Ireland
Companies based in
Ireland
9 of the top 10
global software
companies
5 of the top
10 companies
on Forbes’ list 10 of the top
of The World’s 10 global ICT
Most Innovative
Companies have companies
Irish operations.
14 of the 13 of the top
top 15 global 15 medical
aviation lessors technology
based in Ireland companies
Second largest 9 of the
software top 10 global
exporter in the pharmaceutical
world companies
15 of the top 25
financial services
companies
06
Your move in the right direction | Investing in Ireland
Recent investment
New investment company Irish operations New investment company Irish operations
Mobile Technologies Inc European HQ Compar AG Engineering Development and
Sales Centre
Allergen Manufacturing
Paragon 28 International office
Looker European HQ
TPGS International office
Microsoft Global Inside Sales Centre
NetNeutrals EU European HQ
Indeed EMEA HQ
Wrike International office
BrowserStack International HQ
ACI European data centre
NGINX Inc. EMEA HQ
Trusource International operations centre
Red Hat R&D Centre
Casa Systems Inc. International operations
Aralez Pharmaceuticals International office
SMT European HQ and R&D and
Tobam International office
Innovation Centre
EVO Payments Irish HQ
YapStone International HQ
Almac Group International office
WP Engine Innovation and Technical
Aerie Pharmaceuticals Manufacturing plant support centre
Tech Mahindra Centre of excellence Fazzi Healthcare Services Healthcare services and coding
centre
BD R&D facility
GE Biopharmaceutical
Acacia Communications EMEA-APAC HQ
manufacturing facility
MetLife Global Technology Campus
MathWorks Shared sale and services centre
DocuSign Cybersecurity Centre of
Ortec Inc. European HQ
Excellence
Deutshe Bank Data lab
Cylance International office
Kaspersky Lab European R&D centre
Takeda Manufacturing
Fitbit EMEA HQ
MacStadium International HQ and European
Data Centre Brown Bag Films Flagship Studio
Emergenetics European HQ Eventbrite Customer support centre
Telnyx International office
Source IDA
07
Your move in the right direction | Investing in Ireland
World class across a
variety of industry
sectors
Life sciences - medical technologies, Technology, media,
biotechnology and pharmaceuticals Why Ireland for life sciences? telecommunications (TMT) and
Ireland is counted among the global entertainment
•• World-class research institutes
leaders in the life sciences industry and The availability of young, skilled technology
that are intergrated with the
over four decades of ongoing investment and engineering employees has been a key
industry
has made Ireland the location of choice factor in Ireland continuing to attract giants
for many global life sciences companies. •• Availability of labour with specific in the technology industry to Ireland.
Ireland’s longstanding track record of science and engineering skills
attracting inward investment in the The technology sector in Ireland
•• Regulatory track record
life sciences industry includes many of incorporates the full range of high-
the major global players in the medical •• Close collaboration between tech activities including research and
technologies and pharmaceutical sectors. companies in the Industry development, high value manufacturing,
Ireland is one of Europe’s largest medical shared services, software development
•• Grant aid and tax incentives
technology hub spots with 13 of the world's and supply chain management.
for research and development
top 15 medical technologies companies
activities
having manufacturing operations in Ireland. With the world’s top 10 ICT companies
•• Wide range of experienced located here, along with a rich start-up
The activities carried out by these support service providers scene, Ireland has rapidly established itself
companies in Ireland ranges from as a key technology hub in Europe.
•• Transparent tax regime and
research and development and high value
commitment to 12.5% corporation
manufacturing, to IP management and The Irish Government’s steadfast
tax rate
supply chain management. This range of commitment to positioning Ireland as
operations bears witness to the educated, •• Special Assignment Relief a ‘knowledge economy’ through its
flexible and highly-skilled workforce Programme to attract key talent continued promotion of research and
available in Ireland. This is testament to to Ireland development activities, and high value
the fact that, once established in Ireland, manufacturing, has paid dividends and
many companies expand their operations has been fundamental in building Ireland’s
beyond their initial presence. reputation as the obvious location for
Why Deloitte for life sciences? technology companies.
The constant commitment of Irish
Governments in supporting and enhancing •• Deloitte member firms serve 83% The production of the National ICT Skills
incentives for research and development, of the 23 FG500 Science & Health Strategy and Plan in 2014 and the creation
through tax benefits such as the recently Care companies of the Irish Centre for Cloud Computing
enhanced R&D tax credit and grant aid, has and Commerce (IC4) are examples of how
resulted in a significant portion of the life the Irish Government partners with the
science companies operating in Ireland also industry. Government backed incentives
carrying out research and development
Over 40 years experience such as these have not only resulted in a
here. in life sciences has resulted rise in the talent pool from our third-level
institutions in the areas of computing,
in a dynamic, well serviced software and electronic engineering
sector and a globally but also ensures that Ireland continues
to be seen as a key technology hub
recognised centre of internationally.
excellence
08
Your move in the right direction | Investing in Ireland
Ireland is the second to many of the world’s leading financial Through publication of the International
institutions along with a sophisticated Financial Services Strategy 2020 (IFS2020)
largest exporter support network including accountancy, framework, the Irish Government has set
of software in the world legal, actuarial, taxation, regulatory, out its commitment to ensuring the further
telecommunications and other service growth of this sector.
