1

Business and Taxation

Guide to

Ireland
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Preface
This guide was prepared by Mazars Ireland, in January 2012.

Mazars has offices in:

 Dublin: Harcourt Centre - Block 3, Harcourt Road, Dublin 2

 Galway: Mazars Place, Salthill, Galway

Tel: +353 1 449 4400

Website: www.mazars.ie

Developments in tax legislation are rapid. The information given in this guide reflects the tax legislation
as of January 2012. Before taking specific decisions, it’s recommended that professional advice and
guidance be sought.

This guide provides a brief overview. More detailed information on matters discussed in this publication
can be obtained from the persons responsible for the tax and advisory service areas within Mazars in
Ireland:

Noel Cunningham - International Tax Partner - ncunningham@mazars.ie

Frank Greene - Tax Partner - fgreene@mazars.ie
Gerry Vahey - Tax Partner - gvahey@mazars.ie
Paul Mee - Tax Partner (Galway) - pmee@mazars.ie

© Praxity 2011
This guide is intended as a general guide only and should not be acted upon without further advice.
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Contents Page

1. General information 5
1.1 Opportunities and possible obstacles for foreign investors
1.1.1 Education
1.1.2 Labour mobility and immigration requirements
1.1.3 Communication and transport infrastructures
1.2 Area and population
1.3 Government and law
1.4 Economic situation
1.5 Currency
2. Regulation of foreign investment 8
3. Government incentives 9
3.1 Grant assistance
4. Business organisations available to foreigners 11
4.1 Limited Liability Company (LLC)
4.2 Unlimited liability company
4.3 Partnerships
4.4 Irish branch of a foreign company
4.5 Sole trade
4.6 Investment funds
5. Setting up and running business organisations 13
5.1 Limited liability/Unlimited liability companies
5.1.1 Incorporation
5.1.2 Mandatory requirements for CRO registration
5.1.3 Post incorporation
5.2 Irish branch of foreign entity
5.2.1 Registration
5.2.2 Post incorporation
5.3 Partnerships
6. Corporate taxes and social charges 15
6.1 Tax rates
6.2 Start-up companies
6.3 Losses, deductions and depreciation
6.3.1 Trading losses
6.3.2 Research and Development (R&D)
6.3.3 Intangible assets and tax depreciation
6.4 Foreign dividends
6.5 Dividend Withholding Tax (DWT)
6.6 Branches and foreign tax credits
6.7 Transfer Pricing
6.8 Capital Gains Tax
6.8.1 Exemption and share disposals
6.8.2 Capital gains tax exemption on property
6.9 Social Security
6.9.1 Pay Related Social Insurance (PRSI)
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6.9.2 Tax credits

7. Personal taxation 21
7.1 General introduction
7.2 Residence and domicile
7.2.1 Residence
7.2.2 Ordinary residence
7.2.3 Domicile
7.2.4 Domicile levy
7.2.5 Split year residence – employment income
7.2.6 Assignment relief
7.3 Tax returns ‘pay and file system’
7.3 1 Tax rates and bands
7.3.2 PAYE
7.3.3 Trading losses
7.4 Inheritance and gift taxes
7.4.1 Taxable persons
7.4.2 Taxable amount
7.4.3 Personal allowances
7.4.4 Tax rate
8. Double taxation agreements 25
9. Sales and use taxes 28
9.1 Value Added Tax (VAT)
9.1.1 VAT rates
9.1.2 Customs duties
10. Portfolio investments for foreigners 30
10.1 Undertakings for Collective Investment in Transferable Securities (UCITS)
10.2 Alternative investment structures – QIFs
10.3 Capital gains tax (CGT)
10.3.1 Exemption on property
10.3.2 General investments
11. Trusts 32
11.1 Capital Gains Tax (CGT)
11.2 Income tax
11.3 Capital acquisitions tax (CAT)
11.4 Stamp duty
11.5 Double tax treaties
12. Practical information 34
12.1 Transport
12.2 Language
12.3 Time relative to Greenwich Mean Time (GMT)
12.4 Business hours
12.5 Public holidays
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1. General information
1.1 Opportunities for foreign investors
Ireland’s geographic location places it firmly in the middle of the American European trading corridor. In
2012, Ireland replaced Singapore as the world’s 2nd most globalised nation. Ireland has attracted over
1,000 international companies andis home to more US investment than all of the combined BRIC (Brazil,
Russia, India and China)countries. These companies operate in varioussectors, in particular:

 Life sciences
 ICT (Information Communication Technologies)
 Engineering and
 Financial services.

Multinational corporations are a key driver of the Irish economy, accounting for more than two-thirds of
all exports, at €110 billion annually; and contributing nearly half of all corporate tax revenues. Ireland is
now home to multinationals such as Google, Pfizer, Facebook, Citi and Boston Scientific.

In choosing Ireland over other possible locations, senior management have indicated that their decisions
have been influenced by Ireland’s:

 Pool of highly educated employees, particularly in the digital, life science and financial sectors
 A strong legal framework for development, exploitation and protection ofIntellectual Property
rights
 Ireland has become more competitive, particularly with regard to office rents, energy rates and
labour costs
 One of the lowest corporate tax rates of 12.5% and a 37.5% tax deduction on R&Dexpenditure
 Only native English speaking country in the Eurozone.

The focus on Ireland's industrial and economic policy is to create a favourable economic and fiscal
environment where enterprise (both indigenous and foreign) may thrive. Increasingly, companies have
been choosing Ireland as a hub for their European ambitions. A significant number of multinational
organisations are using Ireland as a technology hub by planning data centres in Ireland. At present,
Ireland is home to 8 of the 10 largest ICT companies in the world.

1.1.1 Education

Ireland is renowned for its young and well-educated workforce and has a reputation for having one of
the best education systems in the world for higher education achievement .Ireland ranks 9th according to
the IMD World Competitiveness Yearbook 2011. Almost 1 million people are in full-time education and
60% of school leavers go on to third level education. The majority of these undertake courses in
business, engineering and computer science.
Ireland boasts seven universities and 13 institutes of technology, which offer a full range of degree and
diploma courses in all areas associated with a modern society and progressive economy. Extensive on-
campus research and development facilities also exist, particularly in the area of microelectronics.
Government sponsored agencies and bodies also provide training facilities to the Irish labour market.
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1.1.2 Labour mobility and immigration requirements

Given Ireland's membership of the EU, free mobility of labour exists between Ireland and the other EU
Member States. Work permits are generally required for the employment of non-EU nationals.

1.1.3 Communication and transport infrastructures

Ireland has one of the most advanced and competitive telecommunications infrastructures in Europe.
The investment of over €5bn in recent years has resulted in state of the art optical networks. The
telecommunications market is fully de-regulated and currently over 20 companies compete on the basis
of value-added services.

The National Roads Authority (NRA) has recently delivered one of the most significant investments in
Ireland’s future: a Major Inter-Urban motorway network that connects Dublin with the five major urban
centres, namely Belfast, Cork, Galway, Limerick and Waterford. This €8 billion investment has expanded
Ireland’s national road network to 5,515km, comprising 1,187kms of motorway and 4,328kmsof other
roads.

