Moving to Ireland Forums

Ireland Info · Joined: 21 Oct 2006 Posts: 18 Home Country: ireland

DOING BUSINESS IN IRELAND

STARTING A BUSINESS

STANDARDIZED COMPANY
Legal Form: Private limited company
Minimum Capital Requirement: 0
City: Dublin

Registration Requirements:

Procedure 1. The founder swears before a Commissioner for Oaths
Time to complete: 1 day

Cost to complete: EUR 10

Comment: A director or secretary or solicitor engaged in the formation of the company must swear (on the statutory form for incorporation) that the (relevant) provisions of the Irish Companies Acts have been complied with and must declare that the company will be carrying on an activity in the State when the company has been incorporated.

Procedure 2. File necessary materials with the Companies Registration Office (CRO)

Time to complete: 10 days

Cost to complete: EUR 50 with pre-approved memorandum and articles, EUR 100 for standard registration

Comment: There are currently three methods by which a company may be registered at the Companies Registration Office here in Ireland and these are listed as follows:

1. The Companies Office operates a CRO disk system, where the papers for incorporation are lodged in electronic form and also hard copy. The Memorandum and Articles of Association submitted under this scheme must in a pre-approved format agreed by the Companies Office. and oOnce the documents are lodged, the Companies Office takes 5 working days to incorporate the company.

2. The Companies Office operates a "Fe Phrainn" system where again the Memorandum and Articles submitted to incorporate the company must also be in a pre-approved format. Documents submitted under this scheme are in hard copy only and the Companies Office takes 10 working days to incorporate the company.

3. A hard copy of the documents is submitted to the Companies Office, where the Memorandum and Articles of Association are not in a pre-approved format. In this instance the Companies Office takes between 2-4 weeks to incorporate the company.

To access the first two systems one has to apply for an access number from the Companies Registration Office and has the Memorandum and Articles of Association approved in advance. Usually only professional agencies use the expedite systems.

Necessary documents for limited companies: memorandum and articles of association, list of directors, secretary and subscribers, statement of nominal (authorized) and issued share capital and consideration paid, notice of registered office, statement of the main activity to be carried out and the address where it will be carried out from, all contained in a statutory notice sent to the CRO. Forms can be downloaded from the CRO's website.In all cases a Companies Office form A1 must be submitted which contains details of the name of the company, the first directors, secretary, registered office, the subscribers to the memorandum and articles of association, the authorized and issued share capital and details of the place in the state where it is proposed to carry on the activity of the company and details of the place where the central administration of the company will be carried on. In addition the memorandum and articles of association, signed by the subscriber shareholders will be submitted to the Companies Office.

As of April 2006, professional incorporators will not have to re-register pre-approved memorandum and articles. The Company Law Enforcement Act 2001 already made provisions for the registration of pro forma or "Reference" Memoranda and Articles of Association, Pursuant to the new provisions, the memorandum and articles, once registered, may be referenced in future incorporations and need no longer be filed with each new incorporation.

A registration fee of €100 is charged for each Ref M&A registered with the Office. However, the use of the Ref M&A, within the CRODisk system, in the incorporation of a company will result in a reduced incorporation fee of €50. The fee for the registration of a company other than in accordance with the new procedures costs €100.

Procedure 3. Get a company seal

Time to complete: 1 day (few hours)

Cost to complete: EUR 20

Comment: The company is also obliged to keep the statutory registers for the directors and shareholders

Procedure 4. Register for corporation tax, social insurance (PAYE/PRSI) and VAT with the Revenue Commissioners

Time to complete: 7 days

Cost to complete: no charge

Comment: Fill in and file a form TR2. The tax ID number is only needed when the company is to pay taxes at the year end. Once the form has been entered on the Revenue's computer the company is registered straight away for PAYE/PRSI. Registration for VAT takes a further 5-10 working days.

Note: Procedures sometimes take place simultaneously. Instances of this are marked with an asterisk (*).

TYPES OF BUSINESS

Private Limited Companies
Private limited companies are owned by the shareholders, whose liability is limited to the amount of share capital they have invested. Private companies may retain the right to refuse to register transfer of shares and have a limit on the number of members.

Limited companies are required to issue accounts annually to shareholders. These accounts must be audited by a registered auditor, who reports to the shareholders in accordance with company law.

Company details are filed at the Companies' Registration Office, whose records are publicly available for inspection.

Limited companies are subject to corporation tax at the standard rate. Profits under £50,000 are taxed at a lower rate. Many companies are entitled to a special reduced rate of 10% for manufacturing and other 'qualifying' activities, up to the year 2010. It is government policy to reduce the standard rate to a uniform rate of 12.5% by 2005.

Public Limited Companies
Public companies must have a minimum of seven shareholders. Shares in public companies may be traded freely and many companies are quoted on recognised stock exchanges. Public companies are subject to strict regulatory and disclosure requirements.