providers. In addition, many institutions
have subsequently established and Within the banking sector, Ireland has
Why Ireland for TMT and continue to establish operations outside attracted many of the world’s largest banks
entertainment? the IFSC and across the country. Ireland is to establish operations in Ireland. The
•• Availability of young, skilled now home to more than 500 international functions of their Irish operations range
labour with expertise in the financial institutions. from corporate and wholesale banking;
areas of technology and software global business and transaction services;
development corporate and structured finance; treasury
and cash management; securitisation and
•• Cultural affinity with the US – Why Ireland for financial many more.
understanding of multinational services?
corporations (MNC) requirements •• Young, skilled and talented Ireland has also positioned itself as a centre
and ethos workforce with expertise across of excellence in the international funds
•• Promotion of research and all areas of international financial sector and has become the largest hedge
development (R&D) activities services. fund administration centre in the world.
through tax incentives and grant •• Pro-business and pragmatic
aid Attracted by the low corporation tax rate
approach of the Irish Financial and the ease of doing business in Ireland,
•• Ease of doing business Regulator many of the world leaders in securitisation,
•• Track record of success •• Range of professional services insurance and leasing, in particular aircraft
and support services with leasing, have established significant
•• English-speaking labour force with specialist financial services operations in Ireland.
multilingual capabilities expertise
•• Transparent tax regime and Having a proven track record both in the
•• Time zone – overlap with US and Financial Services and Technology sectors,
commitment to 12.5% corporation Asia
tax rate the availability of incentives to encourage
•• Ease of travel to New York and research and development, together with
•• Special Assignment Relief London having the youngest population in Europe
Programme to attract key talent ensure that Ireland is in a unique position
to Ireland •• International profile of Irish Stock to continue to excel in the area of financial
Exchange funds listings services and become a leading player in the
•• Transparent tax regime and area of FinTech.
Financial services – insurance, commitment to 12.5% corporation
banking, investment management and tax rate
leasing Why Deloitte for financial
The Irish International Financial Services •• Special Assignment Relief services?
Centre (IFSC) is at the heart of Ireland’s Programme to attract key talent
•• Deloitte member firms serve 89%
success as a global centre of excellence for to Ireland
of the 119 FG500 FSI companies
financial services. The IFSC now plays host
09Your move in the right direction | Investing in Ireland
High value-add
operations based on
knowledge and skills
At the cutting edge for high-value with generous government incentives Ireland has always prided
manufacturing for research and development, has
With constant developments in technology resulted in many multinational companies
itself on being ahead of its
and communications and the dominance expanding their manufacturing activities to global competitors
of low-cost competitors, the manufacturing incorporate research and development.
industry continues to be challenged and
in terms of facilitating
evolve. Ireland has adapted to the changing A location of choice for shared services shared services centres
landscape of multinational manufacturing Ireland has always prided itself on being
and has become a global leader in high- ahead of its global competitors in terms
and is now well deserved
value manufacturing. The availability of of facilitating shared services centres and of its reputation as a
a highly-educated and adaptable labour is now well deserved of its reputation as a
force, in addition to world-class research location of choice to implement a blended
location of choice to
institutes have pushed Irish manufacturing shared services model. implement a blended
facilities up the value chain.
This includes senior management,
shared services model.
As a result, Ireland has become a strategic technology development, HR and analytics
manufacturing site for many of the expertise, in addition to the traditional
world’s top companies in the life sciences financial skills. Typically these projects
and technology sectors. In addition, the involve higher value added, multilingual,
opportunity to collaborate with Irish multijurisdictional activities across many
universities and research facilities, coupled business functions being managed in
Ireland. Ireland’s ability to satisfy these
criteria, combined with other factors such
as a low corporation tax rate, has proved
Why Deloitte for
to be the winning formula for Ireland’s
manufacturing?
ongoing success in not only attracting
•• Deloitte member firms serve 84% new investment but also in encouraging
of the 192 FG500 Consumer and reinvestment by incumbent investors in the
Industrial products companies shared services sector.
Deloitte’s Global Shared Services Survey 2015 found that
71% of respondents stated they plan on growing the
amount of functions in their shared services centres in
the near future.
10Your move in the right direction | Investing in Ireland
R&D environment, excellent infrastructure
and supportive government policies.
We have continued to see a large growth in
investment in this sector in recent years.
Taking the lead in intellectual property
and supply chain management
Commitment to the 12.5% corporation
tax rate together with the pro-business,
pragmatic legal environment has made
Ireland a global leader for IP management
and supply chain management. Many
household names in the technology
and life sciences sector have centralised
the management of their IP in Ireland.
Further boosting Ireland’s offering as
an IP management location, in 2009 a
comprehensive onshore IP regime was
introduced, allowing for capital allowances
The winning formula for research and development environment represent all to be claimed on IP acquired by an Irish
development industries including pharmaceutical and company for the purposes of its trade.
Ireland’s investment in the sciences and technology companies, financial services Adding to this existing IP regime, the recent
promotion of science and engineering and consumer business, with many now introduction of the first OECD approved
related university programmes has choosing Ireland as the location to house patent box by the Irish Revenue in the
produced generations of highly- skilled their global research and development form of the knowledge development
and highly-employable graduates. This, centres. box incentive aims to ensure that Ireland
along with the 25% tax credit for qualifying continues to take the lead and remain
research and development expenditure, Green Ireland – Clean Technology competitive in the area IP management.
and the potential for government grant Ireland has emerged as a major hub for Many companies have successfully
assistance has proved to be a winning investment in the rapidly developing Clean amalgamated their supply chain
combination. This has been instrumental Technology sector. Ireland’s strategic management, IP management and R&D
in pushing Ireland among the top location is a natural advantage for the functions in Ireland. This enables them to
research and development locations generation of many renewable energy proactively manage their global effective
in the world. Companies benefiting sources and is backed by a high level of tax rate while maximising cross-functional
from Ireland’s dynamic research and relevant skills and experience, a thriving efficiencies.
