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)


Scientific Co-operation in International Tax Law

Tax law is a field of scientific research. And there are co-operations of universities from different countries. On 4 March 2011 the second Joint Seminar of the following universities will take place in Hamburg :

  • University of Hamburg (Course of studies: Master of International Taxation)
  • Universita die Roma Sapienza (Course of studies: Master in Pianificazione Tributaria Internazionale)
  • Guardia di Finanza – Corso Superiore die Polizia Tributaria

The seminar will cover the following topics:

  • Transparancy and Exchange of Information with “Tax havens”
    • The legal Framework for Exchange of Information
    • Domestic Measures against the improper use of tax havens
  • The Domestic Legislation against Tax Havens
    • Constitutional , EU and International Framework of Mutual Assistance in Tax Matters
    • The Single Instruments (New Rules and Critical Issues)

Co-ordinators are the professors Gerrit Frotscher and Pietro Selicato.

Speakers from the IAPA are involved and will cover the following topic:

Domestic Measures against the improper use of tax havens


Doing business in Poland: Taxation

The system of taxation in Poland is similar to other EU countries.
There are three main taxes: value added tax, corporate income tax, personal income tax.

Value added tax

The basic rate is 22% (an increase to 23% is planned in 2011). The regulations are based on EU directives, so main principles are similar to those existing in other EU countries. Generally the tax shall be transparent for entrepreneurs, but there are some limitations in deduction of VAT paid – personal cars (partial deduction up to 60%, no more than 6,000 PLN is allowed), fuel used to power them, hotels, and restaurants.

Corporate income tax

The basic rate of the tax is 19%. It is the only income tax related to the economic activity. It is payable to the state budget. It is shared with local authorities based on other regulations. Poland implemented regulations that eliminate double taxation in case of dividend payments from one company to the other one – when certain conditions have been fulfilled the revenues from dividends are free from income tax.

Personal income tax

The basic rates are 18/32%. Personal income tax is applicable also for individuals running economic activity as sole entrepreneurs or partners of partnerships. They have got an additional possibility to pay flat 19% rate tax, similarly to bigger companies.

The income tax rate on interests and capital gains is 19%.

Other taxes and charges

There is a number of other taxes that may be applicable depending on the activity of the entrepreneur – the most important are excise duty, real estate tax, transportation means tax, civil law transaction tax as well as social security contribution, charges on using the environment, recycling of electronic and electric products, contribution for the fund of supporting disabled people and others.

It is always worth  considering  consultancy with a tax advisor to review the taxes and charges that may be applicable and how to pay them in the best way.

Author: Tomasz Wikliński, THOMAS sp. z o.o., www.thomas.pl


Doing business in Switzerland: What’s so special on a Swiss Holding-Company?

Some people must have asked themselves, what’s so special about a Swiss Holding Company compared to an EU-Holding-company. However it’s a fact, that the Swiss holdings are criticised and flacked by the politicians and tax authorities of foreign countries – even though most of the people do not know why – except that it is a “Swiss Holding Company” and there must be something wrong with it.

First we need to know, that Swiss taxes are divided in different tax-authorities that raise taxes: federal taxes, cantonal and communal taxes. The tax-rate for federal taxes of corporate entities is 8.5%. The regular cantonal and communal taxes vary between 8 and 25%.

Second we need to understand that the Swiss Holding Company does not differentiate between whether it is domestic or foreign-owned and managed. Foreign shareholders are non-privileged towards Swiss owners. Furthermore , the Holding Company exempts – as well as the counterpart in the EU – all dividends from applicable participations from taxation.

 Now what the cantonal and communal taxes additionally exempt from taxation is ”other income” as for example interests, licence-fees or management-fees but only under the condition, that the company has the “holding-privilege” which is tied to the following requirements:

  • 2/3 of the assets of a company have to be in qualifying shareholdings or
  • 2/3 of the income have to come from qualifying shareholdings (dividends)

Then we have to consider, that the tax-exemption of other income is not valid for the federal taxes. This is a consquence of the existing autonomy of the cantons which prohibits Switzerland and the federal taxes to intrude into cantonal matters.

