Holding Company in Ireland
International corporations are attracted to Ireland because it is an EU Member State that has one of the lowest corporate Tax Rates within Europe, 12.5%. The regulatory and legal framework is extremely welcoming to Foreign Direct Investment in Ireland.
The majority of overseas companies who are looking to expand their operations utilize the Irish Holding Company in Ireland structure.
A brand new Irish holding company will become the majority shareholder of the current international company, meaning it would hold 51 percent or more of the shares. The international company would then be referred to as a subsidiary corporation.
Eligibility Criteria for Holding Company in Ireland
Six months in the initial phase could be a difficult learning curve, particularly when you aren’t sure what to be expecting. There are deadlines and registrations due in this period, which can put you in the wrong direction in case you don’t meet these deadlines.
8 criteria after your company have been established.
- Check that your company’s setup is correct
- Registration of the beneficial owner
- Create an account with a bank
- Registration of Corporation Tax
- VAT registration
- Annual Returns
Document Required for Holding Company in Ireland
In essence, the requirements needed to establish the Limited Company in Ireland are:
* A company name
* Details of Directors, Company Secretary, and Shareholders
* Information on the authorized and issued capital shares
* Contact details of your registered address and business address
* A valid ID is needed with Evidence of Address.
Procedure for Holding Company in Ireland
Irish holding corporations are registered within the Companies Act in 2014 and registration requires these steps:
- The right to reserve a trading name (at least three names must be suggested to guarantee uniqueness);
- In the process of drafting your Articles of Association and filing them with the Companies Registration Office (CRO);
- Applying for a tax identification number with Revenue Commissioner.
Our Irish company formation experts are available should you choose this kind of structure for your local company.
Tax Structure for Holding Company in Ireland
Typically, Irish companies must pay corporation taxes on income that is:
- 12.5% on the profits from trading income or
- 25% of profits of non-trading profits;
- 25 percent or no withholding tax for dividends
- 20 percent, 33% or zero 10% withholding tax on interest and royalty.
The rates of VAT to which an Irish holding company is subject are:
- 23% of the standard rate;
- 0 percent, 4.8%, 5.5%, 9.5%, and 13.5 percent reduced rates.
VAT registration is required for goods supplied that have a turnover at or above EUR 75,000.
A lower threshold for registration which is EUR 37,500 per year could be used in certain situations.
Advantages of Holding Company in Ireland
The establishment of a holding company in Ireland comes with numerous advantages, including:
1. Minimize risk
The most efficient method to create a holding company in Ireland is by structuring it in such a way that minimizes the risk associated with its subsidiary companies and safeguards assets.
If any of the affiliate companies become insolvent, the creditors will get their compensation only from the subsidiary company, and not from the other subsidiaries or the holding company. If one or more of the subsidiary companies fails the business will continue operating and assets worth a lot of money will be secured.
Additionally, this structure reduces tax liabilities.
2. Property benefits
A Holding Company in Ireland company doesn’t create goods or services but may hold assets that are tangible and intangible, such as intellectual properties such as buildings, land and trading stock, etc.
One of the advantages of having your business premises, or any other property, in a holding company is that you can transfer or sell the trading business, but keep the property following the sale.
There’s also the possibility of a reduction in Stamp Duty Land Tax (SDLT) when you transfer the property to the hands of a holding company.
3. Tax benefits
There could be substantial tax advantages when restructuring your business, as it allows the transfer between cash and tangible assets, as well as intangible assets between various entities, without tax burdens.
If properly structured and with prior approval from HMRC There could be tax efficiency in Corporation Tax, Capital Gains Tax, and Stamp Duty Land Tax.
4. Group efficiencies
A group structure may result in synergies throughout the group, like having a central administrative, finance, and marketing function that runs from the company holding.
The expenses of centralized teams could be charged to the subsidiary for the services used and could help save every company that has an internal team.
5. Security of asset
It is strongly recommended to put your assets, such as property in a holding company to ensure the long-term viability of your company. If your trading business were to liquidate then your assets are protected.
6. Chance to test more risky investment strategies
One of the main functions of the holding firm is that it helps protect its subsidiaries and gives you the chance to test more risky investment options while securing those risks from other aspects of the company.
This gives you greater flexibility to grow and growth of the overall business.
7. Succession Planning
Another advantage of restructuring could provide you with more options for succession planning.
For example, you could wish to transfer the trading business to family members or sell the business however, you can keep the asset or property you own.
8. Business selling
Restructuring is a good idea to consider a sale in the future. It shows you have a plan since you might not wish to sell the entire business and you could choose to sell different components or subsidiaries in a planned manner and at different dates.
A business that is located in Ireland is eligible to apply to pay the 12.5 percent Irish corporation tax. It is due on all its global profits, not only for Irish sources of profits.
A company that is established in Ireland is not automatically classified as a resident corporation if it is owned by shareholders that reside within another EU State or country in in that Ireland has signed a tax treaty.
But, the most important test for fiscal residency lies in an assessment of the the “central management and control” test. This means that a business can be considered to reside in Ireland if the major decision-making regarding its activities and operations is taken in Ireland.
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A residents-owned holding company in Ireland complies with taxation under the Corporation Tax system and the taxation on VAT as well as withholding. It is the Irish company tax structure is regarded as straightforward and comes with low costs for compliance.
In terms of taxation, the most important factors are the absence of controlled international company law and transfer pricing regulations, the absence of rules for capitalization that are thin and the possibility of the deduction of interest from funds borrowed to acquire a certain shareholding as well as an exemption from taxation on capital gains, the taxation rules for dividends paid from abroad as well as the wide tax treaty system.
In the majority of instances, the parent company remains in control either by being the sole shareholder or by establishing subsidiary bylaws. Because the two businesses are distinct, each pays taxes on its income.
A holding company registered in Ireland must use any of the types set out to it in Irish corporate law. The most popular structures are a private limited liability corporation or an unlimited liability private company. There isn’t any required minimum amount of equity required for the formation of an Irish privately owned company.
The major tax advantage of holding companies has to do with the fact that it doesn’t have to file a tax return for each subsidiary. Generally speaking, subsidiaries can give dividends directly to the company holding them without triggering an obligation to pay taxes.
Dividends can be transferred between holding and subsidiary companies without tax consequences. When a corporation owns over 10% of shares of another company and then sells those shares there is typically no tax to be paid on any gains.