Over the years, the Irish government fiscal policy has undergone some revisions. These changes have positively transformed Ireland from being one of the most backward European countries to become one of the most economically thriving countries in the European Union. Today, Ireland stands as one of the most favorable destinations for international companies who want to set up a holding company in Europe. What makes Ireland very attractive for foreign investors are the low tax rates and it’s generally foreign-friendly legal structure.
Ireland is both a member of the of the Organization for Economic Co-operation and Development (OECD), and the European Union (EU) thus it facilitates a well-regulated jurisdiction very much convenient for holding companies. As result, holding companies in Ireland can take advantage of this jurisdiction by disposing of its shares in any other company located in the EU or any other country that has signed a double tax treaty with the Irish government. This will allow holding companies to obtain a capital gains exemption. Note that this exemption is only feasible if 5 percent or more of the ordinary shares are in an honorable condition and have been held for over one year.
The Registration Process Explained
Ireland offers two options for registering a holding company:
- As an Irish Public Limited Company
- As an Irish Limited Company
Most people choose to register their Irish holding companies as private limited companies because this legal structure exempts the necessity of minimum share capital. On the other hand, to set up a public limited company in Ireland, the founders should have a minimum share capital of 38 000 euro. By the time of incorporation, they should have paid at least 25% of the money.
Understanding the Taxation of holding companies in Ireland
- Ireland has a very attractive corporate tax, set at only 12.5% of the profits gained from trading activities. The Irish corporate tax is one of the lowest not only in Europe but on a global scale;
- Holding companies are liable to pay 25% tax from any other passive income they get;
- The holding company should pay 33% tax for any capital gains that do not qualify for tax exemption;
- Concerning repatriation of dividends, the Finance Act of 2013 introduced tax credit for certain foreign dividends received by an Irish residing company;
- The standard residing tax for all other cases is valued at 20%.