corporate tax in ireland - dundalk · corporate tax in ireland fig.1: % corporation tax headline...

Corporate tax in ireland

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09Guide to Tax in Ireland


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09 Contents 1 Introduction 4 Corporation Tax in Ireland 5 Tax Relief Available 7 Research & Development (R&D) Tax Credit 9 Intangible Assets and Intellectual Property 10 Transfer Pricing Rules in Ireland 11 Internationalisation 14 Taxes on Capital 15 Tax Administration16 Other Business Taxes17 Personal Taxation

Facts and figures…

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0 5 10 15 20 25 30 35 40 45 50

Ireland

ChinaNetherlandsUK

GermanyBelgiumFranceUSAJapan

Singapore

Luxembourg

Switzerland

12.50

25.0025.5028.00

30.0033.9934.4339.5041.00

18.00

28.59

21.00

0 5 10 15 20 25 30 35 40 45 50

Ireland

France

Luxembourg

Belgium

Netherlands

UKGermany

32.60

39.5039.30

44.2044.60

35.6037.40

0 5 10 15 20 25 30 35 40 45 50

ChinaNetherlandsUK


Singapore

Luxembourg

Switzerland16.6717.4521.53

25.0032.5633.4544.6348.31

6.71

22.53

10.76

FiG.1: % Corporation tax Headline rates

FiG.3: oVerall tax BUrden as % oF Gdp

Source:Deloitte,2009

Source:Eurostat,2008

FiG.2: % inCrease in proFit reqUired to aCHieVe same distriBUtaBle inCome aVailaBle in ireland Based on rates in FiG 1


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FiG.1: % Corporation tax Headline rates ireland – a winning location for global business.

FiG.3: oVerall tax BUrden as % oF Gdp

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introdUCtion

Ireland’s transformation into a dynamic, knowledge-based economy for the 21st century is the result of a decisive strategy to secure Foreign Direct Investment by leading global companies.

Almost1,000MultinationalCorporations(MNCs)havechosenIrelandastheirstrategicEuropeanbase,attractedbyourpro-business,lowcorporatetaxenvironmentandyoung,highlyskilledworkforce. ManyoftheseMNCshavegoneontoexpandtheirfacilitiesinIrelandbecauseofthepositive,adaptableattitudeoftheworkforceandthereadyavailabilityofhighlyeducated,ambitiousmanagers.IrishMNCteamstakeaforward-thinking,partnershipapproachtothebusiness,anticipatingmarketdevelopmentsandcomingupwithgreatideastoseizenewopportunities.That’showsomanyhavemovedupthevaluechainoftheparentMNCtotakeonhighervalue,knowledge-intensiveactivities. ThevibrantambitionthathasbroughtIrelandthisfarisnowfocusedonsecuringForeignDirectInvestment(FDI)investmentinthreekeyareas:HighValueManufacturing,GlobalBusinessServices,andResearch,DevelopmentandInnovation(RD&I).TheseactivitiesarethrivingacrossallthebusinesssectorsinwhichIrelandhasbuiltupaconcentrationofknowledgeandexpertise:LifeSciences,InformationandCommunicationsTechnologies(ICT),InternationalServices,DigitalMediaandConsumerBrands.Lookingtothefutureasalways,IrelandisalsodevelopingtheemergingareasofCleanTechnology,ServicesInnovationandConvergence. ThechallengenowforIrelandandourMNCpartnersistopreparefortheneworderintheglobalbusinessenvironmentthatwillsurelyemergewitheconomicrecovery. Irelandisready,ableandwillingtohelpourexistingandnewMNCpartnersinventtheirfutures.

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The Global Innovation Survey 2009 ranks Ireland as first for Foreign Direct Investment and fourth for the ease of doing business.

Ireland Investment Highlights 2008

— Atotalof130ForeignDirectInvestmentswon

— NumberofcompaniesinvestinginIrelandforthefirsttimeup16%on2007

— A24%increaseinResearch,DevelopmentandInnovationprojects

— Circa€2bnintotalinvestmentsecuredandover8,837newjobscreated

introdUCtion

FiG.1: % Corporation tax Headline rates


0 5 10 15 20 25 30 35 40 45 50

Ireland

ChinaNetherlandsUK


Singapore

Luxembourg

Switzerland

12.50

25.0025.5028.00

30.0033.9934.4339.5041.00

18.00

28.59

21.00

0.0 0.5 1.0 1.5 2.0 2.5

Ireland

NetherlandsLuxembourgSwitzerland

Belgium

Germany

UK

1.32

1.651.63

1.762.18

1.331.45

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Corporation tax in ireland

12.5%Ireland’s corporate tax rate is 12.5% on all trading profits.

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Corporation Tax in IrelandCorporate Tax RatesIreland’s12.5%corporatetaxrateontradingincomeisoneofthelowest‘onshore’ratesintheworld.‘Tradingprofits’includeabroadrangeofcommercialactivitiesincludingIntellectualProperty(IP)andSupplyChainManagement. TheIrishGovernmentiscommittedtoretainingthe12.5%corporatetaxrateontradingincomeuntilatleast2025. Ataxrateof25%appliestonon-tradingincome(passiveincome)suchasinvestmentincome,foreigndividends,rentalincome,netprofitsfromforeigntrades,andincomefromcertainlanddealingsandoil,gasandmineralexploitations.

The Irish Corporate Tax SystemAcompany’sliabilitytocorporationtaxinIrelanddependsonitsresidency.Irishresidentcompaniesareliabletocorporationtaxonalltheirworldwideincomeandcapitalgains.AcompanyisconsideredtobetaxresidentinIrelandifitscentralmanagementandcontrolarelocatedintheState.Thelocationwheremajorpolicydecisionsofacompanyaretakenisoftenwherethecompany’scentralmanagementandcontrolaresituated.