In the case of shares in a limited company (public or private), overseas individuals can use offshore trust arrangements to minimise their exposure to capital gains tax and inheritance tax liabilities.

Branches of Foreign Companies
Under Irish law, foreign-owned companies may establish a branch in Ireland. Such branches must be registered with the Registrar of Companies. Corporate tax payable in Ireland is limited to the tax on the profits attributable to the branch. Furthermore, since the branch is not considered a separate entity, losses incurred can be offset for tax purposes against profits in the country in which the company is legally established.

Branch structures are favoured by multinational corporations who base manufacturing operations in Ireland.

Partnership
A partnership is two or more people trading under a common name with common objectives. This form of business entity is favoured by professional bodies. A limited company can be a partner in a venture with other individuals/corporate bodies.

Partnerships generally have unlimited liability. Partnerships are normally regulated by specific agreements between the partners but, in the absence of a specific agreement, the Partnership Act 1890 makes provision for certain matters between the partners.

It is possible for non-residents to enter into partnerships with either residents or non-residents of the Republic of Ireland, to do business in the Republic of Ireland. However, partnerships are rarely used by individuals for this purpose due to the lack of limited liability.

The Limited Partnership Act 1907 provides for the formation of limited partnerships that are analogous to the French Societe Anonyme. The partners in such partnerships are divided into two categories: partners with unlimited liability who are generally responsible for managing the affairs of the partnership; and other (normally non-executive) partners whose liability is limited to their contribution to the partnership.

Sole proprietorship
This is the simplest form of business structure, whereby a private individual owns and runs a business in his/her personal name. There is no limitation of personal liability for trading debts. Sole proprietors are taxed as individuals.

Co-operative
A co-operative is a legally incorporated body in which the board of management/directors are, or are controlled by, the worker members/shareholders. Membership is open and voluntary and each member has only one vote.

TAXES

All forms of direct taxation in Ireland operate on a self assessment basis. Self assessment was introduced during the 1988/ 1990 period and has been a tremendous success.

The principal forms of direct taxes include:

Income Tax

Income tax is charged on the taxable income of individuals, partnerships, and on Republic of Ireland property income of non-resident individuals and companies. The government fixes the tax rates in its annual budget.

This standard rate of tax is also the rate of withholding tax deductible from certain types of income paid to foreign investors, for example, rents and interest. The overall income tax liability of an individual is calculated at the end of each income tax year by reference to his total income less deductions.

The Republic of Ireland tax year ends on April 5th and an individual's liability to income tax is assessed by reference to this date.

The income tax position of non-residents or foreign domiciliaries is ruled by the concepts of domicile and residence.

Domicile, Residence and Ordinary Residence
Domicile is a concept of common law and is not defined in statute. Under Irish law, an individual can only have one domicile at any one time. An individual acquires a domicile of origin at birth based on the domicile of his parents. An individual may renounce his domicile of origin and acquire a domicile of choice. This will involve making permanent ties with the country where the domicile of choice is being established.

An individual is Resident in Ireland for a particular tax year if:

*he is present in the State for 183 days or more in that tax year, or

*he is present in the State for 280 days or more in that tax year and the preceding tax year together

Irish tax law also entitles an individual, who is not resident for a tax year under either of the above criteria, to elect to be treated as a resident for that tax year if he can satisfy the Irish authorities that he will be resident for the next tax year.

An individual is Ordinarily Resident in the State for a tax year if he has been regarded as resident in the country for each of the preceding three tax years.

An individual who is resident, ordinarily resident and domiciled within the state for a particular tax year is liable to all forms of Irish taxation on world-wide income.

Non-residents and foreign domiciliaries may, however, be exempt from some Irish taxation on the grounds of foreign domicile, residence or ordinary residence.

The retention of foreign assets, family ties, and foreign citizenship, coupled with return visits to a homeland and the execution of an overseas will, assists in the retention of a foreign domicile.

There are eight possible permutations of domicile, residence and ordinary residence in the Republic of Ireland and great care must be taken to obtain professional advice as to the Republic of Ireland taxation consequences of an individual investing in, moving to, or acquiring a residence in the Republic of Ireland.

Corporation Tax

Irish resident companies are liable to CT on their world-wide income and gains. Residence, for CT purposes, is determined by where the company is managed and controlled.

In general, the rules of income tax and capital gains tax are applied in computing the profits of a company for corporation tax purposes.

A reduced rate of corporation tax of 10% applies to profits of companies derived from the following activities until December 31st 2010:

*Manufacture of goods in Ireland

*Repair of computer equipment which was originally manufactured in Ireland

*Fish farming, meat processing, micropropagation and cloning of plants

*Some computer services (e.g. data processing, software development and related technical or consultancy services) for which employment grants are available

*Film production and production of certain newspapers

*Repair of ships and certain qualifying shipping activities

*Maintenance or repair of aircraft, aircraft engines or components

*Design and planning services concerning civil, electrical, mechanical, or chemical engineering work outside the EU

*Wholesale sales on export markets of products manufactured in Ireland (this provision for special trading houses expires on December 31, 2000)

*Internationally traded financial services, if located at the IFSC (Irish Financial Services Centre, Dublin) or from Shannon. This provision expires on December 31, 2005.