11Your move in the right direction | Investing in Ireland
Ireland’s cost
competitiveness
During the recent economic downturn, With inflation below the EU average
there was realignment of labour and since 2008, as our economy continues
real estate costs in Ireland. Although an to grow, Ireland is focused on ensuring
increase in such costs is understandable that cost increases do not hamper our
after a period of economic stagnation, competitiveness as a location for inward
Irish labour costs have remained investment and that Ireland continues to
relatively stable compared to a number position itself favourably among the most
of EU countries which have experienced competitive countries in the world in which
significant increases in wages and salaries. to do business.
Ireland also continues to have one
of the lowest rates of social security
Ireland has one of
contributions, being 8th lowest in the the most educated
OECD. Employers’ contributions are 10th
lowest and employee contributions are the workforces in the World.
5th lowest. According to the OECD
Given the importance of trade with the UK 52% of 25-34 year
and US for Ireland, changes in the value
of the euro impact significantly upon Irish
olds have a third level
competitiveness, with any depreciation qualification; 10% higher
of sterling and the dollar impacting the
cost competitiveness of Irish exports, but
than the OECD average.
equally making imports relatively cheaper. Source: OECD - Education at a Glance 2015
12Your move in the right direction | Investing in Ireland
IMD World Competitiveness Ireland’s tax wedge is one
World cost of living 2016 Yearbook 2016 of the lowest in the OECD
Location Rank Location Rank Location 2015
Hong Kong 1 Hong Kong 1 Belgium 55.3
Luanda 2 Switzerland 2 Austria 49.5
Zurich 3 United States 3 Germany 49.4
Singapore 4 Singapore 4 Hungary 49.0
Tokyo 5 Sweden 5 Italy 49.0
Geneva 9 Denmark 6 France 48.5
Bern 13 Ireland 7 Finland 43.9
London 17 Netherlands 8 Czech Republic 42.8
Paris 44 Norway 9 Sweden 42.7
Dublin 47 Canada 10 Portugal 42.1
Milan 50 (Source: IMD World Competitiveness EU21 41.8
Yearbook, 2016) Spain 39.6
(Source: Mercer Cost of Living Survey,
2016) Greece 39.3
Turkey 38.3
Best countries in the world to do Euro Labour Costs Per Hour 2015 Luxembourg 38.3
business 2016 (Total Labour Costs) Norway 36.6
Denmark 36.4
Location Rank Per Per % Change
hour hour 2008 / Netherlands 36.2
Sweden 1
2008 2015 2015 Oecd Average 35.9
New Zealand 2
Norway 37.80 51.20 35% Poland 34.7
Hong Kong 3
Austria 26.40 32.40 23% Iceland 34.0
*Ireland 4
Finland 27.10 33.00 22% Japan 32.2
United Kingdom 5
Denmark 34.60 41.30 19% USA 31.7
Denmark 6
Belgium 32.90 39.10 19% Canada 31.6
Netherlands 7
Sweden 31.60 37.40 18% UK 30.8
Finland 8
Luxembourg 31.00 36.20 17% Australia 28.4
Norway 9
Germany 27.90 32.20 15% Ireland 27.5
Canada 10
Netherlands 29.80 34.10 14% Switzerland 22.2
*Top ranked member of Eurozone France 31.20 35.10 13% Korea 21.9
(Source: Forbes.com, 2016)
Ireland 28.90 30.00 4% Israel 21.6
(Source: Eurostat, 2016) Mexico 19.7
New Zealand 17.6
Chile 7.0
(Source: OECD, 2016)
Tax wedge is income tax plus
employee and employer social
security contributions 2015 as
percentage of the labour costs.
13Your move in the right direction | Investing in Ireland
The investment
climate
Political background economy is becoming more like that of Principal forms of doing business
Ireland is a parliamentary democracy. other developed economies. Agriculture The selection of a corporate structure
A constitutional president with largely remains relatively more important in for an investment in Ireland will be
ceremonial duties is elected by universal Ireland than in other Western European strongly influenced by tax considerations
suffrage. economies. such as the Irish tax rate applying to
operations, the group’s home country tax
Economic structure Foreign trade considerations, and the group’s future
Industry accounts for a higher level The Irish economy relies heavily on foreign plans for repatriating profits earned in
of output than is the case in most trade. The UK and the US are Ireland’s Ireland back to the home country.
other developed economies, and most largest trading partners.
manufacturing is foreign-owned and Private and public limited liability
profitable, resulting in large amounts of Exchange controls companies are the two main forms of
profits repatriated abroad. However, as There are no exchange controls and corporate organisation in Ireland. Most
manufacturing output growth has slowed approval is not required for foreign foreign investors choose the former, as
and services output has accelerated in investment or capital importation. they are less costly to set up and easier to
many sectors, the structure of the Irish operate. In a private limited company, the
right to transfer shares is restricted, the
number of non-employee shareholders
may not exceed 99, and no shares or
debentures may be offered to the public. A
public limited company must have at least
seven members and a minimum nominal
capital of €38,092.14.
Foreign investors may also choose to set up
a local operation by establishing a branch
in Ireland. Such branch representative
offices may sometimes not be taxable in
Ireland, as a result of their activities or tax
treaty relief.