Seaports handle three-quarters of Irish trade with the rest of the world, between roll-on, roll-off ferries
and lift on, lift off container ships. Their critical importance to the economic prosperity is illustrated by
the fact that the value of this trade in the Republic was approximately €130 billion for 2005 compared to
€14 billion through Ireland’s airports.

International airports at Dublin, Shannon and Cork handle over twenty million passengers and 125,000
tonnes of freight every year. Direct daily scheduled services are available from Ireland to European and
North American destinations. Internal passenger and helicopter services are provided, using a network of
six regional airports.

1.2 Area and population

Ireland is situated off the north-west coast of mainland Europe, and is geographically the most western
island in Europe. This guidedeals with the Republic of Ireland, which is governed by a stable
parliamentary democracy and has beena Member State of the European Union since 1973. The land area
of the island is approximately 84,000 square kilometres. The Republic of Ireland being 70,000 square
kilometres and Northern Ireland 14,000 square kilometres. The most recent census (April 2011) indicates
that the Irish population is 4.6million, and only 11% of this population isover the age of 65.

1.3 Government and law

Ireland is a parliamentary democracy. The two houses of parliament are Dáil Éireann (House of
Representatives) and Seanad Éireann (the Senate). The Constitution was enacted in 1937. It defines the
powers and functions of the President, the Government and the Oireachtas.

The Government is led by the Taoiseach (the prime minister) and Tánaiste (deputy prime minister). The
President is the Head of State and is directly elected by the people. Each of Dáil Éireann's 166 members
is a TD (Teachta Dála). They are directly elected by the people. General elections take place at least once
every five years. Seanad Éireann has 60 members; 11 are nominated by the Taoiseach, six are nominated
by university graduates and 43 are elected from panels of candidates representing specified vocational
interests. Seanad Éireann can initiate or revise legislation, but Dáil Éireann has the power to reject these
proposals or amendments.
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The President does not have an executive or policy role. However the President has the absolute
discretion to refuse the dissolution of Dáil Éireann when the Taoiseach has ceased to retain a majority in
the house. The President can also refer a Bill to the Supreme Court for a judgment on its
constitutionality.

The policies of the main political parties in Ireland (Fianna Fáil, Fine Gael, The Labour Party and Sinn Féin)
are generally in line with mainstream European political policies and these parties are all members of the
various mainstream allegiances of the European Parliament.

Irish law is based on Common Law as modified by subsequent legislation and the Irish Constitution of
1937. Justice is administered in public courts established by law. Judges are appointed by the President
on the advice of government and are independent. The Companies Acts 1963 to 1990 govern company
law in Ireland. These generally mirror the UK legislation. Most EU Directives on company law have been
implemented in Ireland.

1.4 Economic situation

Ireland is a small, open, trade-dependent economy. Over the last two decades it has experienced
unprecedented growth arising primarily from its strong export performance. Although the world
economy is entering a very challenging time, Ireland’s economy has adapted and reacted to these
challenges. Ireland has continued to develop a powerful presence of many of the world’s most
innovative companies in ICT and digital media, life sciences, engineering, business services and financial
services. This continued success has allowed Foreign Direct Investment (FDI)-fuelled exports to temper
the economic downturn and serve as a vital part of our recovery.
The IMD World Competitiveness Yearbook 2011 ranks Ireland 10th for GDP per capita.
Despite all the economic challenges that have arisen, Ireland is still a country that is ‘open for business’.
Ireland has a unique combination of benefits on offer to global businesses:

 EU membership and access to the single market

 Pro-business culture, with a 12.5% corporate taxation rate, taxation credits for R&D activities
and an extensive double taxation treaty network
 Excellent research environment, with highly productive alliances between industry and academia
 High-skilled, knowledge-based economy, delivering highly productive employees with excellent
technical, language, managerial and customer service capabilities
 Only English speaking Eurozone country.

1.5 Currency
Ireland has been a member of the EU since 1973 and the euro has been the currency of Ireland since its
introduction on 1 January 2002.
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2. Regulation of foreign investment

Ireland does not have exchange controls, and there are no restrictions on foreign investor
participation in Irish companies.
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3. Government incentives
Government incentives to attract inward investment and encourage indigenous investment generally
take the following forms:

 Tax incentives, which are discussed in Section 6 of this guide‘Corporate taxes and social
charges’, and
 Grant assistance, which is discussed in section 3.1 below.

3.1 Grant assistance

Four main government agencies provide grant assistance in relation to establishing businesses in
Ireland. They are:

 Enterprise Ireland - which provides assistance to Irish owned companies or autonomously run
subsidiaries of foreign companies
 IDA Ireland - who deal with grant assistance for inward investment
 Shannon Development - who deal with grants for both Irish and foreign investment in the
Shannon Airport region, and
 Údarasna Gaeltachta - who deal with grants for the ‘gaeltacht areas’, i.e. the areas around the
west, north west and south west of Ireland where Irish is widely spoken in everyday life.

The incentives generally take the form of grant or advisory assistance. The grant assistance may cover a
combination of:

 Employment and capital grants

 Research and development (R&D) grants
 Rent subsidies
 Training grants
 Management development grants
 Loan guarantees and interest subsidies
 Equity investments.

Advisory assistance may cover any or all of the following areas:

 Management issues
 Technical development
 Marketing
 General expansion.

The process of grant assistance negotiations can take a number of months, the timescale being largely
dictated by the speed with which the applicant company can respond to the relevant agency and
provide it with the information sought.

Following an introductory meeting, the relevant agency will usually request the submission of a formal
business plan. The business plan should cover the following areas:

 Background information on the company, including:

o a brief history of the company
o a description of its product range and markets
o commentary on the company's financial status and
o a brief résumé of key individuals in the company.

 A description of the project, where it proposes to locate in Ireland and the reasons for selecting
Ireland. This description should address:
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o the expected number of jobs to be created

o markets to be served from Ireland
o the level of investment and
o the expected contribution to the Irish economy.

 Ownership structure for the Irish operation.

 Financial projections for five years, with details of assumptions underlying these projections.

The number, quality and location of jobs to be created are all major factors that usually determine the
overall grant amount that is awarded.

Other state agencies thatprovide assistance to new and existing businesses include:

 Science Foundation Ireland (SFI) is the national foundation for excellence in scientific
research. SFI is investing in academic investigators and research teams to generate new
knowledge, leading edge technologies and competitive enterprises in the fields of science and
engineering, which underpin the broad areas of Biotechnology, Information &Communication
Technology (ICT) and sustainable energy and energy-efficient technologies.
 FÁS(Foras Áiseanna Saothair) is the national training and employment authority. It provides a
range of training and employment services to jobseekers, community groups and employers.
 Forfás is the national policy and advisory board for enterprise, trade, science, technology and
innovation in Ireland. It is the body in which the State's legal powers for industrial promotion
and technology development have been vested.
 City and County Enterprise Boards (CEBs) are locally controlled enterprise development
boards. Their function is to develop indigenous enterprise potential and stimulate economic
activity at local level.
 Bord Bia (Irish Food Board) acts as a link between Irish food and drink suppliers and existing
and potential customers. Its objective is to develop export markets for Irish food and drink
companies and to bring the taste of Irish food to more tables worldwide.
 BIM (Bord Iascaigh Mhara) is the Irish State agency with responsibility for developing the Irish
seafood industry. It works closely with fishermen, fish farmers, processors, marketers and the
service sector to support the development of the industry from primary production stage
through to marketing.
 Fáilte Ireland is one of the Irish Government Agencies and is responsible for the development
and promotion of tourism in the Republic of Ireland. It concentrates on a number of key areas:
o Promoting home holidays
o Marketing niche products such as golf, angling, etc.
o Implementation of the Government’s Sports Tourism Programme
o Managing accommodation quality
o Operating the Tourism Product Development Scheme.
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4. Business organisations available to

foreigners
There are no legal restrictions on foreign individuals or corporations setting up a business in Ireland. The
most common form of company in Ireland is a limited liability company, which is regulated by the Irish
Companies Acts. However, there are many different structures that can be entered into in Ireland to
trade from, including:

 Unlimited liability companies

 Partnerships
 Branches of foreign companies
 Sole trade
 Investment funds.

