Ireland

Tax residency – A Private limited company is tax resident in Ireland if it is managed and controlled in Ireland or if it is incorporated in Ireland. However, companies incorporated in Ireland which are tax residents in a treaty country by virtue of management and control may be deemed Irish non-residents for tax purposes.

Basis – Corporate income tax is levied on worldwide income.

Tax rate – The corporate tax rate is 12.5% for trading income and 25% for non-trading income.

Capital gains – Capital gains are usually taxed at 33%. However, gains obtained from the disposals of interest in offshore funds and foreign life assurance policies which are not located in the EEA or treaty countries may be taxed at a 40% rate.

There is a participation exemption from capital gains obtained by Irish companies if a minimum of 5% of the shares is held for 12 months, the company whose shares are sold is resident in the EU or in a treaty country, among other conditions.

There is also a capital gains tax entrepreneur relief which consists of a reduction in the tax rate to 10% on the disposal of chargeable business assets.

Dividends – Dividends from resident entities are exempt from corporate tax.

Dividends received from an EU or a treaty country may be taxed at a 12.5% rate. If the company holds 5% or less of the share capital and voting rights, dividends may be exempt from taxation.

Dividends received from a listed company or a company that is part of a 75% listed group the principal class of the shares of which are regularly traded on the Irish Stock Exchange, or any other EU or treaty country Stock exchange, may be taxed at a 12.5%. If the company holds 5% or less of the share capital and voting rights, dividends may be exempt from taxation.

Dividends received from entities incorporated in a country other than a treaty country or an EU member state are subject to the 25% tax applied to non-trading income.

Interests – Interests are usually taxed at a 25% tax rate.

Royalties – Royalties are generally subject to a 25% tax rate. However, if it is considered that the Irish company is carrying on an IP trade, royalties and other similar income may be subject to a 12.5% tax rate.

Withholding Taxes – Dividends paid to resident or non-resident individuals and companies are subject to a 25% withholding tax. However, an unilateral exemption from withholding taxes on dividends apply to dividends paid to:

• Irish tax resident companies
• Non-resident companies that are resident in a country with which Ireland has a tax treaty or in another EU member state, where the company is not controlled by Irish residents.
• Non-resident companies that ultimately are controlled by residents of a tax treaty country or another EU member state.
• Non-resident companies whose principal class of shares are traded on a recognised stock exchange in a treaty country or another EU member state or on any other stock exchange approved by the Minister for Finance (or if the recipient of the dividend is a 75% subsidiary of such a listed company).
• Non-resident companies that are wholly owned by two or more companies the principal class of shares of each of which is traded on a recognised stock exchange in a treaty country or another EU member state or on any other stock exchange approved by the Minister for Finance.
• Individuals who are resident in a tax treaty country or in another EU member state.
• Certain pension funds, retirement funds, sports bodies, collective investment funds, and employee share ownership trusts.

Interests and patent royalties paid abroad are subject to a 20% withholding tax unless a tax treaty or the EU parent-subsidiary applies.

Royalties which are not derived from patents are not subject to withholding tax.

Foreign-source income – Foreign-source income, including foreign branch income, and capital gains are usually subject to corporate tax. However, income retained in subsidiaries is usually not taxed until remitted to Ireland. A foreign tax credit may be available.

Losses – Losses arising from taxable income may be carried forward indefinitely and be carried back to the immediately preceding period of equal length.

Inventory - Inventory may be valued at the lower of acquisition/production costs or market value, whichever is lower. First in first out (FIFO) is accepted. Last in first out (LIFO) and base-stock methods are usually not accepted.

Anti-avoidance rules – Transfer pricing rules apply to related party transactions, which usually must be carried out in accordance with the arm’s length principle.

There are limitations to the deductibility of interest payments made to related parties.

Undistributed income of a controlled foreign company (CFC) may be attributed to the Irish shareholder, if such undistributed income can be reasonably attributed to relevant Irish activities.

There are several exemptions to the above:

• Exemptions that exclude a CFC fully from the charge. These include an effective tax rate exemption, profit/profit margin exemptions, an essential purpose test exemption, and an exemption where the CFC has no non-genuine arrangements in place.
• Exemptions that apply to specific income streams of a CFC. These include a transfer pricing exemption and an essential purpose test exemption.

In addition, an exempt period may also apply on the acquisition of a CFC where certain conditions are satisfied. 

Labor taxes – Employer contributions to the Pay-related Social Insurance are up to 10.75% of an employee’s gross earnings. The contribution rate for employees is 4%.

Tax credits and incentives – There is a 25% tax credit on qualifying R&D expenses, being a total effective tax deduction of 37.5%. In addition, under the Knowledge Development Box, a reduced corporate tax rate of 6.27% applies to certain profits arising from assets derived from R&D initiatives.

Certain start-ups may benefit from a tax relief for three years if the total amount of corporate tax payable does not exceed EUR 40,000 in each year.

The Intellectual property regime provides a tax deduction for capital expenditure incurred by a company on the acquisition of qualifying IP assets such as patents and registered designs, trademarks, know-how, domain names, copyrights, service marks, among many others. Capital allowances incurred on qualifying IP assets are available for offset against income generated from qualifying IP assets, up to a maximum deduction of 80% of the IP derived profits. The remaining 20% is taxable at the 12.5% corporation tax on the basis that the company is carrying on a trade.

Personal income tax – An individual is deemed to be tax resident in Ireland if he or she is present in Ireland for 183 days in a calendar year or 280 days in any two consecutive years.

After an individual has been tax resident for three consecutive years, he or she becomes an ordinary resident. Ordinary residence ceases once the individual has been a non-tax resident for three consecutive years.

Tax residents are subject to tax on their worldwide income, while non-residents are taxed on their profits arising in Ireland.

Personal income is taxed at progressive tax rates up to 40% on annual income exceeding €33,800. Individuals are also subject to the Universal Social Charge at progressive rates up to 11%.

Dividends are taxed at standard rates, although individuals who are resident but not domiciled in Ireland are not subject to tax on their foreign investment income, provided that it is not remitted to the country.

Interest income is usually taxed at 39%, although certain exemptions may apply.

Capital gains are taxed separately at a flat tax rate of 33%. A rate of 40% applies in the case of certain interests in funds and life assurance policies.

Rental income is considered ordinary income and therefore taxed at the applicative tax rate.

Other taxes – Property tax is levied by municipalities at a 0.18% rate for properties with a market value up to €1m and 0.25% on properties over €1m. Transfer of properties are subject to a stamp duty between 1% and 2%.

Assets passing on death and on lifetime gifts are subject to a capital acquisition tax at a 33% rate.

There are no taxes on net wealth in Ireland.

V.A.T. standard rate is 23%. Reduced rates of 13.5%, 9% and 4.5% may apply for certain goods and services.