CompaniesnotresidentinIrelandbutwithanIrishbranchareliabletocorporationtaxon(i)profitsconnectedwiththebusinessofthatbranchand(ii)anycapitalgainsfromthedisposalofassetsusedforthepurposesofthebranchintheState.

CompaniesnotresidentinIrelandandwhodonothaveanyIrishbranchareliableto(i)incometaxonanyIrish-sourcedincomeand(ii)capitalgainstaxongainsfromthedisposalofspecifiedIrishassets.

Calculating Tax LiabilityInIreland,companiesareliabletocorporationtaxontheirtotalprofits,includingtradingincome,passiveincomeandcapitalgains.InordertocalculatetheamountofprofitthatissubjecttoIrishtax,itisnecessarytounderstandsomebasictaxrules:

IRISh ReSIdenT Company

Liabletocorporationtaxonworldwideincome

IRISh bRanCh oR agenCy

LiabletocorporationtaxonIrishbranchincome

non IRISh ReSIdenT wITh no bRanCh

LiabletoIrishtaxonIrishsourceincome

Corporation tax in ireland

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tax relieF available

Tax Relief AvailableInterestInterestonborrowingsusedforatradeorbusinessistax-deductibleonanaccrualsbasis,subjecttosomeexceptions.Interestonborrowingsusedfornon-tradingpurposes-forexample,fortheacquisitionofsharesinanothercompany-maybedeductibleonapaidbasis,subjecttocertainconditions.

Capital allowancesAccountingdepreciationisnotdeductibleincalculatingbusinessprofitsfortaxpurposes.Capitalallowancesare,however,availableinrelationtoexpenditureon:

1. PlantandMachinery — Expenditureonplantandmachinery,fixturesandfittingsetc,maybewritten

offat12.5%perannumonastraight-linebasisoveran8-yearperiod. — Expenditureonscientificequipmentiseligiblefora100%capitalallowance. — Thecostofenergyefficientequipmentisgrantedat100%capitalallowance

(intheyearoftheexpenditure)aspartoftheIrishGovernment’sGreenInitiative.Eligibleequipmentincludes:

-Motorsanddrivers;-Systemslighting;-BuildingEnergyManagementSystems(BEMS);-ICT;-Heatingandelectricityprovision;-Heatingventilationandair-conditioningcontrolsystems;and,-Electricandalternative-fuelvehicles.

2. IndustrialBuildings Expenditureonindustrialbuildingsusedformanufacturingpurposesqualifies

foranannualtaxallowanceof4%,writtenoffonastraight-linebasisovera25-yearperiod.

3. Losses Trading lossescanbeoffsetagainst(i)futureincomefromthesametrade,or

(ii)tradeincomefromtheprecedingaccountingperiod.Thereductionintaxpayabledependsonthetaxratewhichwouldhaveappliedifagainhadarisen,i.e.10%,12.5%or25%.

excess losses canbecarriedforwardindefinitelyagainstfuturetradingincome. Capital lossescantypicallybeoffsetagainstothergains,eitherwithinthesame

periodorinfutureperiods(subjecttosomeexceptions).

4. GroupRelief A‘taxgroup’isconsideredtoexistonlywhenthereisa75%relationship(direct

orindirect)betweenanIrishresidentcompanyandanIrishbranchofanEEA(EuropeanEconomicArea)company.

Thefollowingexpensesmaybeoffsetonagrouptaxbasis: — Tradinglossesmaybeoffsetonacurrentperiodbasisagainsttaxable

tradingprofitsofanothergroupcompany; — Excesschargesonincome,includingpatentroyalties; — Excessmanagementexpensesofinvestmentcompanies;and, — Capitalassetsmayalsobetransferredwithinthegrouptax-free.

IrishlegislationnowprovidesthatanIrishresidentparentcompanymayoffsetagainstitsprofitsanylosses of a foreign subsidiaryresidentfortaxpurposesintheEU.Thisisprovidedthatthelossescannotbeusedinthelocaljurisdiction.

Capital lossescannotbesurrenderedwithinagroup.

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AmendmentstoFinanceActshavegreatlyimprovedtheoriginalscheme.TheFinance(No.2)Act2008continuedthisprocessbyincreasingtheR&Dtaxcreditfrom20%to25%(inadditiontoataxdeductionat12.5%forR&DexpenditureinIreland).

r&d

researCh & development (r&d) tax Credit

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5. Pre-TradingExpenses Certainpre-tradingexpensesofcompaniesareallowableincalculatingtrading

incomeonceithascommencedunderSection82,TaxesConsolidationAct(TCA)1997.Thereliefappliestotradesorprofessions(whetherincorporatedornot),whichcommenceonorafter22January1997.UnderSection82,adeductionisallowedforpre-tradingexpensesincurredinthethreeyearspriortocommencementofthetradeorprofession.Theseexpensescanbedeductedfromtaxableprofits.

Examplesofeligiblepre-tradingexpensesare: — Accountancyfees; — Advertisingcosts; — Costsoffeasibilitystudies; — Costsofpreparingbusinessplans; — Rentpaidforthepremisesfromwhichthetradeorprofessionoperates.

6. TaxExemptGovernmentSecurities ForeigncompaniesinIrelandareexemptfromcorporationtaxoninterest

earnedoncertainIrishGovernmentsecuritiesissuedtothem.Suchsecuritiescanbeissuedinanumberofmajorcurrencies.