Ease of setting up a company
Setting up an Irish company is
straightforward and can be completed
within two weeks generally if a standard
Constitution is used.
14Your move in the right direction | Investing in Ireland
Key features of
Ireland's attractive
regime
Low corporate
tax rate at 12.5%
Special
Assignment First OECD
Relief Programme compliant patent
for executives
box regime
relocating to
Ireland
A refundable
25% R&D tax
73 bilateral tax credit for relevant
treaties expenditure and
tax relief for R&D
employees
Extensive
double An attractive
taxation treaty holding company
network and EU regime
Directives
An effective zero
tax for foreign
dividends
15Your move in the right direction | Investing in Ireland
A snapshot of Ireland’s
competitive tax regime
Trading income (including active financing, leasing, licensing,
central entrepreneur, manufacturing, procurement and R&D).
Dividends from trading company in EU/DTA. Dividends from
12.5%
Corporate tax rate trading companies in non-DTA (where listed) and countries with
which Ireland has ratified the Convention on Mutual Assistance
on Tax Matters.
25% Passive income (33% for certain capital gains).
Capital gains tax 0% Where capital gains tax participation exemption applies.
Capital duty 0% No capital duty on the issue of shares.
Applies to transfers of Irish registered shares (exemptions for
1%
Stamp duty group transfers and certain assets such as IP).
2% Applies to transfers of commercial property.
Treaties with all major business jurisdictions (including Canada,
Treaty network 73 signed China, Japan, India, Hong Kong, Singapore, South Korea and the
United States).
Broad range of domestic exemptions from dividend, interest and royalty
Withholding taxes
withholding taxes.
Value added tax (VAT) EU VAT regime.
20%/40% income tax rate bands plus USC at bands between 0.5% - 8% and
4% PRSI, but incentive for executives to relocate to Ireland - reduction in
taxable income by 30% on remuneration over €75,000 subject to conditions.
Individual rates
In certain instances a company’s R&D tax credit may be surrendered against
key employees’ income tax (subject to the credit not reducing the employees’
effective tax rate below 23%).
16Your move in the right direction | Investing in Ireland
Tax overview
Despite changes in the global tax
framework, the Irish Government has
The Irish legislative provisions provide for a
secondary filing mechanism, under which a The Irish
repeatedly committed itself to the
retention of the EU approved 12.5%
multinational group can designate an Irish-
resident constituent entity of the group
Government
corporate tax rate for active trading
companies. This rate applies to all active
to act as a “surrogate parent” entity and
file a CbCR with Irish Revenue on behalf of
has repeatedly
trading profits and contrasts with some
other jurisdictions which offer full or partial
the group. Further, if it is not possible for
the ultimate parent entity or a surrogate
committed itself
tax holidays to select companies only. This
12.5% is the headline rate and so for some
parent entity to file a CbCR, there will be a
requirement for a local country filing with
to the 12.5%
companies which can benefit from other
reliefs/tax incentives, such as the R&D tax
Irish Revenue – known as “an equivalent
CbCR”.
corporation tax rate
credit and IP regime, the effective tax rate
can be lower than 12.5%. Ireland is also bound by the same rules
on state aid and rulings of the Court of
Over recent years improvements to the Irish Justice as all EU Member States. In addition
regime have continued to be implemented. Ireland has committed to the OECD’s Base
The introduction of the first OECD compliant Erosion and Profit Shirting (BEPS) process
patent box regime, enhancements to the and continues to engage with the European
generous R&D tax credit regime, together Union tax proposals. The various actions of
with existing reliefs/tax incentives have BEPs and EU Anti-Tax Avoidance Directive
enhanced Ireland’s attractiveness as an are likely to result in certain changes being
inward investment location when combined implemented into Irish taxation legislation
with the 12.5% tax rate. in the coming years.
In addition, Ireland has full transfer pricing While the standard rate of corporation tax
legislation in place. The regime relies is 12.5%, passive income such as certain
on OECD principles and applies only to interest, rent and royalty income, is taxable
trading transactions. The regime is seen at a higher rate of 25%. Income from
as relatively benign, in applying only to certain trading activities (e.g. dealing in
trading transactions, and which allows and developing land, the exploitation of oil,
companies to rely on contemporaneous gas and mineral resources, and dealing in
documentation of other global group licences) is also taxable at the 25% rate.
companies. Ireland has however
introduced Country-by-Country Reporting In addition to corporation tax, companies
(CbCR) legislation and regulations effective in Ireland may be subject to capital gains
for accounting periods commencing on tax, stamp duty, value added tax (VAT) and
or after 1 January 2016. Under the new customs duties.
provisions, an Irish-resident ultimate parent
entity of a multinational group (broadly, Taxable income and rates
one with annual consolidated revenue in A company which is tax resident in Ireland
excess of €750 million in the immediate is subject to Irish corporate tax on its
preceding accounting period) will be worldwide income and gains.
required to file a CbCR with Irish Revenue.
17Your move in the right direction | Investing in Ireland
allowed as a deduction or credit. Credit
is given either unilaterally or under the
provisions of a relevant tax treaty. Where
no such agreement exists or unilateral
credit relief is not available, deductions are
granted in calculating taxable profits.
Deductions
Income is generally calculated for corporate
tax purposes by adjusting the net profit
shown in the audited financial statements.
Regular business expenditure type items
are tax deductible subject to certain
exemptions. Expenditure of a capital
nature is not normally deductible, however,
tax depreciation applies to a range of
capital items including qualifying IP.