4.1 Limited Liability Company

A limited liability company is one in which the liability of the shareholders is limited. It can be a public
liability company (Plc) or a private company (ltd).

There are a number of different types of private limited companies, namely:

1. A private company limited by shares – this is the most common type of company in Ireland.
The liability of the company’s members with regard to asset contributions is limited to the
amount, if any, paid for their shares.
2. A private company limited by guarantee – this means that the liability of a member is
restricted to the amount that they guaranteed to contribute to the company.
3. A public company (Plc.) - the shares in such a company are offered for subscription to the
public. A Plc. cannot have issued share capital of less than €40,000, at least 25% of which must
be fully paid up before the company commences business or exercises any borrowing powers.
The net assets of the company, as listed on the balance sheet, must at least be equal to the
total of its called up share capital.

4.2 Unlimited Liability Company

This is another type of private company with a share capital. However, the members of the company
have unlimited liability. In the event of a winding up, both past and present members are liable to
contribute to the assets of the company.

4.3 Partnerships
A partnership is a relationship between at least two persons conducting a business with a view to
making a profit. The partnership itself is transparent for tax purposes. The profits are apportioned
between the partners in a pre-agreed ratio and each partner is taxed on their individual share of the
profits. Partners in general partnerships, which are governed by the Partnership Act of 1890, do not
have limited liability.

It is possible to set up a limited liability partnership under the Limited Partnership Act of 1907, where
the partners’ liability is limited to the amount they have subscribed to in the limited partnership.
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4.4 Irish branch of a foreign company

Foreign companies can trade in Ireland through a branch. The branch is not a separate legal entity to the
foreign company and is seen as a mere extension of the foreign company. Any losses incurred in the
branch can be used to offset any profits arising in the related foreign company.

Profits attributable to a branch are taxable in Ireland. Subject to any double taxation treaty in place
between Ireland and the country in which the foreign company is resident, the branch profits may also
be taxable in the other jurisdiction. Subject to the double taxation agreement, a credit should be
available for any Irish tax paid on the branch profits.

Foreign companies operating through an Irish branch must inform the Companies Registration Office
within one month of establishment.

4.5 Sole trade

A sole trade is typically a business operated by a single individual. The liability of the owner is unlimited
and unshared. Availability of credit for the business is generally tied to the individual’s own personal
finances and assets. The profits of the business are the individual’s own profits and are taxed directly at
their personal tax rate.

4.6 Investment funds

Investment funds are vehicles for combining individual investors in a fund for investment in a common
objective. The legal forms are generally:

 Capital investment companies

 Contractual funds
 Unit trusts
 Investment limited partnerships.

Investment funds are generally required to return details of their accounts to the Irish Central Bank on
an annual basis and are regulated by the Financial Regulator.
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5. Setting up and running business

organisations
5.1 Limited liability and unlimited liability companies
5.1.1 Incorporation

The incorporation process is relatively straightforward. To form a company, the following documents
must be submitted to the Companies Registrations Office (CRO) along with a fee (currently €50):

 Memorandum of Association
 Articles of Association
 Form A1

Memorandum of Association
The Memorandum of Association sets out the basis upon which the company is incorporated. It must
contain provisions dealing with certain matters, e.g. the name and objects of the company and, if it is a
company with limited liability, that fact must also be stated. The structure of the Memorandum must be
in accordance with the format as set out in the Companies Acts.

Articles of Association
The Articles of Association identify the rules under which the company proposes to regulate its affairs.
Articles are required to be registered by a company limited by guarantee with a share capital or an
unlimited company. A company limited by shares or a guarantee company that does not have a share
capital may register Articles with the CRO.

Form A1
Form A1 is used to supply details of the company name, its registered office, details of the secretary and
directors and their consent to act in this capacity, together with the subscribers and details of their
shareholdings. The form incorporates a statutory declaration that the requirements of the Companies
Acts have been complied with and identifies the reason for the incorporation of the company.

5.1.2 Mandatory requirements for CRO registration

There are a number of obligations incidental to registering a company with the CRO. These relate to:

 Name
 Registered office
 Activity in the State
 Officers.

Name
It is important that persons forming companies satisfy themselves of the acceptability of the proposed
name in advance of submission of documents to the CRO. It is possible that a third party could raise an
objection post-incorporation which could result in the company being directed to change its name by
the Registrar.

Registered Office
The registered office of a company is the address to which CRO correspondence and all formal legal
notices will be sent. The registered office can be anywhere in Ireland. The address must be a physical
location. It is not possible to use a post office box number. This is on the basis that members of the
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public have a right to visit the company's registered office to inspect certain registers and documents
and to deliver documents by hand.

Activity in Ireland
A company will not be incorporated unless it appears to the Registrar of Companies that the company,
when registered, will actually conduct an activity in Ireland.

Company Officers
All company types must have a minimum of two directors, one of whom is resident in the EEA. All
companies are also required to have a company secretary. The company secretary may be one of the
directors of the company. A body corporate may act as secretary to another company.

Failure to satisfy this requirement will result in the company having to acquire an insurance bond for
cover of €25,395.

The insurance bond can be avoided if the company obtains a certificate from the Registrar of Companies
stating that the company has a real and continuous link with one or more economic activities being
conducted in Ireland. This certificate will only be issued by the Registrar on receipt of proof of such a
link. Typically a statement from the Irish Revenue Commissioners indicating that the Revenue
Commissioners have reasonable grounds for such a link will be accepted as proof.

5.1.3 Post incorporation

Following company incorporation, it is necessary to notify the CRO of any changes to registered
particulars (e.g. name of company secretary).

In addition to the above, as part of the annual compliance process a company must file an annual return
(Form B1). This form sets out certain prescribed company information. This document must be filed on
an annual basis, irrespective of whether the company was trading or dormant in the period. Depending
on the status of the company, it may also be necessary to file audited accounts with the form.

5.2 Irish branch of foreign entity

5.2.1 Registration

A foreign company which is registered abroad may establish a branch or a place of business in Ireland.
Any company which is incorporated outside of Ireland and establishes a branch in Ireland must be
registered with the CRO. The registration must take place within one month of the establishment of the
branch in Ireland.