Research & Development (R&D) Tax CreditIrelandhashadanR&DTaxCreditschemesince2004.Itspurposeistoencouragebothforeignandindigenouscompaniestoundertakenewand/oradditionalR&DactivityinIreland.ThetaxcreditisavailabletoIrishresidentcompaniesandbranchesonthecostofin-house,qualifyingR&DundertakenwithintheEuropeanEconomicArea(EEA),providedsuchexpenditureisnototherwiseeligiblefortaxbenefitelsewherewithintheEEA. Overtheyears,variousamendmentstoFinanceActshavegreatlyimprovedtheoriginalscheme.Finance(No.2)Act2008continuedthisprocessbyincreasingtheR&Dtaxcreditfrom20%to25%(inadditiontoataxdeductionat12.5%forR&DexpenditureinIreland).

researCh & development (r&d) tax Credit

how IT woRkS:CompanyPerspective € IrishSupport €R&Dspend 100.00GrantAid(e.g.20%) (20.00) [email protected]%= 10.00Netofgrantcost 80.00 80@25%= 20.00Taxsaving (30.00) Totaltaxsaving 30.00Totalnetcost 50.00 Plusgrantaid 20.00 Totalsupport 50.00

R&d aCTIvITIeS muST be:— Systematicor— Investigativeor— Experimental(fieldsofscienceandtechnology)— Areaofbasicresearch— Appliedresearch— Experimentaldevelopment.

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FinanceAct2009containsimportantmeasurestodrivethedevelopmentofIrelandasahubforcompaniesengagedintheownershipanddevelopmentofintellectualpropertyassets.

intellectualproperty

intanGible assets and intelleCtUal property (ip) in ireland

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intellectualproperty

intanGible assets and intelleCtUal property (ip) in ireland

Furthermore,forallfutureaccountingperiodsthebaseyearisnow2003.Inessence,thismeanstheIrishschemewillbecomevolumebasedfornewentrantstotheR&Dsector.

Thecreditalsoprovidesthatupto:— 5%oftheR&DexpenditurecanbeoutsourcedtoEuropeanUniversities,andin

addition;— 10%oftheR&Dexpenditurecanbesub-contractedtounconnectedparties.

(i.e.15%intotal).

Refundable Creditapplieswherethereisinsufficientcorporatetaxliabilitytouseupthefullcredit.Thecreditcanbe:— carriedback12months;or,— Carriedforwardindefinitely;or,— BeclaimedinarefundfromRevenue(overthreeaccountingperiods).

CoredefinitionsofqualifyingR&DexpenditurearecontainedintheTCA1997,whichcoversbothrevenueandcapitalexpenditure.Inpractice,qualifyingexpenditureincludeswages,relatedoverheads,plantandmachinery,andbuildings. Inordertoqualifyforthetaxcredit,itisnecessarytoseektoachievescientificortechnicaladvancementandinvolvetheresolutionofscientificortechnologicaluncertainty.

Intangible Assets and Intellectual Property (IP) in IrelandIreland’staxsystemhasforsometimeencouragedboththecreationandmanagementofintellectualproperty,bymeansofour12.5%taxrate,R&Dtaxcredit,andpatentexemption. ThispositionhasnowbeensignificantlyimprovedbytherecentlypublishedFinanceAct2009,whichincludesanewcapitalallowancesystemforexpenditureincurredontheacquisitionofintangibleassets. Thenewreliefappliestoqualifyingacquisitionsoccurringafter7May2009andallowsforthecapitalexpendituretobewrittenoffinlinewiththeaccountingtreatment,orafixedperiodof15years.Thereliefisgivenbymeansofacapitalallowancedeductionavailableagainsttradingincomefromthemanagement,developmentorexploitationoftheintangibleassetconcerned. Itappliestointangibleassetsrecognisedundergenerallyacceptedaccountingpracticeandwhichareincludedinthespecifiedcategorysectionofthelegislation,whichincludes:patents,registereddesigns,designrightsorinventions,trademarks,tradenames,brands,brandname,domainname,servicemarkorpublishingtitle,copyright,know-how,etc.Forfurtherdetails,pleaseseewww.idaireland.com.

Acompany(ALtd)receivesanR&Dcreditof€100(million)buttheircorporationtaxliabilityisonly€80(million),thusthereisanexcesscredit

TheyopttoreceivearefundfromRevenue,prescribedasfollows:period one: 33%oftheexcessispaidtothecompany,i.e.

ALtdreceivesapaymentof€6.6(million)fromRevenue.

period Two: 50%oftheexcessremainingwillbepaidbyRevenue,i.e.ALtdwillreceive€6.7(million)[20–6.6=13.4X50%]

period Three: Theremainingexcesswillbepaid,i.e.€6.7(million)

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other Tax deductions for Ip CostsOtherexistingprovisionsthatwillcontinuetoapply,separatetothenewscheme,include:— Scientific research: revenueandcapitalexpenditureonactivitiesinthefield

ofnaturalorappliedsciencefortheextensionofknowledgeisallowableasatradingexpenseintheyearinwhichtheexpenditureisincurred.Thewrite-offisnotavailableforminingorpetroleum-relatedresearch.

— Software:canbewrittenoffovereightyearsonastraight-linebasis,wherethesoftwareisusedforbusinesspurposes.

patent Royalty exemptionInadditiontothelowcorporatetaxrate,Ireland’staxlegislationcontainsanexemptionforincomederivedfrom‘qualifyingpatents’.Theterm‘qualifyingpatents’coverspatentswheretheresearch,planning,processing,experimenting,testing,devising,designing,developingorothersimilaractivityleadingtoaninventionwascarriedoutinIrelandorelsewhereintheEEA(EuropeanEconomicArea). Qualifyingpatentincomeissubjecttoaceilingof€5millionfortheexemptioninanyoneyear.Theexemptincomeisanyroyalty,orothersum,paidbytheuseroftheinventionpatented.Asacompanyusuallyholdsthepatent,thisincomeisfirstlyexemptfromtaxinthehandsofthecompany.Irishtaxlegislationalsoallowsthetax-freenatureofsuchincometobepassedtoshareholderswhoreceivedividendsfromacompanythatqualifiedforthepatentincomeexemption.

