Ireland imposes tax on the worldwide income and gains of its residents. Non-residents who carry on business in Ireland through a branch or agency, who are entitled to income with a source in Ireland or who hold interests in Irish land, buildings, mining or exploration rights, may also be subject to Irish taxation.  An Irish resident company is liable to corporation tax at 12.5% (or 15% for entities within the scope of Pillar 2) on its trading profits, 25% on passive income and 33% on capital gains.

Ireland has a tax-exempt regime for regulated investment funds and a regime to facilitate international financial transactions including securitizations.

Ireland imposes a 20% withholding tax on non-residents who receive certain interest payments or patent royalties from Ireland.  The payer of any such amounts is liable for withholding and remitting this tax on behalf of the non-resident recipient.  However, Ireland has a broad range of exemptions.

Ireland imposes a 25% dividend withholding tax on the payment of dividends to non-residents but a number of exemptions apply, including dividends paid to residents of countries with which Ireland has a double tax treaty and companies resident in non-treaty countries which are controlled by treaty residents.

Ireland is a member of the European Union (EU) which is an important source of law in Ireland.  Ireland also has an extensive double taxation treaty network (76 signed, 74 of which are in effect) that can eliminate withholding tax where the conditions for a domestic law exemption are not satisfied.

Value added tax applies to many supplies of goods and services made in Ireland.  In addition, stamp duty applies to the purchase of many assets such as shares and land.

Ireland is a signatory to the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI), which came into force in May 2019.

In October 2021, Ireland, along with over 130 other countries in the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting, signed up to an agreement to reform the international tax framework as it applies to large corporate groups.

In this chapter

• Taxation authority
• Legal system
• Business vehicles
• Financing a corporate subsidiary
• Corporate income tax
• Cross-border payments
• Payroll taxes
• Indirect taxes

Taxation authority

The Office of the Revenue Commissioners (Revenue) is the Irish taxation authority and it is responsible for the administration and collection of Irish taxes and excise duties.

Legal system

Ireland has a common law legal system with a written constitution that provides for a parliamentary democracy.  Ireland is a member of the EU having joined the EEC in 1973. 

Statute law is enacted in Ireland by the national parliament, known as the” Oireachtas.”  The Oireachtas includes an upper and lower house.

Business vehicles

A non-Irish resident may establish either an Irish business vehicle to carry on business in Ireland or operate directly through a non-Irish entity (with or without an Irish permanent establishment).  Irish business vehicles include companies (limited or unlimited) and partnerships.

Partnerships

Under Irish law, partnerships are characterized as the existence of a relationship between two or more people who carry on a business with a view to profit.  A partnership is not a separate legal entity.  Partners are jointly and severally liable for the debts of the partnership and usually take an active part in the business.  It is possible to form partnerships with limited liability, in which there must be at least one general partner (which may be a company) that has unlimited liability.  Limited partners are liable to the extent of their investment, and cannot take part in the running of the partnership nor have the power to enter into binding contracts on behalf of the partnership.

For Irish tax purposes, partnerships are treated as fiscally transparent for direct tax purposes, meaning that taxes on income and capital gains are assessed on the partners individually according to their attributable share of the income or gains, rather than on the partnership itself.

A partnership (through the precedent partner) is required to file an annual partnership tax return on behalf of all the partners showing, among other things, the taxable profits or losses of the partnership and their allocation among the partners.

Private companies limited by shares

The private company limited by shares is the most common form of trading entity in Ireland and is generally incorporated as a subsidiary of a non-Irish holding company or as a stand-alone company.  The liability of the shareholders is limited to the fully paid-up amount of the share capital in the company.  There is no minimum share capital requirement for a private limited company, nor any requirement that the capital must be paid up.

A private company limited by shares (i.e.  a Limited or Ltd company) may have at least one and up to 149 members (not including employees), and the company is prohibited from inviting the public to subscribe for any shares or debentures of the company.  While a designated activity company (DAC) limited by shares is similar to a private company limited by shares, the main difference is that the activities of a DAC are limited to the company’s objects as set out in the memorandum, and a minimum of two directors is required.

A company may be tax resident in Ireland on the basis that it is incorporated in Ireland and/or managed and controlled from Ireland.  An Irish incorporated company will be tax resident in Ireland unless it is treated as a resident in another country under the terms of a double tax treaty between Ireland and the other country.  An Irish resident company is subject to corporation tax on its worldwide profits and capital gains, with credit generally available for many forms of overseas taxes paid.