5.2.2 Post incorporation

Subsequent to the registration of a branch, it is necessary to notify the CRO of any changes to its
registered details (e.g. place of business in Ireland). Accounts of the foreign companymust also be filed
with the CRO on an annual basis.

5.3 Partnerships
There are no specific requirements governing the establishment of general partnerships. However,
registration of a business name is obligatory if any individual, partnership or body corporate conducts
business under a name that is not their own.

The Limited Partnership Act, 1907 facilitates the creation of a partnership in which some members
have limited liability.The liability of these members is limited to the extent of their contribution. A
limited partnership must be registered with the CRO. If it is not registered with the CRO,the partnership
will be regarded as a general partnership.
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6. Corporate taxes and social charges

A company that is tax resident in Ireland is liable for Irish corporation tax on its worldwide profits.
Companies that are not tax resident in Ireland are only liable for corporation tax on profits generated by
an Irish branch or agency.

In general, a company is tax resident in Ireland if it is an Irish incorporated company or if it is managed

and controlled in Ireland. There are certain exceptions to this rule.

6.1 Tax rates

The standard rate of corporation tax in Ireland is 12.5% on trading income.

A higher rate of 25% applies to non-trading income (e.g. rent, certain dividends) and certain trades.

Tax is payable on capital gains at a rate of 30%.

6.2 Start-up companies

In keeping with Ireland’s pro-enterprise tax policy, Ireland operates a tax exemption for ‘start up
companies’.

Qualifying companies are exempt from Irish corporation tax and capital gains tax in each of their first
three years by the amount of qualifying Employer’s PRSI (social insurance) paid. This is subject to an
overall corporation tax and capital gains tax limit of €40,000 per annum. In addition, the maximum
employer’s PRSI contribution per employee is limited to €5,000. In essence, this exemption enables a
start-up company to generate a trading profit of €320,000 per annum for the first three years before
incurring a tax liability.

6.3 Losses, deductions and depreciation

6.3.1 Trading losses

Trading losses are calculated in the same manner as trading profits and may be carried forward
indefinitely against income from the same trading activity. Trading losses are offset against trading
income of the current accounting period and, if required, can also be offset against trading profits in the
previous accounting period of equal length. If there is an unused amount of losses, they may be set off
against all other income of the same period (i.e. passive investment income) as a credit on a value basis.

6.3.2 Research and Development (R&D)

Various measures introduced over the past number of years have resulted in incremental R&D
expenditure qualifying for a 25% tax credit. This credit is in addition to the existing deduction which can
be taken for the expenditure incurred. The net effect is that an effective deduction of 37.5% is available
for each Euro of expenditure incurred on qualifying R&D activities.

In order to qualify for the credit, the following conditions must be satisfied:

 The R&D activities must be undertaken in the European Economic Area

 A deduction must not be available for the expenditure in any other territory
 Any grant or State Aid received should be offset against the expenditure in the first instance
 Payments made which are not arm’s length in nature will not qualify for relief.
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Recently enacted legislation provides that ‘key employees’ engaged in the R&D process will be able to
receive tax-free payments from their employer. This is a cost effective manner of remunerating key
employees involved in the R&D process.

6.3.3 Intangible assets and tax depreciation

Companies incurring capital expenditure on qualifying intangible assets may qualify for tax deprecation
on the expenditure. It is necessary for claimant companies to undertake a trade and to use the
intangible assets for the purposes of the trade.

Qualifying intangible assets for the purposes of the allowance are assets which are:

 Recognised as intangible assets under generally accepted accounting standards, and

 Included within the definition of ‘intangible asset’ under the provision of the Irish tax
legislation. In general this comprises patents, copyrights, trademarks, brand names, know-how
and goodwill.

While it is permissible under the terms of the legislation for the transaction to be between connected
parties, the consideration payable must represent market value.

Where all conditions have been satisfied by an applicant, allowances will be available over a 15 year
period, or in line with the write down period as provided for in the financial statements. In the event
that the intangible assets are disposed of more than 10 years after acquisition, no clawback will arise.
This will only apply if the asset is not subsequently acquired by a connected party who itself is entitled
to relief on the cost of acquisition.

6.4 Foreign dividends

In general, foreign dividends received by an Irish resident company will be taxable at a rate of 25%.
Dividends received by an Irish company from companies outside of Ireland can be subject to corporation
tax at 12.5% or 25%. Foreign dividends can be taxed at the 12.5% rate when:

 The foreign dividend is sourced from the trading profits of a company resident in the EU, or a
country with which Ireland has a double taxation agreement, or
 The foreign dividend is received from a company not resident in the EU or a country with which
Ireland has a double taxation agreement. The company paying the dividend is required to have
the principal class of its shares substantially and regularly traded on a recognised stock
exchange.

Should a dividend be paid partly out of trading profits and partly out of non-trading profits, the dividend
must be apportioned and the part attributable to trading profits will be subject to the 12.5% tax rate. In
many cases, a credit will be available for withholding tax and underlying tax imposed on the foreign
subsidiary, which can have the effect of reducing the effective Irish tax rate to nil.

Ireland operates a system of unilateral credit relief, which requires the holding company to have a
minimum 5% ownership in the company paying the dividend. The paying company can be situated in
both treaty and non-treaty countries. Credit is available for local taxes paid in addition to State taxes on
income. The legislation also applies to foreign tax paid by lower tier subsidiaries. Any foreign tax not
qualifying for credit may be claimed as a credit against corporation tax arising on any other foreign
dividends and unused credits can be carried forward to future periods.
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Ireland has implemented the EU Parent Subsidiary Directive, whereby underlying tax relief will be
available to an Irish resident company or an Irish branch of an EU resident company, which receives a
dividend from a company resident in an EU State. A minimum 5% holding in the subsidiary is required.
Double taxation relief is also available through Ireland’s extensive tax treaty network.

A system of ’onshore pooling’ allows for a situation where the foreign tax on dividends exceeds the Irish
tax. The excess is available to offset against Irish tax on other foreign dividends received in the
accounting period concerned and any unused balance can be carried forward and offset in subsequent
accounting periods. Pooling arrangements apply separately to dividends that are taxable at the 12.5%
rate and to dividends that are taxable at the 25% rate. Any surplus of foreign tax arising on dividends
taxable at the 12.5% rate will not be available to offset against dividends taxable at the 25% rate.
However, there will not be a similar restriction in the case of dividends taxable at the 25% rate.

Foreign dividends received by Irish companies may be exempt from Irish corporation tax. This treatment
will only apply where the Irish company holds less than 5% of the share capital and voting rights in the
foreign entity. In addition, this treatment will only apply when the Irish company treats such income as
trading income for tax purposes.

6.5 Dividend Withholding Tax (DWT)

In general, dividends paid and other distributions made by Irish resident companies are liable to a
dividend withholding tax (DWT) at the standard rate of tax (currently 20%). However, the law provides
an exemption from DWT in certain circumstances. Dividends can be paid gross (without deduction of
DWT) in the following circumstances:

 Persons, other than companies, who are neither resident or ordinarily resident in Ireland and
who are resident for tax purposes in another EU Member State or in a country with which
Ireland has a Double Taxation Agreement (treaty country). These persons can include
superannuation funds and non-resident charities.

