Setting up business in Ireland

iapa-conference-london-june-2012_150pxThis presentation was given by Tom Kean, BKRM Ireland at the conference of IAPA International Association of Professional Advisers on 26 April 2012 in The Hilton Metropolitan Hotel, London.

  • Use Ireland as your business’ springboard to Europe and the USA
  • Ireland is ranked as the number 1 country for business in Europe (Forbes 2011)
  • Ireland has the youngest workforce in Europe, 30% of the workforce are less than 25 years old
  • EEA employees do not require work permits or a visa to work in Ireland
  • Ireland is an English speaking country within the Euro zone
  • Daily direct flights to the USA & Middle East
  • There is free movement of goods within the EU
  • Ireland has 65 tax treaties and there are an additional 7 treaties under negotiation
  • Ireland has excellent tax treaties with China & Korea
  • A company can usually be incorporated in Ireland within 5 business days

Tax advantages of setting up business in Ireland

Corporation Tax Rate

  • 12.5% corporation tax rate, it’s one of the most favourable rates globally
  • 3rd lowest total tax rate in the EU
  • The low tax rate can maximise high rate of return on investment
  • A potential 3 year exemption from corporation tax for start-up companies incorporated after 14 October 2008

Stamp Duty

  • Stamp Duty rates have been substantially reduced in Ireland, the current stamp duty rates are;
    • o 1% for residential property
    • o 2% for non-residential property

Research & Development (R&D) Incentives

  • R&D expenditure is included in expenses when calculating taxable profits
  • A further 25% tax credit for qualifying R&D expenditure
  • Qualifying R&D expenditure includes expenditure incurred with the EEA, provided the expenditure has qualified for relief elsewhere
  • The higher of 5% or €100,000 of the R&D expenditure can be outsourced to European Universities
  • Furthermore, the higher of 10% or €100,000 R&D expenditure can be sub-contracted to other unconnected parties
  • Buildings used for qualifying R&D purposes are eligible for a building capital allowance
  • It is possible to secure a repayment of the excess R&D tax credit over a 3-year cycle, subject to certain criteria
  • The company can elect to surrender part of the R&D tax credit to key employees

Intellectual Property (IP) Tax Regime

  • Ireland offers various IP structuring opportunities
  • Amortisation of qualifying IP acquisition costs. The capital expenditure can be written off over its expected useful life or the company can elect to write off the capital expenditure over 15 years. If the IP was held for 10 years, there is no balancing charge on disposal
  • The revenue expenditure relating to the IP is allowed as an expense in the profit and loss account however this expenditure may also qualify for an R&D tax credit
  • Deduction allowed for licensed-in IP rights
  • The IP tax regime applies to:
    • Patents
    • Copyright
    • Registered designs
    • Design rights or inventions
    • Trademarks
    • Trade Names
    • Brands
    • Brand Name
    • Service mark or publishing title
    • Know-how
    • Certain software
    • Costs associated with applications for certain legal protection

Attractive to Holding Companies

  • Tax exemption for domestic and foreign gains of qualifying shareholdings (EU & treaty countries)
  • Tax exemption for Irish dividends
  • Similar relief for foreign dividends
  • No withholding tax on dividends paid to treaty countries under domestic law
  • Double taxation relief for tax suffered on foreign branch profits and pooling provisions for unused credits
  • Ireland can be an attractive location for the holding company of IP rights by multinational groups. If the activities constitute a trade, the profits would be taxed at the corporation tax rate of 12.5%. There may also be a possible opportunity to claim IP capital allowances on capital expenditure.

Special Assignment Relief Programme (SARP)

  • Income tax relief may apply to foreign employees coming to work in Ireland
  • The employment income liable to Irish tax is the greater of
    • Total employment earnings and benefits received in, or remitted to Ireland or
    • the first €100,000 plus 50% of earnings and benefits in excess of €100,000
  • Encourages key overseas talent to work in Ireland
  • Employee must become tax resident in Ireland and exercise the employment in Ireland for at least 1 year
  • Employee must continue to be paid by the overseas employer
  • Relief is available by repayment after the end of the tax year

Other advantages of setting up in Ireland

The Start-up Entrepreneur Programme

  • Participants can be given residency in this State for the purposes of developing their business. Immediate family may join the participant providing they can be fully maintained.
  • The residency permit is initially issued for a 2-year period. At the end of the period, each case is reviewed and the progress of the business is evaluated.
  • The entrepreneur programme is aimed at individuals with a good business idea in the innovation economy and funding of €75k.
  • The programme focuses on high potential start-ups.
  • The State agencies will play a key role in evaluating the suitability of proposed business proposals for the programme.

