Company light - Irland - wer weiss etwas dazu?
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20.02.2005, 21:13
irish light
sprechen sie den speziellen 12,5%-tarif an?
kurzbeschreibung hier:
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Ireland - 12.5% Corporation Tax Regime- A Tax Planning Opportunity
With effect from 1st January 2003, Ireland introduced a standard rate of corporation tax for Irish companies of 12.5% for all trading income. A higher rate of 25% applies to passive income such as interest, dividends and other on non-trading income.
The first question to address therefore is what is a trade?
The specific factors which would give a company trading status and thus qualify for the 12½% rate, can be summarised as follows:
- whether the subject matter (e.g. goods bought) was acquired for sale or investment.
- the length of the period of ownership of the subject matter.
- the frequency and number of transactions.
- supplementary work on or in connection with the development of the business.
- the circumstances giving rise to the transaction.
- the motive behind the transaction.
These factors are largely based on what are referred to as "The Badges of Trade" as set out by the 1956 Royal Commission in the UK, which has persuasive authority in Ireland.
The specific taxation issues that a company with foreign shareholders must address in qualifying for the 12.5% rate of tax can be summarised as follows:
1. that the Company must have sufficient substance in order that the income of the company qualifies as trading income.
2. that the Company is controlled from Ireland.
1. Trading income
In general, trading income is taxed at 12.5% and investment income is taxed at 25%.
To avoid passive income classification, the company must conduct an active business. This could include, amongst other matters, being actively involved in the management and negotiations of contracts, the distribution of the subject matter of the business and the enforcement of its rights.
It is vital to show a physical presence in Ireland where the company would have an office where these management activities would take place.
The effective functioning of a trading company would also require that a suitably skilled employee be available in the country to carry out key management activities. It would be necessary that the Irish company be able to operate on a day-to-day basis without continual recourse to a foreign parent for routine instruction and guidance.
2. Control from Ireland
The 12.5% rate is not available to trades, however actively managed, which are carried on wholly outside of Ireland. However, where a company is managed from Ireland and has a general management role in a trade carried on outside Ireland, it is likely that this would be regarded as an Irish trade to qualify for the 12½% rate. On the other hand, where the board takes no part in the actual management or running of the trading operations this would be considered a foreign trade and profits would be taxed at 25%.
In order to avoid this foreign trade classification it is essential that board meetings where significant decisions and policy are determined are physically held in Ireland.
These board meetings should be well documented to demonstrate that key policy and business decisions are taken at these meetings. Other decisions to be made at a board meeting may include:
- approval of annual budgets and forecasts, business projections.
- approval of the financial statements for the year.
- the appointment of senior staff members and approval of remuneration levels.
It is recommended that three to four board meetings be held in Ireland on an annual basis. In the absence of regular meetings it may be open for tax authorities to argue that decisions relating to the running of the company take place outside of Ireland.
The analysis contained above gives an indication of the issues involved in a company qualifying for the 12.5% rate of corporation tax.
Over the years, with the clear attractions of the lowest rate of corporation tax in the European Union, many of the larger corporations have focused on moving their more mobile (and quite often most profitable) activities to Ireland.
However, once the profit has been made and taxed at this low rate, the next question that could reasonably be asked by its parent company, is how can it repatriate its profits in a tax effective way?
Dividends and Dividend Withholding Tax
Ireland imposes withholding tax at a rate of 20% on outward-bound dividends. However, where the provisions of the EU-Parent Subsidiary Directive are met, this rate of withholding tax is reduced to 0%.
To avail of this 0% rate, the EU Parent company must have held at least 25% of the Irish subsidiary company for a period of at least 2 years. Once these conditions are met, a dividend can be paid by the Irish subsidiary free of dividend withholding tax. The Irish company is not required to furnish declarations in circumstances where it is paying dividends to an EU parent under the provisions of the directive. The Irish company should, however, retain certificates of tax residence of the EU parent company to whom the dividend is paid should the Irish company be required to furnish such certificates by the Irish Revenue Commissioners.