Certain companies, which include, inter alia, companies under the control of five or fewer 'participators' are regarded as 'close' companies. 'Participators' include shareholders and certain other persons and close members of their family. Special rules apply to these companies to restrict the shareholders and directors use of company funds.

An Irish resident shareholder who receives a distribution from an Irish resident Republic of Ireland company is entitled to a tax credit. The tax credit available to overseas residents depends on the terms of any double taxation treaty between the Republic of Ireland and their country of residence.

The government recently announced (1998) their objective of having a general 12.5% corporation tax rate by the year 2005. Projects located in the IFSC qualify for the special 10% corporation tax rate.

Capital Gains Tax

Capital gains tax is incurred when a company or individual sells a taxable capital asset at a taxable profit.

A taxable capital asset, for the purposes of CGT, includes all forms of property including options and property created by the person disposing of it, i.e. goodwill, copyright, etc. The cost price in most circumstances is indexed upwards to eliminate the inflation effect in the intervening years up to the disposal.

An Irish domiciled individual resident or ordinarily resident in the State is liable to Irish CGT on gains accruing from the disposal of all assets, regardless of where they are situated.

An Irish resident company is liable to corporation tax on its gains on the disposal of all assets, regardless of where they are situated.

A charge to Irish CGT arises on the disposal of certain specified assets irrespective of the residence status of the disponer. These are:

*land and buildings within the State

*minerals in the State, or any rights or interests in relation to mining or minerals, including exploration or exploration rights within the limits of the Irish continental shelf

*assets situated in the State used for the purposes of a branch or agency

*unquoted shares deriving the greater part of their value from land or buildings or materials

Capital Acquisitions Tax

Capital acquisitions tax is a capital tax chargeable on gifts/inheritances where:

*The disponer is Irish domiciled or

*The gift/inheritance is situated in the State

There are three classes of exempt thresholds, depending upon the relationship between the disponer and recipient of the gift/inheritance. Cumulative gifts/inheritances in excess of the relevant threshold are taxable. Gift tax is calculated at 75% of tax calculated under the inheritance tax tables.

Inheritance tax does not apply to lifetime gifts, or disposals on death, of non-Republic of Ireland assets owned by persons domiciled outside the Republic of Ireland. Because of this exemption, it may be wise for a person domiciled outside the Republic of Ireland to channel investment into the Republic of Ireland through an offshore company. Then the shares in the offshore company (which are foreign assets) will be deemed to pass on death, not the underlying Republic of Ireland assets.

Inheritance tax applies to certain types of trusts. Such trusts are required to pay inheritance tax at reduced rates on the total value of the trust assets at periodic intervals.

Non-Republic of Ireland trusts created by persons domiciled outside the Republic of Ireland at the time of creation are not subject to inheritance tax either on disposal or by way of periodic charge.

Capital Allowances

Capital expenditure on certain qualifying capital assets for the purposes of trade may be written off against profits for income tax and corporation tax purposes. Normal accounting depreciation on non-qualifying assets is not allowed as a tax deduction.

The principal forms of indirect taxes include:

Value Added Tax

Irish law obliges business entities to register for VAT and to charge VAT on the supply of certain goods and services. However, a VAT registered entity can generally recover VAT paid on items purchased, including expenses and imported goods. In this way, VAT is designed to be a tax on the consumer only rather than the supplier.

No VAT is payable on goods imported from other registered entities within the EU. VAT is payable at the point of entry to the customs authorities before goods from non-EU countries can be released to the purchaser.

VAT registered entities that manufacture and export at least 75% in value of their production may apply for permission to import raw materials from non-EU countries without payment of VAT at point of entry.

Stamp Duties

Stamp duty is payable on the purchase price of commercial land with a value in excess of £60,000, on the annual rent for new leases of land/ buildings, and on the transfer of shares in a company.

Stamp duty is payable on the purchase of residential property at graduating rates which are dictated by purchase price, new or second hand houses and whether the purchaser intends to be an owner occupier or investor.

The stamp of a document acts as proof of payment of stamp duties and ensures the legality of the transaction.

There are four categories of stamp duty as follows:

Fixed Duties

Payable at a fixed rate on bills of exchange, promissory notes, cheques, options and certain conveyances.

Ad Valorem Duties

Calculated on the consideration involved these duties are payable on leases, share transfers, mortgages, conveyances of sale, insurance policies etc..

Capital Duties

Payable on capital transactions by certain companies.

Imposed Duties

Imposed duties are levied on banks, insurance companies, promoters of credit/ charge cards, and certain boards of authority.