Private companies limited by guarantee

Most companies limited by guarantee are either charitable or non-profit organizations.  They typically have a low commercial risk and are formed without share capital.  This type of company may be formed by one or more persons who, in effect, are the guarantors.  A guarantor agrees to contribute a nominal amount, which is typically quite small, on the winding-up of the company in the event of a shortfall of assets at that time.

As a corporate body, the tax treatment rules are broadly the same as for private companies limited by shares but as a company limited by guarantee does not have ordinary share capital, certain reliefs are not available.  However, companies which are registered as charities benefit from a number of tax exemptions.

Public limited companies

Subject to the satisfaction of legislative requirements and the company’s constitution, a public limited company (PLC) may offer, allot, and issue securities to the public.

The Irish Stock Exchange operates three markets for securities: (i) The Main Securities Market (MSM) for the securities of Irish and overseas companies, (ii) The Enterprise Securities Market (ESM) for small to mid-sized companies, and (iii) The Atlantic Securities Market (ASM) for European and United States listings.

The Irish Stock Exchange also offers listings to unit trusts and UCITS.  These listings on the investment fund market are available to both Irish and foreign funds.  The authorized minimum share capital for a PLC is €25,000, or a greater sum as determined by Ministerial Order, of which at least 25% must be fully paid up.  A PLC must have at least two directors and a secretary.

Unlimited liability companies

There are three forms of unlimited company: the private unlimited company (ULC), the public unlimited company (PUC), and the public unlimited company with no share capital (PULC).  One or more persons may form an unlimited company and the members of unlimited companies have unlimited liability.

An unlimited liability company is subject to tax on the same basis as a private company limited by shares.

Investment funds

Investment funds in Ireland can take a number of different legal forms.  Noncorporate forms include unit trusts, common contractual funds and investment limited partnerships (ILP).  A CCF is a contractual arrangement which allows investors to pool assets in a regulated tax transparent fund.   An ILP is a regulated partnership which is transparent for Irish tax purposes.  Investment funds may also be formed as companies or Irish Collective Asset-management Vehicles (ICAVs).  The ICAV is the most common regulated fund structure and is within the “gross roll-up regime.”  Investment funds within this regime are not subject to Irish tax on income or gains and there is no withholding tax on distributions, redemptions or transfer of units where the investor is non-Irish or an exempt Irish investor and the required declaration is in place (subject to special rules which apply to funds owning significant Irish real estate assets).

Securitization companies

There is a regime for certain companies that satisfy the conditions to be a “qualifying company” within the meaning of Section 110 of the Taxes Consolidation Act 1997 (Section 110 companies).  This regime applies to companies which hold “qualifying assets” which refers to a wide range of financial assets as well as commodities and plant and machinery (including aircraft).  A Section 110 company is entitled to tax deductions as if it were a trading company and may also take a tax deduction for profit dependent interest where certain conditions are satisfied (and subject to interest limitation and anti-hybrid rules).  The regime is widely used for a range of international finance transactions.

Companies incorporated outside Ireland

A foreign company can set up a branch in Ireland instead of a limited company.  Under Irish law, a branch is not considered a separate legal entity and all legal responsibilities and liabilities stay with the parent company.  At least one person resident in Ireland must be nominated to act on behalf of the company and to sign Companies Registration Office (CRO) forms and other documentation.

A company that is incorporated outside Ireland but resident as a result of being managed and controlled in Ireland is liable to Irish corporation tax on its worldwide profits.  A company which is not resident in Ireland is liable to Irish corporation tax if it carries on a trade in Ireland through a branch or agency and in such case the liability extends only to the profits or gains attributable to the branch or agency.  A non-resident company may also have a liability to Irish corporation tax on Irish source rental income and a liability to income tax on other Irish source income (e.g., interest income).

A non-resident is liable to capital gains tax (CGT) on the disposal of “specified assets.”  A “specified asset” means:

1. Land and buildings located in Ireland
2. Mineral rights located in Ireland
3. Exploration rights in the Irish Continental Shelf
4. Unquoted shares which derive the greater part of their value (>50%) from the above assets
5. Assets situated in Ireland which were used for the purposes of a trade carried on in Ireland through a branch or agency
6. Certain assets of overseas life assurance companies.

Capital gains are taxed at a rate of 33%.

Companies are subject to corporation tax at 12.5% on profits derived from a trade in Ireland (or 15% where Pillar Two applies).  Passive income and income from an “excepted trade” (e.g., some property related activity) is taxed at 25%.  Rental income arising to a non-resident company is taxed at a rate of 25% while other sources of income are taxable at a rate of 20% for a non-resident company not operating through a branch or agency in Ireland.