Tax treatment of Dividends in EU parent company
So, having established that dividends can be paid free of any further Irish taxation where the conditions of the EU Parent-Subsidiary directive have been met, the next question to be asked is what the implications are for the recipient of the dividend income?
Set out below is a table detailing the treatment of dividends paid by Irish subsidiaries to a selection of EU jurisdictions to avail of full or partial exemption from taxation of dividends from Ireland:
Jurisdiction Tax treatment of dividend receipt Participation requirement Holding period
Austria 100% Exempt 25% 2 years
Belgium 95% Exempt 10%/ €1.2m 12 months*
Denmark 100% Exempt 20% 12 months
France 95% Exempt 5% 2 years
Germany 95% Exempt 10% N/a
Italy 95% Exempt 25% 12 months
Luxembourg 100% Exempt 10% /€1.2m 12 months
The Netherlands 100% Exempt 5% N/a
Spain 100% Exempt 5% / €6m 12 months
United Kingdom Credit imputation 10% N/a
* A commitment to retain the necessary shareholding will also satisfy the test.
Bearing the above features in mind, a situation can be clearly envisaged where an EU parent company sets up a 100% Irish subsidiary company which would be subject to the 12.5% rate of corporation tax. The EU parent can then receive dividends from the Irish company and be able to receive those dividends with either full exemption from tax on that dividend income, or, at worst, with a 95% exemption from corporation tax on such dividend income as the under-noted simple example indicates.
Example
An Italian company, involved in the hand-tool manufacturing industry, decided to set up an Irish subsidiary in early 1999 following the announcement of the Irish government’s intention to eventually introduce the 12.5% rate from 1 January 2003. The function for which the Irish company was set up was to manage the group’s after-sales service and credit control function for the US and European Market. Formerly, this activity, which was highly profitable, took place entirely from Italy where it was subject to prevailing rates of corporation tax there.
The Italian parent company holds 100% of the shares of the Irish company. The majority of the board of the Irish company are resident in Ireland, from where all day-to-day activities are managed and controlled. The majority of the company’s board meetings also take place in Ireland where all necessary key decisions are taken.
The Irish company engages service providers in Dublin who have sufficient knowledge and experience of the products and industry that, overall, justifies and enables the Irish company to avail of the 12.5% rate of corporation tax in Ireland.
Net profits for the year to 31 December 2003 are projected at €1,000,000 on which it will pay corporation tax of €125,000, leaving €875,000 in reserves. A dividend of €875,000 is declared to the Italian parent company.
Because the provisions of the EU Parent-Subsidiary Directive will be met, the dividend can be declared to the Italian parent, free of dividend withholding tax. Upon receipt of the dividend in Italy, 95% of the dividend, or €831,250 will be entirely exempt from taxation in Italy, leaving the remaining €43,750 subject to Italian taxation of 36%*.
In analysing the overall tax saving the following simple comparison can demonstrate some of the direct tax savings available on a re-location:
OPERATING FROM ITALY
Profits formerly generated in Italy: €1,000,000 per annum
Taxation in Italy: (€360,000)
OPERATING FROM IRELAND
Profits formerly generated in Italy: €1,000,000
Taxation in Ireland: (€125,000.00)
Post Tax profits: €875,000.00
Dividend distribution to Italian parent: €875,000.00
Taxation in Italy
€43,750 x 36%*) (€15,750.00)
From the above, it can be clearly seen that setting up an Irish subsidiary company and availing of the 12.5% rate of corporation tax, to carry out this profitable area of activity within the group, has the effect of reducing the over all tax bill for the group from €360,000 to €140,750.
*Note: For the purpose of this memorandum we refer only to the general corporation tax rate and it does not include local taxes (IRAP) which vary from 4.25% to 8.5%.
CONCLUSIONS
The combination of the lowest rates of corporation tax in the EU coupled with the beneficial tax treatment afforded to dividends paid from Ireland, an Irish subsidiary, provides an attractive opportunity to organisations who have profitable but geographically mobile elements within their business.