Transfer Pricing Rules in IrelandTransferpricinginIrelandisconfinedtotransactionsinvolvingIrishtaxincentives.Forexample,transactionsbetweenacompanythatqualifiesforthe10%taxrateandanassociatenon-10%companyaresubjecttotransferpricingrules,whichgenerallyrequirethatthesetransactionsmustbeatarm’slength.

transFer priCinG rUles in ireland

Index of eConomIC fReedom RankIng The CounTRIeS

Ireland 82.2UnitedStates 80.7Switzerland 79.4UK 79.0Netherlands 77.0Luxembourg 75.2Belgium 72.1Germany 70.5France 63.3

100-80 free79.9-70 mostlyfree69.9-60 moderatelyfree59.9-50 mostlyunfree49.9-0 repressedN/A notranked

Source:IndexofEconomicFreedom,2009

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InternationalisationHolding CompaniesInvesting into IrelandUntilrecently,investmentinIrelandwaslikelytoberoutedthroughaholdingcompanyinanotherEuropeanlocationsuchastheNetherlandsorLuxembourg.RecentlegislationhasputIrelandinapositiontocompetewiththeseestablishedEuropeanholdingcompanylocations.AnIrishcompanycannowactasaEuropean/RegionalholdingorIntermediateholdingcompany.Thekeypointsrelatetothetreatmentofcapitalgainsandforeigndividends:

foreign dividend IncomeAlthoughforeigndividendincomeisliabletotaxinIrelanditispossibletogainreliefsothatnofurtherIrishtaxwillapply.Companiesmaygaintaxreliefthrough:

1. Foreigntaxcreditpooling;2. EUParentSubsidiaryDirective;3. Doubletaxationagreements.

DividendspaidbyacompanylocatedintheEUorinacountrywithwhichIrelandhasadoubletaxagreement(includingagreementswhicharesignedbutnotyetratified)areliabletocorporationtaxatthe12.5%rateprovidedthedividendispaidoutof‘tradingprofits’. Ifpartofthedividendispaidfromnontradingprofitsandpartfromtradingprofits,thenontradingbalancewillbetaxedatthe25%rate.However,inaccordancewithEUlegislation,Irelandfollowsthe‘de-minimisrule’,whichstatesthatundercertainconditionsthewholeofdividendsaretobetaxedat12.5%,regardlessofwhetheraportionisderivedfromnontradingprofits.

Tax Credit pooling‘OnshorePooling’allowsforeigndividendstobepooledtogether,beforetheyareoffsetagainsttheIrishtaxliability.However,excesstaxonforeigndividendsliableatarateof12.5%cannotbeusedagainstthoseliableatthe25%rate. Thetaxcreditsdonotneedtobeutilisedintheyearinwhichthedividendisreceived.TheycanbecarriedforwardindefinitelyoroffsetagainstIrishtaxonfutureforeigndividends.

internationalisation

The de–mInImIS RuLe

Inordertosatisfythisrule,75%orormoreofthedividendsmustconsistoftradingprofitsfromthepayingcompanyorfromdividendsreceivedbyitfromtradingprofitsoflowertiercompaniesresidentintheEUorinataxagreementcountry.Inaddition,theaggregatevalueoftradingassetsofthedividendrecipientcompanyandofitssubsidiariesmustbegreaterthan75%oftheaggregatevalueofalltheirassets(withintheaccountingperiodinwhichdividendisreceived).

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eu parent Subsidiary directiveTheEuropeanUnionDirectiverequiresthatMemberStateseliminatedoubletaxationofdividendsreceivedbyaparentcompanylocatedinoneMemberStatefromitssubsidiarylocatedinanother.

Atpresent,sinceasubsidiarycompanyistaxedontheprofitsoutofwhichitpaysdividends,theMemberStateoftheparentcompanymusteither:

1. Exemptprofitsdistributedbythesubsidiaryfromanytaxation;or,2. Grantacreditagainstitsowntaxinrelationtothetaxalreadypaidinthe

MemberStateoftheparentsubsidiary.

Foreign Tax CreditsIrishtaxresidentcompaniesareliabletopayIrishcorporatetaxontheirworldwideincome.AforeignbranchofsuchacompanyissimultaneouslyliabletobothforeignandIrishtax.Inordertoeliminatedoubletaxation,IrelandoffersapoolingprovisionwhichenablescompaniesoffsettheforeigntaxasacreditagainsttheIrishcorporationtaxliability.Theextentofthecreditdependsonthenatureoftheprofits,andhencewhethertheyaretaxedinIrelandat12.5%or25%,butinallcasesislimitedtotheIrishtaxontheincomeitem.Thispoolingprovisionallowsforthefactthatforeignbranchprofitsmaybetaxedatavarietyoftaxratesandlooksattheoverallrate,notattheratescountrybycountry.

Repatriation of profits and Irish withholding tax Awithholdingtaxof20%appliestodividendsandotherprofitdistributionsmadebyanIrishresidentcompany.However,extensiveexemptionsareavailableincasesofcertainpaymentstocertainshareholders,including:— Irishtaxresidentcompanies;— Charitiesandpensionfunds;— Certaincollectiveinvestmentfunds;— Certainemployeeshareownershiptrusts;and,— CertaincompaniesandindividualresidentsinotherEUMemberStates,or

countrieswithwhichIrelandhasataxtreaty.

DividendsandotherprofittransfersfromIrelanddonothavetobeineuro,anycurrencycanbeused.

Fortheparentsubsidiarydirectivetoapply,arelationshipofnolessthana10%shareholdingmustexistfrom1January2009.

Ireland has signed comprehensive double taxation agreements with 50 countries, of which 46 are in force and the remainder are pending ratification.