By the way: Dividends from a Swiss corporate entitiy are taxed with 35% source-tax (Verrechnungssteuer) – if the receiver of the dividends is not another corporate entitiy within the EU. In this case the ”notification procedure” is applicable. Of course the source tax can be refunded and/or applied for if there is a double taxation treaty between the two countries involved.

Author: Hugo Schauli, dipl. Wirtschaftsprüfer and Partner der Wirtschafts-Treuhand AG, Basel, Switzerland

hugo.schauli[@]wirtschafts-treuhand[.]ch
www.wirtschafts-treuhand.ch


Hungarian taxation: Business taxation

Corporate Taxation

Introduction

From 1 May 2004, Hungary is a Member State of the European Union. Important features of the Hungarian tax system have been harmonized with EU tax law, including direct taxes, VAT, excise duties, mutual assistance and administrative cooperation.

Companies are subject to corporate income tax, social security contributions, VAT, property tax and excise taxes. Municipal authorities are authorized to levy local taxes, including local business tax and real estate taxes.

Corporate Income Tax

Corporate profits are subject to corporate income tax. The general rate of corporate income tax is 19%. If certain conditions are fulfilled, a rate of 10% is applicable to the part of the taxable base which does not exceed HUF 50 million, while any excess is taxable at the general rate.

Value Added Tax

The standard rate is 25%. A reduced rate of 5% applies to text books and specified medicines, medical materials and supplies. An additional reduced rate of 18% applies to certain basic foodstuff, hotel services and district heating.

Non-residents are taxable in the same manner as residents if they carry out any taxable transactions in Hungary.

EU resident registered taxpayers who are not established in Hungary are entitled to reclaim VAT according to provisions implementing the relevant EU directives.

Non-EU resident registered taxpayers who are not established in Hungary may be entitled, on the basis of reciprocal arrangements, to reclaim the VAT paid on domestic supplies of goods (including the importation of goods) and paid on services used in Hungary for their business activities. Hungary currently has reciprocity agreements with Liechtenstein and Switzerland.

Local taxes

The municipalities are authorized to levy a local business tax at rate of maximum 2% on corporate taxpayers that have their legal seat or permanent establishment within their jurisdiction. This tax is generally levied on the turnover, decreased by the acquisition costs of goods sold, costs of mediated services and material.

Immovable property situated in Hungary may be subject to municipal real estate taxes, including building tax and land tax. The owner is the taxable person. The building tax is HUF 900/m2, while the land tax is HUF 200/m2. These taxes are deductible for corporate income tax purposes.

Payroll tax

Employers’ social security contributions on top of the gross salary are:

  • pension and health insurance contributions at 27%; and
  • vocational training contribution at 1,5%.

The above contributions are deductible for corporate income tax purposes.

Withholding taxes

Dividends paid to (resident and non-resident) corporate shareholders are not subject to withholding tax. Only dividends paid to (resident and non-resident) individual shareholders are subject to withholding tax.

A 30% withholding tax is levied on interest, royalties and certain service fees (including fees for business consulting and advisory, advertising, marketing, etc.) paid to non-resident companies if Hungary does not have an income tax treaty with the country of residence of the recipient.

Transfer tax

Transfer tax is levied on the transfer of ownership (for consideration) of immovable property and rights. The tax is payable by the transferee. The taxable base is the fair market value (generally the sales price), not reduced by debts. The regular rate of the transfer tax is 4%.

Transfer tax is also due on the acquisition of vehicles. The acquisition of shares and other securities for consideration is not subject to transfer tax.

Property tax

A property tax applies to owners of water vehicles, aircrafts and heavy duty passenger cars.

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


The first post

This is the first post from IAPA. In the future there will be blog-like information in this section. Everything around our claim „Audit, Tax and Accounting in Europe. And worldwide.“

You will find posts from Austria, Belgium, the Czech Republic, Denmark, France, Germany, Great Britain, Greece, Hungary, Ireland, Italy, Luxembourg, the Netherlands, Norway, Poland, Portugal, Russia, Spain, Sweden and Switzerland.

The information comes from dozens of Chartered Accountants and Tax Advisers from numerous European IAPA members. Have fun with their posts. Comments are deactivated but, please, feel free to contact any individual author or other member of IAPA for questions or further assistance.