 Companies which are resident in an EU country or a treaty country, but which are not under the
control, directly or indirectly, of a person or persons who are resident in Ireland.

 Companies which are not resident in Ireland and which are ultimately controlled by persons
who are resident for tax purposes in an EU country or a treaty country.

 Companies where the principal class of shares, or the shares of its 75% parent, are substantially
and regularly traded on a recognised stock exchange in treaty countries or EU Member States.

 Non-resident companies which are wholly owned by two or more companies, each of whose
principal class of shares is substantially and regularly traded on a recognised stock exchange in
an EU country or treaty country.

A non-resident company receiving dividends from Irish resident companies must provide a declaration
to the dividend paying company to claim exemption from DWT.

The declaration must include:

 An undertaking that the company is beneficially entitled to the distribution in respect of which
the declaration is being made

 Details of the tax residency of the company, and

18

 An undertaking to provide any further supporting documentation relating to the residency or

control of the company to Irish Revenue upon request.

6.6 Branches and foreign tax credits

Irish tax resident companies are liable for Irish corporation tax on their worldwide income. As a result, a
company with a foreign branch may be liable to tax in both Ireland and in a foreign jurisdiction. In order
to avoid the imposition of double taxation, under Irish provisions it is possible to offset the foreign tax as
a credit against the corresponding Irish corporation tax liability.

In the event that there is any excess credit, the excess should be available for pooling. The extent of the
credit to be pooled depends on the nature of the profits and whether the profits are taxable at 12.5% or
25%. As a general rule, the credit is limited to the quantum of Irish tax payable on the income.

Any unused credits may be carried forward indefinitely and credited against the corporation tax payable
on future profits.

6.7 Transfer Pricing

Ireland adopted transfer pricing legislation, which follows the OECD arm’s length principles and aligns
Ireland with international standards.

The transfer pricing provisions do not apply to small and medium sized enterprises. In general, the
determination of the size of an enterprise will be determined at group level. To fall within the
exemption (including at a group level) there must be fewer than 250 employees and either turnover of
less than €50 million or assets of less than €43 million. The legislation indicates that the transfer pricing
regulations will only apply to related party transactions in which the taxpayer is subject to tax at the
trading rate of 12.5%. Income which may be classified as ‘passive income’ and taxed at the higher rate of
25% should fall outside of the scope of the legislation (e.g. interest, royalties, and certain dividends).

6.8 Capital Gains Tax

6.8.1 Exemption and share disposals

A disposal by an Irish holding company of shares in a subsidiary (Irish or foreign) is exempt from Capital
Gains Tax (CGT) when the following criteria are satisfied:

 The holding company must own a minimum of 5% of the shares in the subsidiary. This
shareholding must include the right to 5% of the profits of the company and the right to 5% of
the assets on a winding up. The minimum holding requirement can also be satisfied when the
holding company is a member of a group and the shareholdings of members of the group are
taken into account.

 The minimum 5% shareholding requirement must have been held for a continuous period of not
less than 12 months.

 The activity of a subsidiary company must wholly, or mainly, be involved in conducting a trade at
the time of disposal. This requirement can also be satisfied when the business of the holding
company, including companies in which the holding company has a direct or indirect ownership
interest of at least 5%, is wholly or mainly conducting one or more trades.
19

 The subsidiary company must be resident in the EU or a treaty country at the time of the
disposal. Subsidiaries located in Ireland will also qualify, but the company cannot derive the
greater part of its value from Irish land, buildings or mineral rights.

This exemption also applies to the disposal of assets related to shares, which include options and
securities convertible into cash. It is not necessary for the holding company to dispose of its entire
shareholding in order for the gain arising on the disposal to be exempt - the gain arising will be exempt
once the prescribed holding requirement is met.

Capital losses arising under the provisions of the CGT exemption cannot be offset against other capital
gains.

The following gains do not qualify for the exemption:

 Gains arising on a deemed disposal when a company changes residence status

 Gains arising on disposals of shares that are part of a Life Assurance Company’s life business
fund.

6.8.2 Capital gains tax exemption on property

A new CGT incentive has been introduced and applies to land and buildings in EEA countries acquired
between midnight 6 December 2011 and up to and including 31 December 2013. If a property is
acquired during this period and is held for at least seven years, the gain attributable to that seven year
holding period will be exempt from Irish CGT.

6.9 Social Security

6.9.1 Pay Related Social Insurance (PRSI)

Social security taxes are known in Ireland as Pay Related Social Insurance (PRSI). PRSI is generally
payable by all people in the Irish tax system. A national of an EU member state in Ireland on temporary
assignment (generally up to 5 years) may opt to remain on their home country social security system.
Any payments made under the Irish system will generally be recognised by the other EU State and vice
versa. In the case of employees, PRSI is withheld at source by the employer.

The standard PRSI rates in effect for 2012 are:

Contribution Rate (%)

PRSI (Employed) 4%
PRSI (Self Employed / Proprietary Director) 4%

A PRSI free threshold of €127 per week relates to certain classes of employee PRSI payments.

Employer social security contributions depend on the quantum of payments made to an employee
during the relevant pay period. The contribution rates for the 2012 period are:

Rate (%) Bracket

4.25% Weekly pay of less than €356
10.75% Weekly pay in excess of €356

6.9.2 Tax credits

20

The Irish tax system provides for tax credits and allowances, including personal tax credit, employee tax
credit, health expenses, pension and permanent health insurance, educational fees and the cost of
renting private accommodation.

The main tax credits in effect for the 2012 tax year are:

Category of Credit Credit Amount

€
Personal Tax Credit 1,650
Married Person or Civil 3,300
CA tax Partnership Tax Credit
PAYE Credit 1,650
Age Allowance (over 65)

Single / widowed 245

Married 490
One Parent Family 1,650
Dependent Relative 70
A tax credit is available at the standard income tax rate (currently 20%) in respect of rent paid for a
principal private residence, up to a maximum of €1,600. The level of the credit depends on the
individual’s age and marital status.
21

7. Personal taxation
7.1 General introduction
An Irish resident and Irish domiciled individual is liable for Irish tax on worldwide income. An individual
who is resident but not Irish domiciled is liable for Irish income tax on Irish sourced income and foreign
income, to the extent that it is remitted to Ireland. The remittance basis of taxation applies to
employments exercised outside of Ireland and to foreign investment income. The part of the income
remitted to Ireland is taxed in the year in which it is brought to Ireland, not the year in which the income
is earned.

Fees from directorships of Irish companies are liable for Irish tax, irrespective of the residence or
domicile position of the director.

7.2 Residence and domicile

7.2.1 Residence

An individual is resident in Ireland for a tax year if he or she spends:

 183 days in Ireland during the tax year,or

 280 days on aggregate in Ireland in the tax year and the preceding tax year.

An individual who is present in Ireland for 30 days or less in a tax year will not be treated as resident for
that year, unless he or she elects to be resident.

An individual will be considered present in Ireland for a day if they are in the country for any part of a
day.

7.2.2 Ordinary residence

An individual is considered to be ordinarily resident in Ireland in a tax year if heor she was resident in
Ireland for the three tax years’ preceding the current tax year.