In each case, relief may be available if the relevant income, profits or gains are already subject to tax in another country, where a relevant double taxation treaty is in force.

An overseas company may also be required to account for VAT in Ireland depending on its activities.  If it has employees who carry out all or part of the duties of their employment in Ireland or it makes payments to directors (wherever resident), there may also be an obligation to deduct income tax, the Universal Social Charge and PRSI (social security contribution) through the PAYE payroll tax system.

Financing a corporate subsidiary

Equity financing

Contributions for shares

Where an equity investment is made into an Irish company with a share capital in exchange for new shares, the amount of the investment is first allocated to the nominal value of each share acquired (which value is governed by the articles of association, for example €1 each) and the excess will be included in the share premium account.

A company’s share capital is made up of the shares that it has issued to its members, whether on, or subsequent to, its incorporation.  The Irish company law allows significant flexibility in the formation of a company, as well as the ability to change the articles of a company at a later date and divide shares into various different classes.

Specific additional rules apply to different forms of body corporate.  For example, public companies are required to have a minimum allotted share capital of €25,000.

Returns to shareholders

Subject to solvency requirements and, in certain cases, the consent of the court, an Irish company limited by shares may reduce its share capital by making payments to shareholders out of capital or by redeeming shares.  A company may also purchase its own shares, provided that (save in limited circumstances) it is able to fund the purchase out of distributable reserves or the proceeds of a fresh issue of shares.

A company limited by shares may only make a distribution to its members (including the declaration of a dividend) out of “distributable reserves.” Generally, distributable reserves are made up of the profits generated or accumulated by that company.

Dividend withholding tax (DWT) at a rate of 25% may apply to the payment of dividends by an Irish company.  However, there are a number of exemptions from DWT.  Payments to certain types of Irish persons are exempt from DWT e.g., group companies, pensions, charities.

Provided the required declaration is in place, there is no requirement to operate DWT on distributions to the following:

1. An individual who is resident in a country with which Ireland has a tax treaty (a Treaty Country) and not resident in Ireland
2. A company resident in a Treaty Country and not under the control of Irish residents
3. A non-resident company which is under the control (directly or indirectly) of persons who are resident in a Treaty Country and which is not under the control of Irish residents
4. Certain listed companies or companies which form part of a listed group

Finance Act (No.2) 2023 introduced certain exceptions to the exemptions from DWT where the distribution is made to an associated entity who is resident, or situated, in certain territories. This is coupled with the disapplication of exclusions from the charge to income tax for the non-Irish resident associated entity who receives the distribution. The territories within the scope of the measures are those included in Annex I of the EU list of non-cooperative jurisdictions for tax purposes and ‘no-tax’ and ‘zero-tax’ territories (referred to as "specified territories"). The measures will not apply in specific circumstances where double non-taxation should not occur.

Debt financing

Withholding tax implications

Payments of “yearly” interest with an Irish source may be subject to withholding tax at a rate of 20%.  A payment of interest which is not capable of lasting more than one year is not “yearly” interest and is not subject to withholding tax.  A payment of interest by an individual is only within the scope of withholding tax if the recipient is resident outside Ireland.

Ireland has a number of exemptions under domestic law, including the following:

1. Interest paid to or by a bank carrying on business in Ireland
2. Interest paid to Irish investment undertakings (regulated funds) and other finance companies that make loans but are not licensed banks
3. Interest paid by a company to a company resident in another EU Member State or in a country with which Ireland has signed a tax treaty where certain conditions are satisfied
4. Interest paid to a US corporation that is subject to tax in the US on its worldwide income
5. Interest paid to a US LLC provided that investors in the LLC themselves satisfy the conditions for an exemption
6. Quoted Eurobond exemption for payments of interest on listed securities and
7. Interest paid by a Section 110 company to a person resident in the EU or a treaty country.

In addition, in cases where a domestic law exemption is not available, the rate of withholding on interest payable to a non-resident lender may also be reduced or eliminated under an applicable double taxation treaty. In certain circumstances, deductible interest payments made to associated companies in "specified territories" may not benefit from an exemption.

There is no withholding in Ireland on the repayment of the principal amount of a loan.

Corporate interest restrictions

Ireland has various rules which determine the ability of a company to take a tax deduction.

There is no general ability to claim a deduction for interest payments.  However, a deduction is available for arm’s length interest which is paid “wholly and exclusively” for the purpose of a company’s trade.  A deduction may also be available for interest used to buy shares in a trading company, or onward lend to another company for it to buy such shares.  These general rules have been supplemented by an interest limitation rule (ILR) and anti-hybrid rules.