Depreciation
Depreciation charged in the financial
statements of a corporation is non-
deductible for tax purposes. Instead,
a system of capital allowances or tax
depreciation is used. Expenditure on
qualifying plant and machinery incurred is
However, due to our holding company A company incorporated or resident usually subject to an annual 12.5% straight-
regime, in practical terms there is a de abroad may be liable for Irish corporate tax line allowance for a period of eight years.
facto foreign dividend exemption in the if it carries on a trade in Ireland through a Capital allowances for qualifying industrial
majority of cases due to availability of branch or agency. buildings also apply.
pooled foreign tax credits and capital
gains tax participation exemption which In cases where the company is resident in a A beneficial tax relief also exists for capital
offers zero tax on disposals of qualifying country with which Ireland has a tax treaty, expenditure incurred by companies on
shareholdings. liability to corporation tax will depend on the provision or acquisition of intangible
whether the company trades in Ireland assets (e.g. brands, trade names and
A company is resident in Ireland for tax through a permanent establishment (PE). copyrights) for the purposes of a trade
purposes where: Where a non-resident carries on a trade which effectively allows tax depreciation for
through an Irish branch (or a PE), it will be qualifying forms of IP.
•• the company is incorporated in Ireland
chargeable to corporation tax on profits
and is not treated as tax resident in Losses and tax consolidation
attributable to the branch.
another country by virtue of a double tax Trading losses may be offset against trading
treaty to which Ireland is a party, or income in the accounting period in which
As Ireland has a wide tax treaty network
•• the company is centrally managed and any foreign taxes paid on profits and they are incurred and in the accounting
controlled in Ireland. income streams taxable in Ireland are period immediately preceding the period in
18Your move in the right direction | Investing in Ireland
which they are incurred. These losses are Where the gain is on the sale of Relief for start-up companies
offset on a euro-for-euro basis. development land or where a non-resident A three year relief from corporation tax
disposes of a non-trading asset, capital is available for new start-up companies
Unused losses may be carried forward gains tax applies at the rate of 33%. that are incorporated on or after 14
indefinitely against trading profits of October 2008 and set up and commence
the same trade, or they may be offset Trading losses may be offset against a qualifying trade between 1 January 2009
against non-trading income and capital chargeable gains for the current or and 31 December 2018, subject to certain
(chargeable) gains in the current year, previous year, except where the gain is in conditions. In order to encourage job
but only on a value basis. For example, a respect of development land. Development creation the value of the relief is linked to
company will need trading losses equal land losses can shelter both development the amount of employers’ PRSI paid by a
to twice the amount of passive income to and non development land gains. company in an accounting period, subject
eliminate its tax liability on that income. to a maximum of €5,000 per employee.
Capital assets may be transferred between
There is no provision in Irish tax legislation Irish resident group companies without The relief allows any unused relief
for consolidation of group profits and liability for capital gains tax based on arising in the first 3 years of trading due
losses. various group and restructuring relief to insufficiency of profits to be carried
provisions. forward for use in subsequent years,
However, losses may be surrendered to a subject to certain conditions.
qualifying group company by way of group Participation exemption for share
relief, provided certain conditions are met disposals
including a 75% relationship exists between Gains derived from the sale of
the company surrendering the losses and shareholdings in other companies are
the company claiming the losses. not taxable if the other company is an EU
resident or resident in a country that has
Capital gains tax concluded a tax treaty with Ireland.
Companies resident in Ireland for tax
purposes are liable to tax on their However, the holding in the target company
worldwide gains. Non-resident companies must satisfy several conditions:
are liable to capital gains tax only in respect
•• It must have been held for at least 12 of
of gains arising on the disposal of land,
the preceding 24 months
minerals or mineral rights in the state,
or of assets used for purposes of a trade •• It must be at least 5% of the company’s
conducted through a branch or agency in ordinary share capital
Ireland. A non-resident company is also
•• It must be a trading entity or part of a
liable to capital gains tax for the disposal
defined trading group
of shares not quoted on a stock exchange
that derive most of their value directly
These provisions make it attractive to
or indirectly from Irish land, mineral or
set up holding companies and corporate
mineral rights.
headquarters in Ireland, particularly given
that Ireland currently has no controlled
Profits arising from the disposal of assets
foreign companies (CFC) legislation.
by companies are taxed as chargeable
gains, at an effective rate of 33%.
19Your move in the right direction | Investing in Ireland
Foreign investment
incentives
The Irish Government is committed to
maintaining an environment conducive
Ireland is an ideal place for companies
to foreign investment and remains
steadfastly committed to the maintenance
to centralise their activities from both
of the 12.5% corporate tax regime as the
cornerstone of industrial policy. The low
a business and tax perspective. In
corporate tax rate, an enhanced IP rate,
generous exemptions from dividend,
particular, companies based in Ireland
royalty and interest withholding tax, a
participation exemption, the absence of
can own and exploit intangible assets
controlled foreign company legislation,
and the existence of incentive packages
with a low effective tax rate.
that maximise EU financial assistance and
efficient use of EU funds, make Ireland an
supporting investors. The IDA favours US companies, in particular, account
extremely attractive jurisdiction in Europe.