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internationalisationinternationalisation

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Ireland’s Double Tax Agreement NetworkThese rates generally reflect the lower of the treaty rate and the Irish domestic rate

Country dividends(%)* Interest(%) Royalties(%)1. AUSTRALIA 0 0/10 102. AUSTRIA 0 0 03. BELGIUM 0 0/15 04. BULGARIA 0 0/5 105. CANADA 0 0/10 0/106. CHILE 0 0/5/15 5/107. CHINA 0 0/10 6/108. CROATIA 0 0 09. CYPRUS 0 0 010. CZECHREP. 0 0 0/1011. DENMARK 0 0/10 0/5/1012. ESTONIA 0 0/10 5/1013. FINLAND 0 0 014. FRANCE 0 0 015. GEORGIA - - -16. GERMANY 0 0 017. GREECE 0 0/5 0/518. HUNGARY 0 0 019. ICELAND 0 0 1020. INDIA 0 0/10 1021. ISRAEL 0 0/10 1022. ITALY 0 10 023. JAPAN 0 0/10 1024. KOREAREP. 0 0 025. LATVIA 0 0/10 0/5/1026. LITHUANIA 0 0/10 0/5/1027. LUXEMBOURG 0 0 028. MACEDONIA 0 0 029. MALAYSIA 0 0/10 830. MALTA 0 0 531. MEXICO 0 0/5/10 1032. NETHERLANDS 0 0 033. NEWZEALAND 0 0/10 1034. NORWAY 0 0 035. PAKISTAN 0 0 036. POLAND 0 0/10 0/1037. PORTUGAL 0 0/15 0/1038. ROMANIA 0 0/3 0/339. RUSSIA 0 0 040. SLOVAKREP. 0 0 0/1041. SLOVENIA 0 0/5 0/542. SOUTHAFRICA 0 0 043. SPAIN 0 0 0/5/8/1044. SWEDEN 0 0 045. SWITZERLAND 0 0 046. TURKEY 0 10\15 1047. UK 0 0 048. UNITEDSTATES 0 0 049. VIETNAM 0 0\10 05\10\1550. ZAMBIA 0 0 0

*ratereflectsIreland’sdomesticexemptiononoutbounddividendpaymentsSource:www.revenue.ie


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taxes on Capital

double Taxation agreementsTofacilitateinternationalbusiness,Irelandhassignedcomprehensivedoubletaxationagreementswith50countries,ofwhich46areinforceandtheremainderarependingratification.Theseagreementsallowtheeliminationormitigationofdoubletaxation.

Irelandiscontinuouslyexpandingthisnetworkofdoubletaxationagreements:— Fournewtaxagreementshavebeensigned(Georgia,Macedonia,Malta

andTurkey);— Eightnewtaxagreementshavebeenconcluded(Albania,Azerbaijan,Bosnia

Herzegovina,Kuwait,Moldova,Morocco,SerbiaandThailand);— Sevennewagreementsareinthepipeline(Argentina,Armenia,Belarus,Egypt,

Singapore,Tunisia,Ukraine);— OthercountrieshavealsobeenidentifiedbyIrelandashavingpotentialfor

doubletaxagreements(Brazil,HongKong,Iran,andthePhilippines);and,—AtaxcooperationagreementhasbeensignedwiththeIsleofMan.

Inaddition,whereadoubletaxationagreementdoesnotexistwithaparticularcountry,unilateralprovisionswithintheIrishTaxesActsallowcreditreliefagainstIrishtaxforforeigntaxpaidinrespectofcertaintypesofincome.

Taxes on CapitalCapital gains Tax (CgT)Profitsarisingfromthedisposalofassetsaresubjecttocapitalgainstax.(Disposalsupto31December2002areadjustableforinflation).Witheffectfrom8April2009thestandardrateinrespectofdisposalsis25%. Tradinglossesmaybeoffsetonavaluebasisagainstcapitalgainsforthecurrentorpreviousyear. CapitalassetsmaybetransferredbetweenIrishresidentgroupcompanieswithouttriggeringaCGTliability.

Relief from Capital gains Tax:— Unilateralcreditrelief ReliefisavailableinIrelandforcapitalgainspaidincertaincountriesincluding

Belgium,Cyprus,France,Germany,Italy,Japan,Luxembourg,theNetherlands,PakistanandZambia(IrelandsignedtaxagreementswiththeseStatespriortotheintroductionofcapitalgainstax).Inaddition,persons(anindividualoracompany)whoareliabletoCGTinIreland,butarealsotaxedonthegaininanothercountry,willbecreditedforforeigntaxpaidagainstIrishcapitalgainstaxdue.

— CGTonsharedisposals Irishholdingcompaniesareallowedanexemptionfromcapitalgainstaxonthe

disposalofsharesintheirsubsidiaries.Theexemptionis,however,subjecttoanumberofconditionsforexampletoberegardedasaholdingcompany,thecompanymustholdatleast5%ofthesharesofanothercompany.

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Stamp dutyStampdutyispayableonthetransferoflandandbuildings,theleaseofpropertyandoncertainlegalinstruments.Ratesvarybetween1%and9%,exceptonleasesofgreaterthan100years,wheretherateis12%.

Transfersbetweencompanieswitha90%relationshipareexemptfromstampduty.

Capital dutyIrelandhasnocapitaldutytax.

Tax AdministrationTheIrishtaxsystemisaself-assessmentregime,inwhichcompaniesareobligedtodeterminewhetherornottheyincurcorporationtaxand,ifso,tofileataxreturnandmakeanappropriatetaxpayment. WhenactivitiesinIrelandbecomesubjecttoIrishtax,thecompanyisrequiredtofileaform(TR2)withtheIrishRevenueCommissioners,whichhandlestaxregistrationforCorporationTax,PAYE/PRSIandVAT,whereappropriate. TaxreturnscanalsobefiledonlinebyusingtheRevenueOn-LineService(ROS),www.ros.ie.Itenablestaxpayerstoviewdetailsoftheirtaxbalancesandprovidesanyrelevantinformationtheyneedtopayandfilewithinthesetdeadlines.