7.2.3 Domicile

An individual is generally regarded as domiciled in the country which he or she considers is their
permanent home. A domicile of origin is acquired at birth (normally that of the father) and this is
deemed to continue until a domicile of choice is acquired.

A domicile of choice may generally be acquired, providing the individual moves from the domicile of
origin with the intention of remaining permanently in the new country of choice.

7.2.4 Domicile levy

A €200,000 domicile levy applies to individuals whose:

 Liability to Irish income tax is less than €200,000

 Worldwide income for a tax year is over €1million and
 Irish situated property is valued at over €5million on the valuation date.
22

The levy applies to individuals who are Irish domiciled, regardless of residence.

Irish income tax is allowed as a credit against the domicile levy. In order to get this income tax credit the
income tax must have been paid on time.

The Irish property will be valued as at 31 December for the year in question. No deduction is taken for
any borrowings outstanding.

Shares in trading companies (or holding companies whose main value derives from subsidiary trading
companies) are excluded from the definition of Irish situated property for the purposes of the €5million
test.

7.2.5 Split year residence – employment income

There are special rules regarding the year of arrival and the year of departure of an individual who is in
receipt of employment income. Generally, employment income arising before the date of arrival and
after the date of departure is not taken into account for Irish tax purposes, even when the individual is
considered resident for that particular tax year.

7.2.6 Assignment relief

Employees assigned to work in Ireland are exempt from income tax on 30% of their employment
income. The exemption applies to employment income between €75,000 and €500,000. The relevant
employees must be assigned to work in Ireland from a country with which Ireland has a double tax
treaty and must arrive for work in Ireland before 31 December 2014. The employee must not have been
resident in Ireland in the five tax years prior to their arrival.

7.3 Tax returns ‘pay and file system’

The Irish income tax year runs from 1 January to 31 December, in line with the calendar year.

Income tax returns are due for submission on 31 October in the year following the end of the tax year.
This is also the due date for payment of any outstanding balance of income tax from the previous tax
year. In addition, preliminary income tax must be paid on or before 31 October in respect of the current
tax period.

7.3 1 Tax rates and bands

A husband and wife may choose to be assessed jointly, separately, or as single individuals. The rates of
individual income tax for the tax year 2012 are:

Personal status Income band (€)

Single or Widowed or Surviving Civil Partner

• No dependent children 32,800

• With dependent children 36,800

Married or in a Civil Partnership 41,800

(One source of income)
Married or in a Civil Partnership 41,800 with an increase of
(Two sources of income) 23,800 (maximum)
23

7.3.2 PAYE

A withholding tax system operates in Ireland, which ensures that employee taxes are collected at source
by the employer. This system is known as the PAYE (Pay As You Earn) system. Each employee, on
commencement of employment, applies tothe tax authorities to obtain a certificate of tax credits, which
is then used by the employer to calculate the correct amountof tax to deduct at source.

Tax should be deducted under the PAYE system on income from all employment duties exercised in
Ireland. This applies irrespective of whether an individual is resident or domiciled in Ireland.

PAYE is only operable on the duties performed in Ireland. Where a part of an employee’s earnings
relates to duties exercised in Ireland, PAYE is only operated on the relevant proportion. Where this
proportion is not easily identified, an advance agreement must be reached with the Inspector of Taxes
as to the percentage of pay on which PAYE is operated. In the absence of this agreement, the employer
must operate PAYE on the whole amount.

7.3.3 Trading losses

Trading losses incurred in a period may be set off against the taxpayer’s total income from all sources
earned in that tax year. Excess trading losses may be carried forward indefinitely and offset against
future profits from the same trade. In the event of a discontinuance of a trade, a carry back of losses is
permitted. The trading loss incurred in the period to the date of cessation may be carried back and
offset against profits of the same trade incurred in the three years of assessment preceding that in
which the discontinuance occurred.

Anti-avoidance legislation restricts the offset of losses and capital allowances relating to certain trades
conducted by an individual without any active involvement in the trade against income from that trade
(and not against other income).

7.4 Inheritance and gift taxes

7.4.1 Taxable persons

Capital Acquisitions Tax (CAT), known as inheritance or gift tax, is payable by the recipients of
inheritances or gifts. In calculating an individual’s exposure to tax, consideration is given to the amount
of any prior gifts or inheritances received by the beneficiary. Tax is payable on a self-assessment basis.

7.4.2 Taxable amount

Tax is payable where either:

 The gift or inheritance comprises Irish located property, or

 The beneficiary is resident or ordinary resident in Ireland at the date of the gift or inheritance,
or
 The donee or disponer (someone who legally transfers property) is Irish resident or ordinary
resident at the date of the gift or inheritance.

Tax is payable on the market value of the property at the date of the gift or inheritance. The value of the
gift or inheritance can be reduced where there are any debts or liabilities attached to the property being
transferred. Special reliefs may apply to the transfer of business or agricultural assets. Where these
reliefs apply, the taxable market value of the assets will be reduced by 90%. Clawback provisions apply if
the relevant business assets or agricultural assets are disposed of within a six year period.
24

7.4.3 Personal allowances

The CAT payable is calculated by reference to the excess over specified thresholds. These threshold
amounts are determined by reference to the beneficiary’s relationship with the donor or deceased. The
threshold amounts for the 2012 period are:

Category of recipient Amount (€)

Child, foster child, , minor child 250,000
of a deceased child, parent (in
particular circumstances)
Parent, Lineal descendent 33,500
(brother, sister, nephew, niece,
grandchild) of the disponer
Others 16,750

Gifts and inheritances received under the above categories are aggregated for the purposes of
determining the class threshold utilised. All benefits taken from the same group threshold since 5
December 1991 are aggregated.

In addition to the above exempt threshold amounts, a small gift exemption of €3,000 per annum is also
available.

7.4.4 Tax rate

CAT is payable at a rate of 30%. This rate is applied to the gift or inheritance amount in excess of the
relevant class threshold.
Trading

• Dublin • Cork www.moorestephensnathans.com

25

8. Double taxation agreements

Ireland has signed comprehensive double taxation agreements with 66 countries. The agreements cover
direct taxes, which in the case of Ireland are income tax, corporation tax and capital gains tax.
New agreements with Albania, Hong Kong and Montenegro are effective from 1 January 2012. A new
agreement was signed with Egypt on the 9 April 2012. The legal procedures to bring this agreement into
force are now being followed.
Ireland has completed the ratification procedures to bring the new agreements with Armenia, Bosnia &
Herzegovina, Kuwait, Morocco, Panama and Saudi Arabia into force. When ratification procedures are
also completed by these countries, the agreements will enter into force.
Negotiations for new agreements with Qatar, Thailand, Ukraine and Uzbekistan have been concluded
and are expected to be signed shortly. Negotiations on a protocol for the existing agreement with
Belgium have also been concluded and the new agreement is expected to be signed shortly.
Negotiations for new agreements with Argentina, Azerbaijan and Tunisia are currently ongoing.
Where a double taxation agreement does not exist with a particular country there are provisions in the
Irish Taxes Acts which allow unilateral credit relief against Irish tax for tax paid in the other country in
respect of certain types of income. These include dividends from foreign subsidiaries, foreign branch
profits, foreign interest treated as trading income and capital gains on foreign assets.
There is also legislation implementing the EU Parent – Subsidiaries Directive, the EU Interest and
Royalties Directive, the EU Mergers Directive and the EU Arbitration Convention.