advanced manufacturing projects for a large proportion of foreign direct
in information and communications investment into Ireland. US firms have
Government incentives target foreign
technology, pharmaceuticals and invested almost $290 billion in Ireland over
investors offering sustained high-skilled
biopharmaceuticals, medical technology, the last decade. In 2015, US investment
jobs and net exports with significant
engineering and consumer products, and accounted for 74% of all foreign direct
local content. The manufacturing of
high value internationally traded service investment into Ireland. This is further
pharmaceuticals and medical devices,
sectors such as software, financial services, evidence of the substantial nature of US
financial services, the provision of
shared services and customer support. investment in Ireland.
information communications technology
(ICT) and professional services are the
Foreign investment in Ireland is substantial Incentives to create and acquire
key sectors in terms of foreign direct
in nature. intellectual property (IP)
investment. The government also favours
In today’s economic climate, the re-
joint ventures between foreign and local
Foreign direct investment in Ireland has evaluation of a company’s global business
investors with complementary skills, and it
increasing importance in the current model is paramount in order to remain
is increasingly focusing on strengthening
economic climate. In particular, large competitive and maximise overall
Ireland’s indigenous technology base.
companies, as defined by Irish Revenue, efficiency. The majority of companies
account for around 80% of corporate tax centralise some or all of their key, high-
Non-tax incentive packages, which are
revenue paid in Ireland. value-added activities into a smaller
sponsored by the Industrial Development
number of global or regional headquarters.
Agency (IDA), may include capital grants,
A centralised model can maximise the
interest subsidies and loan guarantees,
efficiency and profitability of the operation.
and grants for rent reduction, employment,
training, R&D and technology acquisition.
Over recent years we have seen an
These incentives are chiefly determined by
the location and the quality of employment
IDA supported increasing number of multinationals use
low taxed Irish central entrepreneur or
created. The IDA monitors grant recipients
closely, withholding or seeking repayment
companies alone principal companies to manage their
group’s international business. Under these
of grants if job commitments are not met.
sustain over structures the Irish principal company is
the entrepreneur which contracts with
IDA Ireland has a property portfolio of
business and technology parks in major
200,000 jobs in customers and bears all commercial risks.
The entrepreneur also contracts with
cities and is proactive in attracting and
Ireland. foreign subsidiaries (and third parties) for
20Your move in the right direction | Investing in Ireland
production, R&D, sales support etc via an Generous research and development Whereas in prior years the R&D tax
arrangement that works on the basis of tax credits credit was calculated as a percentage of
costs and commissions. In many cases the In addition to availing of the low rate incremental expenditure above “base year”
Irish principal company also owns the IP of corporation tax of 12.5%, many expenditure i.e. the level of spend in 2003,
rights. opportunities exist for companies to for accounting periods beginning on or
optimise their R&D tax relief in Ireland. If after 1 January 2015, this base year concept
Tax relief for capital expenditure on a company has overcome technological is no longer relevant.
intangible assets challenges to develop new products,
Tax relief is available for capital expenditure processes, materials or certain services For accounting periods commencing on or
incurred by companies on the provision for its own use or its customers’ use, then after 1 January 2015, the relief is calculated
or acquisition of intangible assets for the it may qualify for generous Irish R&D tax by allowing a tax credit of 25% of the
purposes of a trade. incentives. qualifying incremental expenditure against
•• It matches tax deductions with the
amortisation or depreciation charge in
the accounts. Alternatively, a company
may elect to claim tax deductions over
Ireland is the first country to introduce
a period of 15 years (this is particularly
useful where brands are acquired
a patent box regime which is in full
as typically there would not be any
accounting deprecation on brands).
compliance with the OECD’s modified
•• The deduction is made by way of capital nexus approach
allowance (tax depreciation). The capital
allowances can only be offset against
income from “relevant activities”,
including the managing, developing and
exploiting of specified intangible assets
or the sale of goods deriving their value
from the specified intangible asset
acquired.
•• Prior to 1 January 2015, the aggregate
amount of any allowances and related
interest expense in an accounting period
could not exceed 80% of the trading
income from the relevant trade. For
accounting periods beginning on or after
1 January 2015, the above restriction
was removed and all relevant income
can be sheltered to further reduce the
Irish effective tax rate. However, a loss
can never be created or set against non-
intellectual property income.
•• For US multinationals, there may also
be a book benefit on acquisition of
intragroup intangible assets.
21Your move in the right direction | Investing in Ireland
the corporation tax liability of the company.
For example, qualifying expenditure of
the tax authorities for the excess over a
three-year period, subject to certain limits. Ireland has an
€100,000 in 2016, would give a corporation
tax credit of €25,000.
A further benefit for companies who are
in receipt of an R&D credit allows them in extensive double
The credit can be offset against a
certain instances to reward key employees.
In effect, the company may surrender a tax treaty network
company’s corporation tax liability in the
year in which it is incurred. The credit is
part of their R&D credit against employees’
income tax (subject to the credit not with 73 signed to
available together with a deduction for
the expenditure, resulting in a cumulative
reducing the employees’ effective tax rate
below 23%). The relief can only be awarded date.
benefit of up to 37.5%, essentially a 300% to key R&D employees e.g. typically those
trading deduction. where 50% or more of their employment
duties relate to relevant R&D. In essence therefore a company will
A credit of 25% is also available for the incur qualifying expenditure (which in the
relevant expenditure incurred on a The R&D tax credit regime, along with other legislation is identical to the definition of
building/structure used for R&D activities. incentives, in particular the IP tax relief for qualifying expenditure for R&D purposes)
the acquisition of intangible assets, assists in creating an IP asset from which it will
Relevant expenditure is broadly defined as in making Ireland a very attractive location then earn qualifying income upon which it
expenditure on the portion of the building for companies to carry out R&D. This also will then claim KDB relief.