The ILR was introduced to comply with the EU’s Anti-Tax Avoidance Directive (ATAD).

The ILR applies to accounting periods commencing on or after January 1, 2022 and operates alongside existing rules that restrict the deductibility of interest expenses.

The maximum corporation tax deduction available for net borrowing/interest costs is limited to 30% of tax-adjusted earnings before tax and before deductions for net interest expense, depreciation, and amortization (EBITDA), subject to some exceptions.  While the default rate of the fixed ratio is set at 30%, there is an ability for a taxpayer to elect to deduct an amount in excess of 30% of tax-adjusted EBITDA under the 'group ratio' rule in certain circumstances.

There is an exemption where a taxpayer’s net borrowing costs do not exceed 3 million euros (EUR).  This EUR 3 million de minimis threshold applies to the 'interest group' as a whole.

There is also an equity-escape carve-out from the ILR.  If the ratio of equity to total assets of the interest group is no lower than two percentage points below the worldwide group’s ratio of equity to total assets, then the equity ratio rule applies, and no interest restriction should arise.

Other rules may apply to limit deductibility in certain cases e.g., profit dependent interest is not deductible unless the paying company is a “Section 110” company.  Payments of interest to group companies may also be restricted in certain cases.

Ireland has also introduced anti-hybrid rules as required under the EU’s Anti-Tax Avoidance Directives (ATAD 1 and 2).

Stamp duty

Ireland does not impose a stamp tax in respect of debt financing but an assignment of a debt could be subject to stamp duty in certain circumstances. There is generally no stamp duty on a share subscription but a rate of 1% applies to share transfers, subject to certain exemptions.

Corporate income tax

Rate of corporation tax

There are three rates of tax on corporate profits in Ireland.  A rate of 12.5% applies to the trading income of a company and a rate of 25% applies to non-trading income and income of an “excepted trade” e.g., mining activities and certain land dealing.  A rate of 33% applies to capital gains. A minimum rate of 15% applies to groups within the scope of the Pillar Two rules.

Income of non-resident landlords

Non-Irish companies in receipt of Irish rental income are subject to corporation tax at a rate of 20%.

New rules which came into effect from July 1, 2023 provide that collection agents who act for a non-resident landlord may deduct the withholding tax.  Landlords are now responsible for filing the required tax return (previously a collection agent may have been responsible for the filing).

Capital gains

An Irish resident company is subject to corporation tax on capital gains at a rate of 33% on its worldwide gains (with exceptions such as where the participation exemption for the sale of certain shareholdings applies).  A non-Irish resident company is also subject to tax on capital gains arising from the disposal of assets held for the purposes of an Irish trade and on the disposal of “specified assets” as outlined above.

A participation exemption is available to Irish resident companies on the disposal of a shares where the company holds an interest of 5% or more for 12 months and the company whose shares are sold is resident in an EU Member State (including Ireland) or a country with which Ireland has signed a tax treaty. The exemption applies where: (i) the business of the company whose shares are disposed of consists wholly or mainly of the carrying on of one or more trades or (ii) taken together, the businesses of the Irish holding company and all companies in which it has a direct or indirect 5% or more ownership interest consist wholly or mainly of the carrying on of one or more trades.

Computation of taxable income

Taxable base

The taxable base depends on the source of the income and on whether the entity is subject to corporation tax or income tax in respect of the income.

In the case of a company that carries on a trade, its taxable trading profits will be based in the first instance on its accounting profits—provided that its accounts are computed in accordance with Irish generally accepted accounting principles (GAAP) or international Financial Reporting Standards (IFRS)—as adjusted for tax purposes.  For example, it will be necessary to adjust the accounting profit or loss to exclude receipts and expenses of a capital nature, and to exclude expenditure that is not wholly and exclusively incurred for the purposes of the trade.

Companies deriving investment income from passive sources will generally be subject to corporation tax or income tax on the gross amount of the income, although a company within the corporation tax regime carrying on an investment business may be entitled to a deduction for the expenses of managing its investments, provided that the expenses are revenue in nature.

Chargeable gains

Broadly, chargeable gains are calculated by deducting the acquisition cost, any enhancement expenditure incurred in respect of the assets and any costs of acquisition and disposal from the proceeds of disposal.  Generally, capital losses arising on the disposal of an asset must be offset against gains arising in the same taxable period or carried forward and offset against gains arising in future periods.

Corporate income tax reporting

Companies are subject to a self-assessment regime in Ireland and must notify Revenue when they first come within the charge to Irish tax.

