Irish Holding Company | Tax
Irish Incorporations Ltd.
leading company administration service provider in Ireland. We can
assist clients with the establishment of International
Holding Companies by utilising Ireland's favourable tax treatment of
Holding Companies. In particular Irish Holding Companies confer capital
gains participation exemption, generous foreign tax credit system,
comprehensive double tax
treaty network, lack of CFC and thin capitalisation. Recent amendments
in the Finance Act 2010 (the "Act") can be seen as continuing evidence
of the Irish
government's commitment to attracting holding companies to Ireland. The
key tax issues to consider when establishing an Irish holding company
are highlighted below.
of Irish Holding Company.
company incorporated in Ireland must take one of the forms provided for
by Irish corporate law. The most commonly used structure for a holding
company is a private limited liability company or a private unlimited
liability company. There are no minimum equity requirements for an
Irish private company. In accordance with Irish corporate law financial
statements must be prepared and filed on an annual basis with the Irish
Companies Registration Office.
Treatment of Holding Companies
- Incorporation of holding company.
- Taxation of
Irish holding companies.
- Disposition of shares in an Irish holding
- Ceasing operations in Ireland.
- Tax treaty network.
Ireland has an extremely favourable corporation tax rate
of 12.5% on
trading profits which is one of the lowest in the EU and EFFA
countries. Passive income earned by a company is taxed at a rate of 25%
and capital gains not qualifying for any relief or exemption are taxed
Gains Tax Participation
Exemption on Disposal of Shares
A disposal of shares in
subsidiary company by an
Irish holding company will be exempt of Irish capital gains tax
provided the following conditions are met.
The holding company
must have held
at least 5% of the
share capital (including the rights to profits and assets on a winding
up) for a continuous 12 month period and the disposal must take place
during or within 2 years after the date of meeting the aforementioned
holding requirement. Therefore if a disposal is made which brings the
shareholding below 5% the remaining shareholding will still qualify for
the participation exemption provided the remaining shares are disposed
of within2 years.
The shares being
disposed of must be
of a company tax
resident in a
country with which Ireland has concluded a double tax treaty or in a
country with which Ireland has signed but not yet ratified a double tax
treaty or in a country resident in an EU Member State.
At the time of
disposal, the shares
being disposed of
must be of a
company whose business consists wholly or mainly of the carrying on of
a trade or trades, or if taken together, the businesses of the holding
company and that of the companies in which it has a direct or indirect
5% or more holding, consist wholly or mainly of the carrying on of one
or more trades.
The investee company
be resident for tax purposes in Ireland, in another EU Member State or
in a country with which Ireland has a tax treaty.
of dividend income
Dividends paid by a
located in the EU
or by a company resident in a country with which Ireland has concluded
a double tax treaty or signed but not yet ratified a double tax treaty
("Qualifying Companies") to an Irish company may be liable to Irish tax
in the following manner:
Dividends paid out of
profits" will be
chargeable to corporation tax at the rate of 12.5% (as opposed to 25%).
In the majority of cases the application of the 12.5% rate of
corporation tax and double tax relief should ensure that no further
Irish tax arises on such dividends. The 12.5% rate will also apply
where the dividend is paid out of dividends received by the foreign
company from the trading profits of its subsidiaries. If only part of
the dividend is derived from "trading profits" then the requisite part
of the dividend will be liable to tax at 12.5% with the balance taxable
at 25%. Where 75% or more of the profits of the dividend paying company
are trading profits of that company or dividends received by it out of
trading profits of lower tier companies that are Qualifying Companies
and their trading assets constitute more than 75% of the aggregate
value of all of their assets all of the dividend will be subject to tax
at the 12.5% rate (even though a percentage of the dividends is not
derived from trading profits). "Portfolio Dividends" (i.e. dividends
arising on holdings of 5% or less) will also be taxed at the 12.5% rate
provided the portfolio dividend is received from a Qualifying Company.
Dividends received from other Irish tax resident companies are
generally exempt from tax.
of dividends from
Withholding tax of 20%
be applied in
respect of dividends paid and other profit distributions made by
companies resident in Ireland. The obligation to withhold tax is placed
on the company making the distribution. Exemption from dividend
withholding tax is available to non-resident shareholders in the
Under domestic law,
dividend is paid to
recipients resident in the EU or in a country with which Ireland has
concluded a double tax treaty or in a country which Ireland has signed
but not yet ratified a double tax treaty ("Qualifying Country");under
domestic law, where the dividend is paid to a
resident in a Qualifying Country and which is not controlled (more than
50%) by Irish residents;under domestic law, where the dividend is paid
company that is
under the ultimate control of persons resident in a Qualifying Country;
Under domestic law,
dividend is paid to a
company, the principal class of whose shares is listed and regularly
traded on a recognised stock exchange in a treaty country or another
Member State, or on another stock exchange approved by the Minister for
Finance. This exemption also applies where the recipient of the
dividend is a 75% or more subsidiary of such a listed entity;
where the dividend is paid to
non-resident company that is wholly owned (directly or indirectly) by
more companies, the principal class of each which is listed (and
traded) on a recognised stock exchange approved by the Minister for
and in accordance with the EU Parent-Subsidiary directive, where the
is paid by a subsidiary company to its EU parent.