used for qualifying R&D activities, provided helps Ireland retain existing activities in
at least 35% of the building is used for an increasingly competitive international The operation of the KDB will practice be
these activities over a four-year period. The environment. more beneficial to Irish companies who
credit available on the qualifying portion carry on development activities in house
of the expenditure is deductible in full in Knowledge Development Box rather than outsourcing elements to group
the year the expenditure is incurred. The Finance Act 2015 saw the introduction of companies. However, when integrated with
credit is available together with capital the Knowledge Development Box (KDB) existing reliefs available, the KDB is very
allowances/ tax depreciation. which is linked to the R&D tax credit and attractive to companies that carry on a
relief for intellectual property acquisitions significant element of their R&D activities
The credit is available for R&D carried out referred to earlier. in Ireland.
anywhere in the EEA, provided no relief
has been claimed in another country. Ireland is the first country to introduce a Stamp duty exemption on acquisition
The R&D must be carried out in-house. KDB which is in full compliance with the of IP
However, where part of the R&D activities OECD’s modified nexus approach. This A broad stamp duty exemption applies
are outsourced, a credit will be allowed for essentially means linking the relief to IP and to the acquisition of intellectual property
an amount of the greater of (a) 5% of the R&D activities. The aim of the relief is to which ensures that stamp duty is not a
total expenditure qualifying for the credit effectively tax qualifying income at a rate of barrier to centralising intellectual property
where the money was paid to a university 6.25%. It achieves this by deducting 50% of in Ireland.
or institute of higher education, and 15% the qualifying income from taxable profits,
of total expenditure where the money was therefore effectively halving the 12.5% rate. These rules enhance Ireland’s
paid to a third-party subcontractor or (b) competitiveness as a location for
€100,000. In order to qualify for relief under the centralisation, management and
KDB the company must earn income development of intellectual property.
The credit may be carried back to the from its IP assets, such as through their
previous year where there is insufficient exploitation or management/licensing.
current year corporate tax. If the credit is In order to have income from IP assets it
still not utilised after the carryback, the must incur qualifying expenditure on their
company may claim a cash payment from development.
22Your move in the right direction | Investing in Ireland
Government grant aid and Potential levels of direct
support funding
A range of services and incentives, Cash grant aid may also be available
including funding and grants, are and the level of grant support
available to those considering awarded is determined by a scoring
foreign direct investment in Ireland. model that includes a strategic,
These are offered by IDA Ireland, commercial and technical
Ireland’s inward investment assessment.
promotion agency, to both new and
01. RD&I feasibility and training
existing clients.
support up to €250,000 may
be available and is designed
While investment from overseas
to stimulate and develop RD&I
manufacturing and internationally
initiatives up to a maximum of
traded services are the broad focus
50% of the total eligible project
of IDA Ireland, the agency continues
cost.
to work with investors once in
02. Companies successful
Ireland to encourage and assist in
in identifying a specific
expanding and developing their
programme or project may
businesses. This long term view of
apply for RD&I support:
relationships with foreign direct
–– Industrial research - funding
investors in Ireland has proven very
available up to a maximum
successful for all involved and is
level of 40%
something IDA Ireland excels at.
–– Experimental development
- funding available up to
IDA Ireland can offer the following
a maximum level of 25%,
assistance:
typically grant rates are lower
•• Provide information and statistics –– Training - maximum level of
on key business sectors and 25% for company specific
locations within Ireland training and 50% for general
training (capped at €2m over
•• Assist in setting up a business in
the lifetime of the project)
Ireland
•• Introduce potential investors
to local industry, government,
service providers and research RD&I grant approval
institutions in Ireland process
•• Offer advice on property solutions •• Up to €7.5m of grant aid –
for international investors approval from IDA Board, for a
single project
•• Up to 15m of grant aid - approval
from IDA Board, for a multiple
projects
•• €7.5m - €15m of grant aid–
requires IDA and Cabinet approval
for a single project
•• Above €15m of grant aid– EC
approval required
23Your move in the right direction | Investing in Ireland
Ireland as a holding
company location
Ireland’s taxation regime contains •• 12.5% tax rate applies to dividends Countries with which Ireland has
the following key features which have paid out of trading profits of an EU/DTA signed tax treaties (January 2017)
enhanced Ireland’s position as a key resident company and to non-EU/DTA if
holding company location: part of listed group (extended with effect Albania Greece Panama
from 1 January 2012, to include territories
•• Irish tax relief is available for interest on Armenia Hong Kong Poland
the government of which has ratified
borrowings which are used to acquire Australia Hungary Portugal
the Convention on Mutual Assistance
share capital of qualifying companies or
in Tax Matters) but pooled tax credits Austria Iceland Qatar
to lend to qualifying companies
are available for underlying taxes and
•• No thin capitalisation rules (although withholding taxes - such that a “de facto” Bahrain India Romania
certain interest paid to a 75% non- foreign dividend exemption in many Belarus Italy Russia
resident parent company can be instances
Belgium Israel Saudi Arabia
reclassified as a non deductible
•• Ireland is not designated as a tax haven
distribution) Bosnia-
Japan Serbia
•• Company accounts may be prepared Herzegovina
•• No Irish capital duty or net wealth taxes
under US GAAP, regardless of place of
Republic of
•• Capital gains tax participation exemption, incorporation Botswana Singapore