A company within the charge to corporation tax is required to report by reference to accounting periods, which will generally be aligned with the company’s own period of account, provided that such period does not exceed 12 months.  The company must file its tax return within 9 months after the end of the accounting period to which it relates.

The tax year in Ireland is the calendar year.

Cross-border payments

Transfer pricing

Ireland’s transfer pricing regime largely conforms to OECD principles and generally seeks to prevent connected parties obtaining an Irish tax advantage by entering into transactions on the basis of non-arm’s length pricing.  Under the applicable rules, it may be necessary for companies to make a transfer pricing adjustment in respect of a transaction that is not made on arm’s length terms.  Taxpayers must maintain contemporaneous documentation in respect of transactions subject to the transfer pricing rules.

An exemption from the transfer pricing rules applies to companies that are classified as small or medium-sized entities under European guidelines (entities with fewer than 250 employees and either a turnover of less than €50 million or an annual balance sheet value of less than €43 million).  Legislation to abolish this exemption has been legislated for but not enacted.

Withholding tax on passive income

Payments made by a resident of Ireland to a non-resident in respect of certain types of interest payments, patent royalties, dividends and certain “annual payments” may be subject to Irish tax withholding.  However, there are broad exemptions under domestic law and Ireland’s treaty network as outlined above.

International tax reform

On October 8, 2021, Ireland along with 135 other countries, committed to a two-pillar plan for international corporate tax reform that supports the OECD Inclusive Framework’s “Tax Challenges Arising from Digitalisation” project.

The Pillar Two rules came into effect in Ireland for fiscal years commencing on, or after,  December 31 2023 following the implementation of the EU's Minimum Tax Directive. The Minimum Tax Directive provides for an EU wide implementation of Pillar Two of the OECD's Two Pillar solution. The Pillar Two rules include an Income Inclusion Rule (IIR) and an Undertaxed Profits Rule (UTPR). The Pillar Two rules provide that income of in scope groups (those with consolidated group revenues of €750 million or more in at least two of the four preceding fiscal years) is taxed at a minimum effective tax rate of 15% on a jurisdictional basis. Ireland has introduced a domestic top-up tax to collect any top-up tax due from Irish entities before the application of the IIR or UTPR top-up tax liability.  It is creditable against any IIR or UTPR top-up tax liability.

Ireland has retained its 12.5% rate of tax for those groups which are below the threshold revenues of €750 million in the Directive.

Payroll taxes

Employment tax

Employees (including, for these purposes, directors and other officeholders) are subject to Irish income tax and universal social charge (USC) in relation to their employment income and benefits.  Individuals have a tax-free personal allowance, with all income above this amount being taxable.  The rates of income tax are progressive, with different rates applying depending on how much annual income falls into different bands.  Employers are responsible for deducting amounts of income tax from the sums paid to employees and paying them to Revenue under the pay as you earn (PAYE) regime.

The Special Assignee Relief Programme (SARP) provides an income tax relief for certain temporary assignees into Ireland.  Where the conditions are satisfied, SARP provides an exemption from income tax for 30% of a qualifying individual’s employment earnings between €100,000 and €1,000,000.  The relief does not cover social security contributions or the universal social charge.

Employment insurance

In addition to income tax, employees (including directors and other officeholders) and their employers are liable to pay related social insurance (PRSI) based on the employees’ employment income.  The contributions are made up of a deduction from the employee’s pay, and an amount paid by their employer.  The employer is responsible for withholding the employee PRSI.  The standard rate of Employer PRSI is currently 11.05%, while the standard rate of employee PRSI is 4%.

From October 1, 2024, the rate of PRSI (employer and employee) will increase by 0.1%.

Indirect taxes

Value-added tax (VAT)

Value added tax (VAT) is imposed on the final consumption of most goods and services supplied in Ireland.  Specific rules with respect to the place of supply exist to determine whether a supply is deemed to be made in Ireland.

The current VAT rate is 23%, with a 13.5% rate for certain prescribed supplies (e.g., energy for domestic use).  In addition, certain “zero-rated” supplies are subject to VAT at the rate of 0% (e.g., exported goods and services) or are exempt from VAT (e.g., health care services, educational services and most financial services).

Since the burden of VAT is intended to fall on the final consumer of the relevant goods or services, businesses engaged in making only supplies of goods or services that are subject to VAT will generally be entitled to recover their VAT costs in full.

Stamp duty

Stamp duty may apply to documents which effect the transfer of certain assets such as shares, land and other forms of assets.  The current rate is 7.5% for non-residential property and 1% for the first €1m of residential property with the balance charged at 2%. A rate of 1% generally applies to the transfer of shares.