Ireland has also concluded Tax Information Exchange Agreements (TIEAs) with Anguilla, Antigua and
Barbuda, Belize, Bermuda, the British Virgin Islands, the Cayman Islands, the Cook Islands, Gibraltar,
Grenada, Liechtenstein, the Marshall Islands, Samoa, St. Lucia, St. Vincent & the Grenadines, the Turks &
Caicos Islands and Vanuatu.

In addition, Ireland has been designated by the Cayman Islands as a country that may make requests for
tax information under Part IV of the Tax Information Authority Law. This allows the Revenue
Commissioners to request information relevant to a tax investigation (including bank and entity
ownership information) from the Cayman Islands authorities without the necessity of a bilateral TIEA.
Page 26
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Effective Dividends Interest Royalties

From: % % %
Albania 2012 5 / 10 0/7 7
Not yet in
Armenia 0/5/15 0/5/10 5
effect

Australia 1984 15 10 10

Austria 1964 10 0 0/10

Bahrain 2010 0 0 0
Belarus 2010 5/10 0/5 5
Belgium 1973 15 15 0
Bosnia Not yet in
0 0 0
Herzegovina effect
Bulgaria 2002 5/10 0/5 10
Canada 2006 5/15 0/10 0/10
Chile 2009 5/15 0/10 5/10
China 2001 5/10 0/10 6/10
Croatia 2004 5/10 0 10
Cyprus 1952 0 0 0/5
Czech Rep. 1997 5/15 0 10
Denmark 1994 0/15 0 0
Not yet in
Egypt 5/10 0/10 10
effect
Estonia 1999 5/15 0/10 5/10
Finland 1990 0/15 0 0
France 1966 10/15 0 0
Georgia 2011 0/5/10 0 0
Germany 1959 15 0 0
Greece 2005 5/15 5 5
Hong Kong 2012 0 10 3
Hungary 1997 5/15 0 0
Iceland 2005 5/15 0 0/10
India 2002 10 0/10 10
Israel 1996 10 5/10 10
Italy 1967 15 10 0
Japan 1974 10/15 10 10
Korea (Rep.) 1992 10/15 0 0
Not yet in
Kuwait 0 0 5
effect
Latvia 1999 5/15 0/10 5/10
Lithuania 1999 5/15 0/10 5/10
Luxembourg 1968 5/15 0 0
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Macedonia 2010 0/5/10 0 0

Malaysia 2000 10 0/10 8
Malta 2010 5/15 0 5
Mexico 1999 5/10 0/5 /10 10
Moldova 2011 5/10 0/5 5
Not yet in
Montenegro 0/5/10 0/10 5/10
effect
Not yet in
Morocco 6/10 0/10 10
effect
Netherlands 1965 0/15 0 0
New Zealand 1989 15 10 10
Norway 2002 0/5/15 0 0
10/ No
Pakistan 1968 No Limit 0
Limit
Not yet in
Panama 5 0/5 5
effect
Poland 1996 0/15 0/10 10
Portugal 1995 15 0/15 10
Romania 2001 3 0/3 0/3
Russia 1996 10 0 0
Not yet in
Saudi Arabia 0/5 0 5/8
effect
Serbia 2011 5/10 0/10 5/10
Singapore 2011 0 0/5 5
Slovak Rep. 2000 0/10 0 0/10
Slovenia 2003 5/15 0/5 5
South Africa 1998 0 0 0
Spain 1995 0/15 0 5/8/10
Sweden 1988 5/15 0 0
Switzerland 1965 10/15 0 0
Turkey 2011 5/10/15 10/15 10
UK 1976 5/15 0 0
United Arab
2011 0 0 0
Emirates
United States 1998 5/15 0 0
Vietnam 2009 5/10 0/10 5/10/15
Zambia 1967 0 0 0
Page 28
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9. Sales and use taxes

9.1 Value Added Tax (VAT)
In general, the vast majority of transactions in respect of goods and services in Ireland are subject to
Irish VAT. This is consistent with the EU Principal VAT Directive. VAT is ultimately borne by the
consumer of the good or service.

Businesses who supply goods or services during the course of their trade may be considered taxable
persons for VAT purposes. The VAT registration thresholds for the 2012 period are:

Threshold Amount (€)

Supply of services 37,500
Supply of goods 75,000
Supply of goods and services where 90% or more 75,000
of the turnover is derived from the sale of goods
Non established person supplying goods or 0
services

When registered, VAT is chargeable on:

 The supply of goods or services in Ireland in the course of business

 The import of goods into Ireland from outside of the EU
 Import of services
 Intra-EU acquisitions by VAT registered persons.

9.1.1 VAT rates

The standard VAT rate for the 2012 tax year is 23%. A reduced rate of 13.5% applies to the supply of
some services.

A specific VAT rate of 9% was introduced for the period to 31 December 2013 in respect of the
supply of certain goods and services (mainly related to tourism). The 9% rate applies to:

 Restaurant and catering services

 Hotel and holiday accommodation
 Admissions to cinemas, theatres, certain musical performances, museums and art gallery
exhibitions
 Fairgrounds or amusement park services
 The use of sporting facilities
 Hairdressing services
 Printed matter, such as brochures, maps, programmes, leaflets, catalogues and newspapers.

A zero rating applies to the majority of uncooked food suitable for human consumption. It also
applies to children’s clothing and medical equipment. In addition, supplies to EU VAT registered
persons and supplies outside the EU are also zero rated.

VAT is calculated on the amount paid for the goods or service. On the importation of a good, VAT
will be based on the value as calculated by customs, plus the customs duty applied.
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Under Irish VAT provisions, certain activities are exempt from VAT. Such activities include the
provision of insurance and banking services.

9.1.2 Customs duties

Customs duties only apply to imports from non-EU countries and the rates applied are laid down by
the EU Directives.
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10. Portfolio investments for foreigners

10.1 Undertakings for Collective Investment in Transferable Securities (UCITS)
Undertakings for Collective Investment in Transferable Securities (UCITS) are investment schemes
established and harmonised under EU law. It is possible for UCITS established in one EU Member
State to be sold cross border into other EU Member States without a requirement for any additional
authorisation. This flexibility enables fund promoters to create a single product for the entire EU,
rather than having to create jurisdiction specific products.

Ireland has become one of the leading EU ‘export’ UCITS jurisdictions. Irish UCITS are distributed in
over 70 countries, contributing to its position as the fastest growing international funds domicile for
UCITS over the past five years.

The decision by fund managers to establish in Ireland has been assisted by the alignment of the
regulatory, tax and industry objectives. Typically, a UCITS can obtain approval within a six to eight
week period. The decision to establish UCITS in Ireland is supported by a favourable tax regime,
offering several distinct benefits:

 Irish UCITS are not subject to Irish taxation on any income or gains
 Distributions made by the fund to non-resident shareholders can be made without the
deduction of withholding tax
 Wide ranging VAT exemptions are available on services to Irish UCITS
 VAT incurred by a UCITS on Irish invoices may be recovered if the securities or investors are
not based in the EU
 Access to the Irish double taxation treaty network, either directly or through the use of an
intermediary vehicle.