Care should be taken to ensure that domestic CFC legislation is addressed on a case-by- case basis. However in the above example, Ireland does not appear on the list of preferential tax regimes or “black list” such as those of The Caribbean or The Channel Islands and this clearly places groups utilising Irish companies, with a sufficient degree of substance to avail of the 12.5% rate of corporation tax, at a significant advantage.
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hope this helps
ffbkdavid
kurzbeschreibung hier:
- - - - - - - - - -
Ireland - 12.5% Corporation Tax Regime- A Tax Planning Opportunity
With effect from 1st January 2003, Ireland introduced a standard rate of corporation tax for Irish companies of 12.5% for all trading income. A higher rate of 25% applies to passive income such as interest, dividends and other on non-trading income.
The first question to address therefore is what is a trade?
The specific factors which would give a company trading status and thus qualify for the 12½% rate, can be summarised as follows:
- whether the subject matter (e.g. goods bought) was acquired for sale or investment.
- the length of the period of ownership of the subject matter.
- the frequency and number of transactions.
- supplementary work on or in connection with the development of the business.
- the circumstances giving rise to the transaction.
- the motive behind the transaction.
These factors are largely based on what are referred to as "The Badges of Trade" as set out by the 1956 Royal Commission in the UK, which has persuasive authority in Ireland.
The specific taxation issues that a company with foreign shareholders must address in qualifying for the 12.5% rate of tax can be summarised as follows:
1. that the Company must have sufficient substance in order that the income of the company qualifies as trading income.
2. that the Company is controlled from Ireland.
1. Trading income
In general, trading income is taxed at 12.5% and investment income is taxed at 25%.
To avoid passive income classification, the company must conduct an active business. This could include, amongst other matters, being actively involved in the management and negotiations of contracts, the distribution of the subject matter of the business and the enforcement of its rights.
It is vital to show a physical presence in Ireland where the company would have an office where these management activities would take place.
The effective functioning of a trading company would also require that a suitably skilled employee be available in the country to carry out key management activities. It would be necessary that the Irish company be able to operate on a day-to-day basis without continual recourse to a foreign parent for routine instruction and guidance.
2. Control from Ireland
The 12.5% rate is not available to trades, however actively managed, which are carried on wholly outside of Ireland. However, where a company is managed from Ireland and has a general management role in a trade carried on outside Ireland, it is likely that this would be regarded as an Irish trade to qualify for the 12½% rate. On the other hand, where the board takes no part in the actual management or running of the trading operations this would be considered a foreign trade and profits would be taxed at 25%.
In order to avoid this foreign trade classification it is essential that board meetings where significant decisions and policy are determined are physically held in Ireland.
These board meetings should be well documented to demonstrate that key policy and business decisions are taken at these meetings. Other decisions to be made at a board meeting may include:
- approval of annual budgets and forecasts, business projections.
- approval of the financial statements for the year.
- the appointment of senior staff members and approval of remuneration levels.
It is recommended that three to four board meetings be held in Ireland on an annual basis. In the absence of regular meetings it may be open for tax authorities to argue that decisions relating to the running of the company take place outside of Ireland.
The analysis contained above gives an indication of the issues involved in a company qualifying for the 12.5% rate of corporation tax.
Over the years, with the clear attractions of the lowest rate of corporation tax in the European Union, many of the larger corporations have focused on moving their more mobile (and quite often most profitable) activities to Ireland.
However, once the profit has been made and taxed at this low rate, the next question that could reasonably be asked by its parent company, is how can it repatriate its profits in a tax effective way?
Dividends and Dividend Withholding Tax
Ireland imposes withholding tax at a rate of 20% on outward-bound dividends. However, where the provisions of the EU-Parent Subsidiary Directive are met, this rate of withholding tax is reduced to 0%.
To avail of this 0% rate, the EU Parent company must have held at least 25% of the Irish subsidiary company for a period of at least 2 years. Once these conditions are met, a dividend can be paid by the Irish subsidiary free of dividend withholding tax. The Irish company is not required to furnish declarations in circumstances where it is paying dividends to an EU parent under the provisions of the directive. The Irish company should, however, retain certificates of tax residence of the EU parent company to whom the dividend is paid should the Irish company be required to furnish such certificates by the Irish Revenue Commissioners.