Three-year exemption for Start-up CompaniesAthree-yearexemptionfromcorporationtaxdemonstratesIreland’scommitmenttoencouragingentrepreneurship,businessstart–upsandemploymentcreation.Witheffectfrom2009,newcompaniescommencingtotradein2009aregrantedreliefon(i)profitsofthenewtrade,and(ii)chargeablegainsondisposalsofassetsusedforthetrade,uptoaprescribedamount. Whenthetotalamountofcorporationtaxdoesnotexceed€40,000,afullexemptionisgranted.Amountsbetween€40,000-€60,000aregrantedmarginalrelief.

International financial Reporting StandardsWherefinancialstatementsaredrawnupinaccordancewithInternationalFinancialReportingStandards,theywillbeusedasthebasisfordeterminingcompanyprofits.Detailedprovisionscoverthetransitionofcompanyfinancialstatementstothesestandards.

tax administration

Tax and LegaL environmenTsFavouring the development of Private equity, venture Capital and entrepreneurship in europe (�=more favourable, �=less favourable)

Source:BenchmarkingEuropeanTaxandLegalEnvironments,EVCA,2008

0 5 10 15 20 25 30 35 40 45 50

Ireland

ChinaNetherlandsUK


Singapore

Luxembourg

Switzerland

12.50

25.0025.5028.00

30.0033.9934.4339.5041.00

18.00

28.59

21.00

0.0 0.5 1.0 1.5 2.0 2.5

Ireland

NetherlandsLuxembourgSwitzerland

Belgium

Germany

UK

1.32

1.651.63

1.762.18

1.331.45

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Other Business TaxesLocal TaxationTherearenoprovincial,municipalorlocaltaxesontheprofitsofcompaniesinIreland.Theonlylocaltaxisapropertytax,referredtoas“rates”,leviedbyLocalAuthoritiesoncommercialproperties.Anamount(orrate)ispayableper€1valuationoftheproperty.TherateissetannuallybyeachLocalAuthority,whichalsodeterminesthevaluationoftheproperty.

value added Tax (vaT)ValueAddedTaxisaconsumptiontaxandischargedongoodsandservicessuppliedinthecourseofbusiness.CreditisgivenforVATpaidtoregisteredtraders,thusthistaxisultimatelybornebythefinalconsumer. VATratesrangefromzeroto21.5%dependingonthetypeofproductorservice,withmostattractingachargeof21.5%. TherearedetailedrulesapplyingtoVATonproperty.

export vaT exemptionSuppliesofgoodswithintheEuropeanUnionareexemptfromVAT(exceptwhensuppliedtounregisteredpersonsintheEU).Importsfromnon-EUcountriesareliabletoVAT. AnEU-widecomputerisedVATInformationExchangeSystem(V.I.E.S.)allowsfortheflowofdataacrosscountriesandenablescompaniestorapidlyobtainconfirmationoftheVATnumbersoftheirtradingpartners. Inaddition,companiesthatexport75%ormoreoftheiroutputfromIrelandcanapplytotheRevenueCommissionersforVATexemptiononalmostalloftheirgoodsandservicesfrombothIrishandforeignsuppliers.ThisreducesadministrationandtheneedtogetarefundofVAT.

Customs and excise dutiesIrelandisamemberoftheEuropeanUnion(EU)andallbordercontrolsbetweenEUMemberStateshavebeeneliminated.Thisallowsduty-freeimportationofgoodsfromotherEUcountries.GoodsimportedfromoutsidetheEUaresubjecttocustomsdutyattheappropriateratespecifiedbytheEU’sCommonCustomsTariff.TherateofdutyisbasedontheInternationalHarmonisedSystem(HS).TheEUhaspreferentialtariffagreementswithcertaincountriesandcountrygroupings,whichresultincustomsdutybeingreducedoreliminated. Excisedutyischargeableonalimitednumberofgoodsincludingpetrol,diesel,LPG,beer,spirits,wine,tobaccoproductsandmotorvehicles.Therateofexcisedutyvariesdependingonthegoodsandispayableinadditiontoanycustomsdutiespayable.

Customs and excise ReliefCustomsandexcisedutiesarecollectedatthepointofimportation.Thereare,however,somecircumstancesunderwhichgoodsmaybeimportedwithoutpaymentofduty:— Inwardprocessing Approvalmaybeobtainedtoimportgoodsduty-freefromoutsidetheEUfor

processingandre-exportationtonon-EUcountries.— Warehousing SpecialarrangementsoperatetoallowmovementwithintheEUofgoods

subjecttoduty,withthedutybeingeventuallypaidinthecountryofconsumption.Businessescanobtainapprovaltostoregoodsduty-freeontheirpremisesuntilrequired.Ifthegoodsareforprocessing,reliefwillapply.Whereafinishedproductforsaleisinvolved,nodutiesarepayableifthegoodsarere-exportedoutsidetheEU.WherethegoodsarereleasedintotheEU,theappropriatedutiesarepayable.

other bUsiness taxes

�7

Personal TaxationIncome TaxWithintheOECD,Irelandhasthefourthlowesttaxwedge.IncometaxischargeableonallincomearisingintheStatetoindividuals,partnershipsandunincorporatedbodies. ThemostcommonformofincometaxisPAYE(PayAsYouEarn)whichisdeductedbyemployersfromanemployee’spay. Personswhoareself-employedorreceiveincomefromnonPAYEsourcesusetheself-assessmentsystem. Personalincometaxratesdependonmaritalstatus.The2009ratesforasinglepersonareasfollows:— Earningsupto€36,400aretaxedat20%;and,—Earningsinexcessofthisamountaretaxedat41%.