10.2 Alternative investment structures - QIFs

Ireland also has wide ranging offerings in the alternative investment sphere. These may appeal to
investors seeking a product that offers more flexibility in the range of underlying investments. The
preferred structure for more sophisticated investors interested in this area is the Qualifying
Investment Fund (QIF).

QIFs are often used by regulated hedge funds to structure investments. Other types of funds that
can be structured as a QIF include:

 Infrastructure funds
 Property or real estate funds
 Venture capital and private equity funds and
 Capital protected or guaranteed funds.

The legal structures that can be utilised to house a QIF are variable capital companies, unit trusts,
investment limited partnerships or common contractual funds. Variable capital companies and
investment limited partnerships are the structures most commonly utilised. They can take the form
of a single portfolio fund or a multi-portfolio umbrella fund.

QIFs are authorised to launch within one day of filing the prescribed documentation with the Central
Bank - there is no requirement for prior filing or review. A self-certification process is provided for
Page 31
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Business and Taxation Guide

instead, from the board of the fund and the Irish legal advisors. Spot check post authorisation
reviews may take place.

The minimum initial subscription per investor in the QIF is €100,000. No limits are made on
subscriptions thereafter.

The tax regime for authorised regulated non-UCITS funds, including QIFs, is the same as for UCITS
funds (see section 10.1), with the advantage of a high level of structuring flexibility offered by the
QIF.

10.3 Capital gains tax (CGT)

10.3.1 Exemption on property

A new CGT incentive applies to land and buildings acquired in EEA countries between midnight 6
December 2011 and up to and including 31 December 2013. If a property is acquired during this
period and is held for at least seven years, the gain attributable to that seven year holding period
will be exempt from Irish CGT.

10.3.2 General investments

Disposals by non-resident investors of shares in Irish companies should not be liable for Irish CGT.
This will be the position if the shares being disposed of do not derive their value from Irish specified
assets (i.e. Irish land and buildings, Irish mineral rights).

Ireland is a useful jurisdiction through which to structure an investment into China. Under domestic
Chinese legislation, disposals by Irish resident companies of shares in Chinese companies are exempt
from Chinese CGT (shares which do not derive their value from Chinese real estate). If correctly
structured, the disposal may also be exempt from Irish CGT. This is on the basis that the provisions of
the Irish participation exemption (referred to above) are satisfied.

Ordinarily, dividends paid by a Chinese resident company to a foreign shareholder are subject to
withholding tax at a rate of 10%. Ireland is one of a limited number of countries which can avail of a
lower rate of withholding tax of 5%. The dividend income will be taxable in Ireland, possibly at the
12.5% rate. A credit should be available for the 5% withholding tax in Ireland.
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11. Trusts
Ireland can be a suitable location for trusts established by foreign settlors. In general, Irish trust law
closely resembles English trust provisions. The main governing Irish statute is the Trustee Act 1893.
Ireland does not currently have a statute permitting the variation of trusts. Accordingly, it is
important that trust deeds be carefully drafted to permit amendment and flexibility.

11.1 Capital Gains Tax (CGT)

If the trustees of a trust are resident in Ireland, the usual rule is that they will be liable for Irish CGT
on the worldwide gains of the trust fund. Trustees are deemed to be resident in Ireland unless:

 The general administration of the trust is ordinarily conducted abroad, and

 The trustees, or the majority of them, are not resident, or ordinarily resident, in Ireland.

The tax liabilities of foreign trusts managed by Irish resident professional trustees may be limited in
certain instances. Professional trustees are deemed for CGT purposes not to be resident in Ireland if
the following conditions are satisfied:

 The trustees are acting in the course of a business which comprises the management of a
trust, and/or
 They are acting as trustees of the trust in the course of that business, and/or
 The whole of the property within the trust comprises, or is derived from, property provided
by a person who was not domiciled, resident or ordinarily resident in Ireland at the time
he/she provided the property.

As a consequence of the above provisions, if the trustees or a majority of them are considered non-
resident, the general administration of the trust will be deemed to be conducted outside of Ireland.
This means that the Irish resident professional trustees will not be subject to Irish CGT on gains
accruing to foreign trusts. This exception does not apply when the assets of the foreign trust
comprise Irish land, buildings and mineral rights and unquoted shares deriving more than 50% of
their value from such Irish property.

Foreign trusts which are Irish tax resident and do not hold any Irish property will not be subject to an
Irish CGT charge.

11.2 Income tax

Irish resident trustees are liable for Irish income tax on the worldwide income of the trust fund.
Unlike CGT, there is no exemption for foreign trusts.

However, potential income tax issues of the trust can be addressed. For example:

 When the trustees acquire shares in a holding company, the holding company could hold the
underlying trust assets. This means that any income arising from the assets would
accumulate in that company rather than in the hands of the trustees. No Irish income tax
charge would arise on such income unless and until it was paid by the company to the
trustees in the form of income.
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 Alternatively, the trustees could mandate that any income should be paid directly to foreign
beneficiaries rather than to them. If those beneficiaries are not Irish resident, this would
avoid an Irish income tax liability. Consideration would need to be given to the tax
implications arising in the country of residence of the beneficiary.

11.3 Capital acquisitions tax (CAT)

Under the provisions of Irish CAT legislation, a liability to Irish gift or inheritance tax will arise when
the benefit is provided by an Irish resident or is received by an Irish resident, or where the gift or
inheritance comprises of Irish property.

Irish CAT should not apply when the settlor and beneficiaries are all foreign residents, and the trust
property transferred to them is foreign property.

11.4 Stamp duty

Specific exemptions can be beneficial when acquiring foreign property and shares in foreign
companies.

11.5 Double tax treaties

As indicated in section 8 of this guide, Ireland has access to a broad network of double tax treaties.
Subject to the personal circumstances of the trustees and beneficiaries, some of these treaties may
offer substantial tax benefits in relation to trusts.
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IRELAND
Business and Taxation Guide

12. Practical information

12.1 Transport
Air, road and rail transport is excellent in Ireland. International airports at Dublin, Shannon and Cork
handle over twenty million passengers and 125,000 tonnes of freight every year. Direct daily
scheduled services are available from Ireland to key European and North American destinations.

12.2 Language
English is the main language used in everyday life and in business.

12.3 Time relevant to Greenwich Mean Time (GMT)

GMT operates in Ireland from the end of October until the end of March. British Summer Time is
one hour ahead of GMT and is used for the rest of the year.

12.4 Business hours

Office hours in Ireland are generally from 9.00am until 5:30pm, Monday to Friday.

12.5 Public holidays

The holidays observed by most businesses and government offices are:

 New Year's Day

 St. Patrick's Day - 17 March
 Good Friday – varies according to church calendar
 Easter Monday – varies according to church calendar
 May Day - first Monday in May
 June holiday - first Monday in June
 August holiday - first Monday in August
 October holiday - last Monday in October
 Christmas Day – 25 December
 St Stephen's Day – 26 December.