TBA & Associates

Ireland holding company formation

Why choose Ireland to open a holding company?

The main reason for opening a holding company in Ireland is the taxation system. The low corporate tax and the extended network of double tax treaties Ireland has with many countries provide an excellent environment for holding companies. Also, as an EU and OECD (Organization for Economic Co-operation and Development) member state, Ireland provides a well-regulated jurisdiction for holding companies.

Due to the participation exemption Irish holding companies may dispose of its shares in any other company within the European Union or a country Ireland has a treaty with, thus obtaining a from a capital gains tax exemption. This exemption applies if at least 5% of the ordinary shares have been held for minimum a year and if the trading condition is respected.

The main features that give Ireland a competitive advantage over other jurisdictions are as follows:

No withholding tax on the payment of dividends by the holding company to EU or tax treaty countries.

No capital gains tax on the disposal of shareholdings in subsidiaries.

No transfer pricing, thin capitalization or CFC rules.

Tax deductions for interest on borrowings to acquire shareholdings in subsidiaries.

Favourable treatment on the receipt of dividend income.

Extensive Tax Treaty network and access to EU Parent-Subsidiary Directive.

Low tax rates for both trading operations and investment activities.

These incentives together with non-tax incentives such as the economic and telecommunications infrastructure, the English speaking population and membership of the EU make Ireland one of the most attractive destinations in Europe for multinational companies.

It is for some or all of the above reasons that many of the world’s leading multinational companies have, and continue to, establish holding companies in Ireland.

Ireland has become a very attractive place for multinational companies!

Advantages of Irish holding company

General taxation regime

There are many reasons why Ireland is an attractive proposition for the establishment of a holding company for multinationals, including membership of the EU, the ever-increasing double tax treaty network and a foreign tax credit system.

These reasons combined with the ease with which an Irish company can pay a dividend to a non-resident company free of withholding tax means that Ireland remains a location which justifies the establishment of holding companies for many large multinationals from around the world.

Exemption for Capital Gains Tax (CGT) on share disposal

Current legislation provides for an exemption from CGT where:

  • The disposing company holds a minimum of 5% of the share capital of the company being disposed.
  • At the time of disposal the company is resident in an EU/tax treaty country.
  • The company does not derive its income from land, minerals or rights or assets relating thereto within Ireland.
  • The shares were held for at least 12 months at any time within 2 years prior to the disposal.
  • Corporation Tax Exemption for Foreign Dividends and a Foreign Tax Credit System.

Foreign dividend income earned by an Irish company and such dividend is paid from trading profits; the Irish company may only be liable to corporation tax at the rate of 12.5%. While some foreign dividends may be subject to tax at 25%, a tax liability may not arise due to Ireland’s attractive foreign tax credit pooling system. The tax credit pooling system allows for tax withheld by foreign countries to be pooled and offset against Irish tax on dividends earned. If such pooled tax credits are not fully utilised, they can be carried forward for offset against future liabilities on foreign dividends earned.

Double taxation agreements

Ireland currently has double tax agreements with 72 countries. These agreements can have the effect of either mitigating or eliminating double taxation between participating countries. This is vital when deciding on a location for company headquarters as many of these companies will have operations throughout the world and this can benefit from such double tax agreements.

Tax credits on foreign branch income

An Irish resident holding company will be liable to corporation tax on its global income, which includes income of a foreign branch. The foreign branch may be liable to both foreign and Irish tax. To eliminate double taxation arising, Ireland’s tax system allows for an offset of foreign tax paid against the corresponding Irish corporation tax liability. As with foreign dividend income, a pooling system of excess credits is available where the foreign tax exceeds the Irish corporation tax. Also, any unused credits may be carried forward.

Withholding tax exemption

Withholding tax at 20% applies to dividend payments and other profit distributions made by an Irish resident holding company. There are a number of exemptions where dividends are paid to certain shareholders including:

  • Companies (and individuals) resident in other EU/tax treaty countries and not under the control of Irish residents.
  • Irish tax resident companies.
  • Non-resident listed companies and their 75% subsidiaries.

Royalty payments can also be made free of withholding tax to companies in the EU or tax treaty countries in certain circumstances.

If you are interested in setting up an Irish holding company and require more information, please contact us! One of our specialists in company formation in Ireland will be happy to provide you all the assistance you may need.

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Year 1 Incorporation and service fees.
Optional Services (Bank Account opening, Nominee services, Certification of documents, amongst others).
Annual Renewal service fees for year 2 and subsequent years, to keep your company in good standing and full Compliant at all times.

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