Setting Up a Limited Company In Ireland

Ireland’s low rate of corporation tax, i.e. 12.5%, holding company regime, research and

development tax credit combined with many other tax incentives, makes it a very popular choice for inward investment. These factors, together with a highly skilled and motivated workforce, have resulted in almost 1,000 overseas companies choosing to invest in Ireland as their European base.

Creation of a Company by Limited Shares

·         A unique company name. You can check if your name is already taken on the CRO website. A company name which sounds similar to or could be mistaken for another name already on the register will normally be rejected.

·         At least one shareholder.

·         At least two directors. (One of whom has to be resident in a EEA country)

·         A company secretary. This can be one of the directors.

·         A registered office. This is the address that CRO post and official legal notices will be sent to. This can be your accountant’s or solicitor’s address if required.

·         Memorandum and Articles of the company. These set out the rules and regulations surrounding the company.

Criteria to Obtain 12.5% Corporation Tax Rate

There are currently two Corporation Tax rates in Ireland. 12.5% for trading income and 25% for passive and foreign income. The 12.5% tax rate is not an automatic entitlement. An Irish resident company which does not have a business in Ireland is taxed as if all its income is foreign income and hence the rate applicable is 25%.

In order for the company to be deemed Irish tax resident it must be controlled from Ireland (the company’s central management). The place of incorporation has little bearing on the determination of the residence of a company. 

Factors to be taken into account in establishing where the company's central management and control lie include, for example, where the important questions of company policy are determined, where the majority of directors reside, where board meetings are held, where the books and records are located, where the negotiation of major contracts is undertaken and where the company's head office is located.
 

It is therefore essential to ensure that a company has a real presence in Ireland to ensure it can avail of the 12.5% rate.  As the 12.5% corporation tax rate is one of the most popular reasons for setting up a company in Ireland, it is very important to be aware that a company is not automatically entitled to pay the 12.5% corporation tax just because it has been incorporated in Ireland. The 12.5% corporation tax rate is only available to trading companies which are deemed to be "managed and controlled" within Ireland.

This is an extremely important point to be aware of and Donnelly Spire can put you in contact with an expert tax advisor. If your main reason for setting up in Ireland is to avail of the 12.5% corporation rate, there is no point in simply setting up a company without also being aware of, and addressing, the "management and control" issues. This is a common pitfall made by people who do not do sufficient research.  Donnelly Spire’s experienced and qualified tax advisors will ensure that this issue is dealt with before setting up the company. If you set up an Irish company but you do not meet the "management and control" requirements, you will pay 25% corporation tax and not the much lower 12.5% rate.

In order for a company to be eligible for the 12.5% corporation tax rate it must be considered Irish resident. The term 'residence' was not, until recently, defined in law. The general rule was that companies, whose 'central management and control' was exercised in the State, were treated as resident here. This rule or test emerged as a result of judicial decisions set down in case law.

Factors to be taken into account in establishing where the company's central management and control lie include:

• Where meetings of the Board of Directors are held;

• Where the majority of the directors reside;

• Where the company's head office is located.

Other areas to consider in deciding if the company can avail of the 12.5% rate are:

• The company engages Irish based employees to carry out the work of the company

• The activities of the company in Ireland add value

• The company has a premises from which it operates in Ireland

Due to the above, it is highly recommended that an Irish resident director and an Irish registered office be provided to any company wishing to avail of the 12.5% corporation tax rate.

Approx. Costs

Cost €

Formation of Irish Private Limited Company

500.00

A number of other costs need to be taken into consideration, if a company needs the provision of a Registered Office Address, the cost is around000 +plus VAT.  However please note that the tax advisor would need to advice you on whether that makes your company eligible for 12.5% corporation tax.

Insurance Policy Bond for Non-Resident Directors

There are a number of other costs such as company formation, VAT & TAX registration including Corporate Tax and registration of directors (approx. €500). Other costs may include company secretarial costs depending on how the company is formed.