Inadditionanincomelevyispayableatthefollowingrates:

personal Tax Credits

Taxableincomecanbereducedbypersonaltaxcreditsdependingoneachindividual’ssituation.Theyareavailabletoeachindividualandmarriedcouple.Theprincipaltaxcreditsfor2009are:— Singleperson€1,830;and,— Marriedcouple€3,660

InadditionaPAYEcreditisavailableforindividualspayingtaxunderthePayAsYouEarnsystem.

Otherdeductionsarealsoavailableincluding:— Rent;— Servicecharges;— Singleparentpayment;— Widowedpersons’payment;and,— TradeUnionsubscriptions.

Thetaxcreditsareatthestandard(20%)rateoftax.Mortgageinterestandhealthinsurancereliefaredealtwithatsource.

peRSonaL InCome Tax RaTeS At20% At41%Singleperson €36,400 BalanceMarriedcouple(oneincome) €45,400 BalanceMarriedcouple(twoincomes) €72,800 BalanceOneparent/widowedparent €40,400 Balance

personal taxation

IncomeLevels RateofIncomeLevels€0-€75,036 2%€75,037-€174,980 4%Over€174,980 6%

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Taxation of foreign domiciled persons in IrelandMostforeignexecutivesworkingforoverseascompaniesinIrelandwouldbeclassifiedasbeingresident,butnotdomiciled,inIreland.ThismeanstheyaresubjecttoIrishincometaxonincomeearnedinIreland,aswellasonanyincomeremittedfromoutsidetheState.

Special assignment Relief programmeTaxreliefisavailableforcertainemployeeswhoareassignedfromabroadtoworkinIrelandforaperiodofatleastthreeyears. Thosewhoearnmorethan€100,000perannumandsatisfyspecificcriteriaareeligiblefortaxreliefonupto50%oftheiremploymentearningsinexcessof€100,000.Attheendofthetaxyear,thereliefwillbegrantedandtaxeswhichwouldotherwisebepayableatyearendwillnotbelevied.

Inordertoqualifyforthetaxreliefanindividualmust:— Benon-Irishdomiciled;— TakeupresidenceinIreland;— BeanemployeeofacompanywhichisnonEEA(incorporatedandresident);but

isfromacountrywithwhichIrelandhasadoubletaxationtreaty;— PriortoarrivalinIreland,havebeenemployedbyanassociatedcompanyofthe

Irishentitytowhichtheyareassigned;— Havepreviouslybeenpaidbytheoverseasemployer;and,— Havebeentaxresidentandexercisedthegreaterpartoftheiremploymentina

relevantoverseasjurisdiction.

TheoverseasemployermustoperateIrishPAYE(andPRSIwhereappropriate)ontheemploymentincome.

approved profit Sharing SchemeContributionsbyanemployertoanapprovedprofitsharingschemearetreatedasanallowabletradingexpense.Thesecontributionsareusedtopurchasesharesforemployees,uptoamaximumexpenditureof€12,700peremployee,perannum.Theemployeeisnotchargedincometaxonthedisposalofsharesiftheyareheldforatleastthreeyears.Thefirstsalebytheemployeeisalsofreefromstampduty.

new Share purchase ReliefEmployeeswhopurchasenewordinarysharesissuedbytheiremployercompanycanclaimtaxreliefuptoalifetimelimitof€6,349.ThecompanymustbeincorporatedandresidentinIreland.

employee Share ownership TrustsCompaniescanobtainataxdeductionforthecostofsettingupandmaintainingaschemetopurchasecompanysharesforthebenefitofemployees.Sharescanbeheldintrustforupto20years.Wherethetrustislinkedtoanapprovedprofit-sharingschemethetransferofsharestotheemployeewillnotbesubjecttoincometax.

personal taxation

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approved Share option SchemeUnderashareoptionschemeapprovedbytheRevenueCommissioners,anemployeeisonlyliabletocapitalgainstaxorCGTonanyprofitsmadeonthedisposaloftheshares,andnotonthevalueofthesharesthemselves. Toqualifyforapproval,theschememustbeopentoallemployees.However,amaximumof30%ofthesesharesmayberetainedfor‘key’employees.

national Social InsuranceSocialsecurityinIrelandisprovidedbymeansofsocialwelfareinsuranceknownasPayRelatedSocialInsurance(PRSI).Itiscompulsoryforallemployeesaged16orovertobecoveredbysocialinsurance.Bothemployersandemployeescontributetowardstheschemeandthecontributionsarecalculatedasapercentageofearnings.Employers’contributiontoPRSIis10.75%ofgrosssalary. AHealthContribution(knownasthehealthlevy)isalsopayable. AllforeignemployeesworkinginIrelandformorethanoneyearmustmakesocialinsurancecontributions,eveniftheyarepaidfromabroad.TheonlyexceptionsareEUnationalswhoarecontributinginanotherMembercountry,orpersonsfromacountrywithwhichIrelandhasasocialsecurityagreement.

employee ContributionsPRSI

HealthContribution

personal taxation

IncomeLevels RateofincomelevelsLessthan€26,000 ExemptFirst€75,035 4%Over€75,036to€100,100 5%

Upto€75,036 4%€352orlessperweek ExemptPRSIcreditperweek €127

�0

FUrther inFormation

WhileeverycarehasbeentakenbyIDAIrelandtoensuretheaccuracyofthispublication,noliabilityisacceptedforerrorsoromissions.