Immigrant investor programme

  • Participants and their immediate family will be granted rights of residence in Ireland
  • The residency permit is initially issued for a 5-year period. At the end of year 2, a review is carried out to ensure that the investor is compliant. After the 5-year period the investor can apply for ongoing residence in 5-year tranches.
  • The intention is that the investor would establish a permanent relationship with Ireland
  • The investment must be:
    • Owned by the investor (not borrowed)
    • Obtained legally by the investor
    • Good for Ireland
    • Good for jobs
    • In the public interest
  • The investor must make an investment of one of the following type:
    • A once off endowment of a minimum of €500,000 to a public project benefiting the arts, sports, health, culture or education.
    • A minimum €1,000,000 aggregate investment into new or existing Irish businesses for a minimum of three years
    • A minimum €2,000,000 investment in a special low interest 5 year immigrant investor bond
    • A minimum €1,000,000 mixed investment consisting of €500k in property and €500k in immigrant investor bonds

Authors: Tom Keane and Deidre Byrne; BKRM Ireland (www.bkrm.ie)


EU: VAT-news

Czech Republic – Proposal to bring single 19% VAT rate from 2012 defeated

Proposal from Czech Finance Minister, Miroslav Kalousek, to bring in a single 19% higher VAT rate from start 2012 has been defeated. The proposal to rush in a higher rate of VAT than under a previously agreed timetable was challenged by junior member of the coalition. Under the existing timetable, two rates of higher VAT at 20 percent and 14 would be introduced next year with a single 17.5 percent rate coming in 2013. Kalousek had been proposing a single 19% higher rate to come in from start of 2012.

France – New 2011 taxation rules for conference and event organisers in France

On the 28 March 2011 the French Tax Authorities published an official guideline on the new VAT place of supply rules for event related services
This guideline is clarifying the impact of the VAT changes that were introduced by the Directive 2008/8/EC dated 12 February 2008 and came into force on the 1st January 2011, and deals in particular with services supplied in connection with conferences, congresses, trade fairs, etc. The information in this administrative guidance can be very useful for taxable persons who are either attending, or organising events in France. It brings some level of response to the uncertainty created by the new EU VAT taxation rules in this area, and also sheds some light on the implementation of those rules in France by featuring specific examples and solutions for various situations.

The information in this guideline is focusing the following items:

  • VAT place of supply rules for services in respect of admission to an event
  • VAT place of supply rules for event organisation services
  • VAT place of supply rules for rental of exhibition space
  • VAT place of supply rules for a complex package of services supplied within the frame of an event

However this guideline is also dealing with other questions such as VAT taxation rules for services rendered by Professional Congress Organisers („PCO“) or the VAT place of supply rules for training services.

Greece – VAT rate on food and drinks supplied for immediate consumption to increase from 1 September 2011

The VAT rate applicable to non-alcoholic beverages and to the supply of food for immediate consumption in restaurants, as well as on some connected services is to increase from 13% to 23% (16% in the Agean Islands) from the 1st of September 2011.

This change will not affect food and beverages supplied in canteens used by medical, educational or social welfare organisations. Also, this change will not affect food intended for mass consumption that are ready to eat and are sold in packages in the restaurant/take-away.

Hungary – Hungary’s VAT regulatory practices not compliant with EU VAT Directive

The European Court of Justice found that Hungary’s practices are incompatible with EU law and need to be modified. The current situation allows taxable persons to deduct the input VAT of their acquisitions from the amount of VAT payable. If the amount that is deductible is greater than the VAT payable the excess can then be reclaimed, except where the taxpayer has not paid the consideration.

This means that for certain taxpayers the opportunity to reclaim VAT is postponed for several tax periods, this was considered by the ECJ in its decision on 28th July 2011 to be  contrary to the EU VAT Directive.

