Tax Considerations for Doing Business in Ireland

Why Businesses Choose Ireland

Some of the key commercial advantages Ireland offers include:

• English-speaking EU country: Ireland is the only English-speaking country in the European Union, facilitating easier communication and business operations for English-speaking companies.
• Eurozone member: Simplifies transactions with other Eurozone countries, eliminating currency exchange issues.
• Strategic access: Ireland provides excellent access to the European mainland, making it a strategic location for businesses targeting the European market.
• Skilled workforce: Ireland boasts a strong workforce, particularly in the tech sector, which is a significant draw for companies in need of skilled employees.
• FDI destination: Due to these advantages, Ireland is a robust hub for Foreign Direct Investment (FDI) with over 1,600 overseas companies employing over 250,000 people in Ireland.

Tax Advantages

However, it is also clear that the tax regime is one of Ireland's key attractions for businesses. Ireland remains fully committed to the OECD BEPs and EU ATAD programmes and have implemented many of the initiatives from these anti-avoidance measures. This has demonstrated Ireland’s tax regime as being reputable and robust while also allowing the Government to defend the long-standing corporation tax rate. 

The standard corporate tax rate is among the lowest in Europe, at 12.5%. However, to benefit from this rate, companies must comply with certain substance requirements. This means they must have a genuine business presence in Ireland and can reflect the profits allocated to Ireland as being genuinely created from activity carried out from within country. 

Additional advantages of the Irish tax regime include: 

• R&D tax credits which provide significant advantages for research and development activities of up to 30% of the expenditure incurred on such activity. 
• The Knowledge Development Box (KDB), which can offer a preferential tax rate on income from intellectual property developed in Ireland of 6.25%.
• Digital Games Tax credit is available at a rate of 32%.
• Capital allowances are available on capital purchases including intellectual property to help reduce taxable profits.
• New businesses can benefit from a corporation tax startup relief sheltering up to €40,000 of corporation tax a year for the initial three years.
• Extensive double tax treaty with 74 jurisdictions to ensure efficiency for multinational groups. 

Practical Considerations

When establishing a business in Ireland, it's crucial to take practical steps:

• Early advice: Consult with tax, legal, and business advisors to determine the requirements and ensure the best corporate structure. 
• Bank accounts: Opening a local bank account can be time-consuming, so initiate this process early.
• Advisory meetings: Take an early trip to Ireland and meet with your key business advisors. Three key relationships will be your accountant/tax advisor to understand the best structure for your business and compliance requirements, your legal advisor especially in relation to understanding local employment law requirements and a local bank to help streamline the setup process.

For tailored assistance in setting up your business in Ireland and understanding the Irish tax system, reach out to Brendan Murphy and the expert team at Baker Tilly Ireland.