Ireland is one of the most targeted European countries by foreign investors. One of the major reasons behind this is its plethora of double taxation agreements signed with over 73 countries worldwide. The Ireland-USA double taxation treaty dates back to 1998. The tax treaty has evidently strengthened the bilateral ties between the two countries and has allowed many multinational companies to flourish in these two countries.
Provisions of the Ireland-US double tax treaty
The double tax agreement between the Irish and the Americans addresses the following tax measures:
The USA stipulates the following taxes to Irish companies:
- The federal income tax;
- The federal excise tax;
- Mostly applies to insurance expenses paid to foreign insurance entities.
Ireland stipulates the following taxes to US companies:
- Corporate or commercial tax;
- Capital gains;
- Income tax.
The treaty also holds true for comparable taxes in either of the two nations. The agreement affects both persons and companies based on tax residence. However, there are special provisions to be considered for permanent structures where any of the companies from either Ireland or USA would conduct their business operations. A typical example of permanent establishments are branch offices.
What are the Tax rates under the Ireland-USA double tax convention?
The double taxation treaty states that profits garnered by companies incur tax only in their countries of residence. However, if the company has permanent establishments in the other country, they will be taxed in the country where they are conducting their operations.
Commercial undertakings relating to shipping and air transportation also incur tax in the country in which company registration was carried out and where business operations are taking place. Income resulting from pieces of immobile property have to pay a tax in the nation where the property is located.
What are the reduced tax rates under the Ireland-US Double tax treaty?
In cases where it is impossible to avoid the double taxation scheme, the agreement between the Irish and the Americans makes available lowered taxes, in a subsequent manner:
- A rate set at 5% pertains to dividend payments in cases where the receiver holds not less than 10% of the total shareholding stake in the entity and a rate of 15% in the other remaining instances;
- A rate set at 0% relates to payments associated with interest;
- A rate set at 0% is aimed at payments for royalties.
Ireland is still expanding its network of double taxation treaties. This just makes it more and more of an attractive tax location for foreign investors from all around the world.
SIGTAX experts are well equipped to assist you in any way possible concerning the aforementioned double tax provisions. For further and detailed information pertaining to tax issues between Ireland and the US, kindly get in touch with our well-informed consultants.