Ireland – Introduction of a new reduced VAT rate of 9%

The Minister for Finance has announced that a second reduced VAT rate of 9% will be introduced in respect of certain goods and services (mainly related to tourism) for the period 1 July 2011 to 31 December 2013 under the “Jobs Initiative 2011”. The new VAT rate is effective from the 1st of July 2011.

Ireland – Update on the deduction rules for Car related expenses

The information used to prepare this update is contained in the VAT Leaflets published on the Irish Revenue website: http://www.revenue.ie/en/tax/vat/index.html

1. Purchase of cars

The purchase of a car in Ireland is subject to Irish VAT. VAT incurred on this purchase is usually not deductible. However, a VAT registered trader may deduct VAT if the car is used 100 % for business and if it belongs to category B or C, i.e. commercial vehicles.

There is an exception to this rule, Motor dealers and driving schools may recover VAT incurred on the purchase of a wider range of vehicles.
From the first January 2009 a trader can also recover some of the VAT incurred in relation to the purchase of category A vehicles, i.e. saloons, estates, hatchbacks, convertibles, etc. However there are conditions;

  • Vehicles must have been registered on or after the 1st Jan 2009
  • CO2 emissions must be less than 156g / km (Co2 emission bands A, B or C)
  • At least 60% of the vehicle’s use must be for business
  • The car must be used for business purpose for at least 2 years

Where those conditions are fulfilled it is possible to recover up to 20% of the VAT paid.

2. Hire and leasing of cars

VAT is recoverable on the hire and leasing of cars under the same conditions than above, i.e. full deduction of VAT may be possible if the car is category B or C and 100% used for business purposes and up to 20% deduction is possible for cars belonging to category A where the conditions described above are fulfilled.

3. Repairs and servicing of cars

VAT is recoverable on repair and servicing of cars under the same conditions than above, i.e. full deduction of VAT may be possible if the car is category B or C and 100% used for business purposes and up to 20% deduction is possible for cars belonging to category A where the conditions described above are fulfilled.

4. Petrol and diesel

VAT registered traders are not entitled to recover VAT incurred on the purchase of petrol.

VAT is fully recoverable on diesel by VAT registered traders if the vehicle is used 100% for business.

5. Toll bridges and car parking

VAT registered traders are entitled to deduct VAT incurred on toll bridges and “off-street” car parking. VAT should be fully recoverable by VAT registered traders if the vehicle is used 100% for business. VAT on “on-street” car parking is exempt.

The Irish revenue has created categories of vehicles ; A, B, C, D, M, M1, M2 etc. only commercial vehicles in categories B and C open right to VAT deduction, Category A is for vehicles such as estates, saloons, convertibles, etc., that are not designed as commercial vehicles.

United Kingdom – HMRC will target businesses who have not registered to pay VAT

HMRC has launched a campaign to target businesses that are trading above the VAT registration threshold (73,000 GBP) but are not registered for VAT.

Under the terms of the VAT Initiative, those who have not registered to pay VAT can come forward any time up to 30 September to tell HMRC that they want to take part. If they make a full disclosure, most face a low penalty rate of 10 per cent on VAT that has been paid late. After 30 September, using information pulled together from different sources, HMRC will investigate those who have failed to come forward. Substantial penalties or even criminal prosecution could follow. HMRC uses new technology and legislation to gather and analyse data, from internal and external sources, to identify people who should come forward.

United Kingdom – Businesses call for VAT cut

Fears that the UK economy has flatlined in the nine months since October have led to the Federation of Small Businesses (FSB) to call for yet another VAT rate change urging the government to drop VAT to 5% in certain sectors. While this approach has been adopted in other jurisdictions such as France, Germany and most recently Ireland there is little evidence of a positive impact and in some cases questions over whether these reductions were being passed on to end consumers at all.

United Kingdom – HMRC continue to move VAT on-line – Consultation Document Released

HMRC has just released a consultation document covering the changes to the operation of VAT and moving of more transactions on-line. HMRC proposes that from 1st of April 2012, for businesses with a turnover below £100,000, it will be compulsory to file VAT returns on-line and make electronic payment of any VAT due. On-line filing is currently optional for these smaller businesses, however, all new businesses that registered for VAT since 1 April 2010 and larger businesses, with a turnover of £100,000 or more are obliged to file and make VAT payments on-line.

Author: Tamás Bajor, Vienna Consult Kft., www.viennaconsult.hu


The first post

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