Further Information:Corporate Tax in Ireland — AguidewrittenbytheIrishRevenueAuthorityexplainswhatisclassifiedas

‘tradingincome’www.revenue.ie/en/practitioner/tech-guide/index.html

Tax Relief— Moreinformationregardingenergyefficientequipmentcanbesourcedfrom

SustainableEnergyIreland,www.sei.ie — Furtherclarificationonpre-tradingexpensescanbeobtainedfromtheIrish

RevenueAuthority,www.revenue.ie/en/about/foi/s16/income-tax-capital-gains-tax-and-corporation-tax/part-04/04-06-08.pdf

Tax administrationValueAddedTax(VAT)— TaxreturnscanbefiledonlinebyusingtheRevenueOnlineService

(ROS),www.ros.ie — DetailedrulesforVATonpropertyareavailableat

www.revenue.ie/en/tax/vat/full-intro.html

BusinessTaxes— AnEUcomputerisedVATInformationExchangeSystem(V.I.E.S.)allowsfor

theflowofdataacrosscountriesandenablescompaniestorapidlyobtainconfirmationoftheVATnumbersoftheirtradingpartners.www.ec.europa.eu/taxation_customs/taxation/vat/traders/vat_number/index_en.htmprovidesdetailedinformationonVATintheEU.

— Customsandexcisedutiesandratesofexcisetaxvary.Fordetailedinformation,visitwww.ec.europa.eu/taxation_customs/taxation/vat/traders/vat_number/index_en.htmandwww.revenue.ie

DoubleTaxationAgreements— Agreementsandtermsandconditionscanbefoundat

www.revenue.ie/en/practitioner/law/tax-treaties.html

R&DTaxCredit— GuidanceonwhatactivitiesconstituteR&Disavailableat

www.revenue.ie/en/practitioner/tech-guide/index.html

PersonalTaxationandTaxCredits— Formoreinformationvisitwww.revenue.ie

2009IReLandHead OfficeIDAIreland,WiltonPlace,Dublin2,IrelandTel:+353(0)16034000Fax:+353(0)16034040e-mail:[email protected]:www.idaireland.com

AthloneAthloneBusiness&TechnologyParkGarrycastle,DublinRoad,AthloneWestmeathTel:+353(0)906471500Fax:+353(0)906471550

CavanIDABusinessPark,DublinRoad,CavanTel:+353(0)494368820Fax:+353(0)494332047

CorkIndustryHouse,RossaAvenueBishopstown,CorkTel:+353(0)214800210Fax:+353(0)214800202

DonegalPortlandHouse,PortRoadLetterkenny,DonegalTel:+353(0)749169810Fax:+353(0)749169801

DundalkFinnabairBusinessPark,Dundalk,LouthTel:+353(0)429354410Fax:+353(0)429354411

GalwayMervueBusinessPark,GalwayTel:+353(0)91735910Fax:+353(0)91735911

LimerickRoselawnHouseNationalTechnologyPark,LimerickTel:+353(0)61200513Fax:+353(0)61200399

SligoFinisklinBusinessPark,SligoTel:+353(0)719159710Fax:+353(0)719159711

WaterfordWaterfordTechnologyPark,CorkRoadWaterfordTel:+353(0)51333055Fax:+353(0)51333054

euRopeFranceMaisond’Irlande33ruedeMiromesnil,75008ParisTel:+33(0)143129180Fax:+33(0)147428476

GermanyFBCFrankfurterBüroCenter,MainzerLandstr.46,60325FrankfurtamMainTel:+49(0)69706099-0Fax:+49(0)69706099-70

UnitedKingdomShaftesburyHouse151ShaftesburyAvenueLondonWC2H8ALTel:+44(0)2073799728Fax:+44(0)2073957599

ida oFFiCe network

2009uSaAtlantaMonarchPlaza,Suite3503414PeachtreeRoad,N.E.,Atlanta,GA30326Tel:+14048167096Fax:+14048460728

Boston31SaintJamesAvenue,7thFloorBoston,MA02116.Tel:+16173574190Fax:+16173574198

California3ParkPlaza,Suite430Irvine,CA92614.Tel:+19497483547Fax:+19497483586

800W.ElCaminoReal,Suite450MountainView,CA94040Tel:+16509679903Fax:+16509679904

Chicago77WestWackerDrive,Suite4070Chicago,IL60601-1629Tel:+13122360222Fax:+13122363407

New York345ParkAvenue,17thFloorNewYork,NY10154-0004Tel:+12127504300Fax:+12127507357

SouTh ameRICaBrazilAv.dasNaçõesUnidas12551-17andar04578-903S.Paulo-SP,BrazilTel:+551134437080Fax:+551149920406

aSIa-paCIfICAustraliaIrelandHouse,Suite2601,Level261MarketStreet,SydneyNSW2000Tel:+61(0)292738524Fax:+61(0)292738527

ChinaSuite655ShanghaiCentre1376NanjingRoadWestShanghai200040Tel:+862162798500Fax:+862162798505

India501/502,5thFloor,BlueWaveB/hKuberComplexOffOshiwaraLinkRoadAndheri(West)Mumbai400058Tel:+912242178900Fax:+912242178999

JapanIrelandHouse2F,2-10-7KojimachiChiyoda-Ku,Tokyo102-0083Tel:+81332627621Fax:+81332614239

Korea13thFloorLeemaB/D146-1Susong-dong,Jongro-kuSeoul110-755Tel:+8227554767/8Fax:+8227573969

Taiwan7FL-12,No.41,NankingW.RoadTaipei103,TaiwanTel:+886225526101Fax:+886225507220

ida office network

2009ida office network

head offICeIDAIrelandWiltonPlace,Dublin2,Irelandt: +353(0)16034000f: +353(0)16034040e: [email protected]:www.idaireland.com

corporate tax in ireland - dundalk · corporate tax in ireland fig.1: % corporation tax headline...

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