Korea
such that capital gains on the disposal of
qualifying shareholdings are exempt from Ireland has committed to the OECD’s BEPS Slovak
Bulgaria Kuwait
Republic
Irish tax process and continues to engage with the
European Union tax proposals. The various Canada Latvia Slovenia
•• No controlled foreign corporation (CFC)
actions of BEPs and EU Anti-Tax Avoidance
legislation Chile Lithuania South Africa
Directive are likely to result in certain
•• Member of the European Union since changes being implemented into Irish China Luxembourg Spain
1973 and Ireland has a wide tax treaty taxation legislation in the coming years. Croatia Macedonia Sweden
network – 73 treaties signed to date However, despite this, Ireland continues
with all major trading partners (including to be a very attractive location for holding Cyprus Malaysia Switzerland
favorable treaties with China, Hong Kong, companies. Czech Rep. Malta Thailand
Japan, Singapore and South Korea) and
a number of other treaties are under Foreign income and tax treaties Denmark Mexico Turkey
negotiation Ireland has an extensive network of double Egypt Morocco United States
tax treaties generally based on the OECD
•• Wide range of domestic withholding tax United Arab
Model Treaty. Where there is no treaty or Estonia Moldova
exemptions for interest, dividends and Emirates
where relief under a treaty is less favorable
royalties
than unilateral relief, unilateral relief may United
Ethiopia Montenegro
•• Transfer pricing applies for accounting be available, particularly on dividends and Kingdom
periods commencing on or after 1 interest. Finland Netherlands Uzbekistan
January 2011, however, this regime will
France New Zealand Vietnam
only apply to trading transactions
Georgia Norway Zambia
Germany Pakistan
24Your move in the right direction | Investing in Ireland
Withholding taxes non-resident companies, unless the rate •• On 23 June 2016, Irish Revenue
Dividends is reduced by an applicable treaty or the published the Bilateral Advance Pricing
The domestic withholding rate on EU Interest and Royalties Directive applies. Agreement Guidelines relating to the
dividends is 20%, however in most Revenue have also issued guidance stating operation of Ireland’s Advance Pricing
instances the rate can be reduced to nil that they are prepared to grant permission Agreement (APA) programme. The formal
if an appropriate declaration is in place to a company paying a royalty, out of bilateral APA programme is effective for
and (a) the recipient is an individual who is which it would otherwise be required applications received on or after 1 July
neither resident nor ordinarily resident in to deduct tax, to make the payment 2016. The programme applies to transfer
Ireland and is resident in the treaty country without deducting that tax where certain pricing issues (including the attribution
or an EU member state or (b) the recipient requirements are fulfilled. Thus there are of profits to a permanent establishment,
is a company and: numerous routes available to avoid an or ‘PE’) and is conducted within the legal
obligation to withhold tax on royalties. framework of the double tax treaty that
•• It is ultimately controlled by persons
Ireland has entered into with the other
resident in a treaty country or EU
Transfer pricing jurisdiction concerned.
member state, or
Transfer pricing legislation took effect for
•• Ireland has introduced Country-by-
•• The principal class of shares of the accounting periods commencing after 1
Country Reporting (CbCR) legislation
company or of another company of which January 2011 in Ireland. The legislation
and regulations effective for accounting
it is a 75% subsidiary is substantially or endorses the OECD Transfer Pricing
periods commencing on or after 1
regularly traded on one or more stock Guidelines and the arm’s length principle.
January 2016. Under the new provisions,
exchanges in DTA countries, or The main points to note in relation to the
an Irish-resident ultimate parent entity of
Irish regime are as follows:
•• It is resident in a treaty country or EU a multinational group (broadly, one with
member state and is not under the •• The regime is confined to related party annual consolidated revenue in excess of
control of person or persons who are dealings that are taxable at Ireland’s €750 million in the immediate preceding
Irish tax residents corporate tax rate of 12.5% (i.e. trading accounting period) will be required to file
transactions). a CbCR with Irish Revenue.
Interest
•• Non trading transactions fall outside the •• An exemption from the transfer pricing
A 20% withholding tax is generally levied
scope of the regime; legislation applies for small to medium
on annual interest payments made to non-
enterprises (companies with fewer than
resident companies. However, a lower rate •• The rules apply to domestic and
250 employees and with a turnover of
may apply where there is an applicable tax international related party transactions,
less than €50m or assets of less than
treaty, the interest is paid to a qualifying subject to an exemption for certain small
€43m globally).
company under the EU Interest and and medium sized companies.
Royalties Directive, or the interest payment
•• As Ireland operates a self-assessment
is specifically exempt under one of the
regime for corporation tax, the onus Why Deloitte for transfer pricing?
various exemptions which are available
is on the Irish taxpayer when filing
under Ireland’s domestic legislation.
its tax return, to demonstrate that Deloitte Ireland were recognised as
In many instances, companies paying
intercompany transactions with related Ireland Transfer Pricing Firm of the
interest in the course of a business or
parties is at arm’s length. Year 2016 and European Transfer
trade in Ireland to EU and treaty corporate
Pricing Firm of the Year 2016 by the
recipients can rely on an Irish domestic •• The documentation requirement under
International Tax Review.
exemption so no withholding applies. the Irish regime may be satisfied by
counterparty documentation prepared
Royalties and fees by the other related party to the
Most royalties are not subject to transaction and therefore the regime
withholding tax. A 20% withholding tax is should have little impact in terms of
imposed on patent royalties and annual attracting or hindering new investment
payments of pure income profit paid to in Ireland.
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