Tax treatment of Dividends in EU parent company
So, having established that dividends can be paid free of any further Irish taxation where the conditions of the EU Parent-Subsidiary directive have been met, the next question to be asked is what the implications are for the recipient of the dividend income?
Set out below is a table detailing the treatment of dividends paid by Irish subsidiaries to a selection of EU jurisdictions to avail of full or partial exemption from taxation of dividends from Ireland:
Jurisdiction Tax treatment of dividend receipt Participation requirement Holding period
Austria 100% Exempt 25% 2 years
Belgium 95% Exempt 10%/ €1.2m 12 months*
Denmark 100% Exempt 20% 12 months
France 95% Exempt 5% 2 years
Germany 95% Exempt 10% N/a
Italy 95% Exempt 25% 12 months
Luxembourg 100% Exempt 10% /€1.2m 12 months
The Netherlands 100% Exempt 5% N/a
Spain 100% Exempt 5% / €6m 12 months
United Kingdom Credit imputation 10% N/a
* A commitment to retain the necessary shareholding will also satisfy the test.
Bearing the above features in mind, a situation can be clearly envisaged where an EU parent company sets up a 100% Irish subsidiary company which would be subject to the 12.5% rate of corporation tax. The EU parent can then receive dividends from the Irish company and be able to receive those dividends with either full exemption from tax on that dividend income, or, at worst, with a 95% exemption from corporation tax on such dividend income as the under-noted simple example indicates.
Example
An Italian company, involved in the hand-tool manufacturing industry, decided to set up an Irish subsidiary in early 1999 following the announcement of the Irish government’s intention to eventually introduce the 12.5% rate from 1 January 2003. The function for which the Irish company was set up was to manage the group’s after-sales service and credit control function for the US and European Market. Formerly, this activity, which was highly profitable, took place entirely from Italy where it was subject to prevailing rates of corporation tax there.
The Italian parent company holds 100% of the shares of the Irish company. The majority of the board of the Irish company are resident in Ireland, from where all day-to-day activities are managed and controlled. The majority of the company’s board meetings also take place in Ireland where all necessary key decisions are taken.
The Irish company engages service providers in Dublin who have sufficient knowledge and experience of the products and industry that, overall, justifies and enables the Irish company to avail of the 12.5% rate of corporation tax in Ireland.
Net profits for the year to 31 December 2003 are projected at €1,000,000 on which it will pay corporation tax of €125,000, leaving €875,000 in reserves. A dividend of €875,000 is declared to the Italian parent company.
Because the provisions of the EU Parent-Subsidiary Directive will be met, the dividend can be declared to the Italian parent, free of dividend withholding tax. Upon receipt of the dividend in Italy, 95% of the dividend, or €831,250 will be entirely exempt from taxation in Italy, leaving the remaining €43,750 subject to Italian taxation of 36%*.
In analysing the overall tax saving the following simple comparison can demonstrate some of the direct tax savings available on a re-location:
OPERATING FROM ITALY
Profits formerly generated in Italy: €1,000,000 per annum
Taxation in Italy: (€360,000)
OPERATING FROM IRELAND
Profits formerly generated in Italy: €1,000,000
Taxation in Ireland: (€125,000.00)
Post Tax profits: €875,000.00
Dividend distribution to Italian parent: €875,000.00
Taxation in Italy
€43,750 x 36%*) (€15,750.00) From the above, it can be clearly seen that setting up an Irish subsidiary company and availing of the 12.5% rate of corporation tax, to carry out this profitable area of activity within the group, has the effect of reducing the over all tax bill for the group from €360,000 to €140,750.
*Note: For the purpose of this memorandum we refer only to the general corporation tax rate and it does not include local taxes (IRAP) which vary from 4.25% to 8.5%.
CONCLUSIONS
The combination of the lowest rates of corporation tax in the EU coupled with the beneficial tax treatment afforded to dividends paid from Ireland, an Irish subsidiary, provides an attractive opportunity to organisations who have profitable but geographically mobile elements within their business.
Care should be taken to ensure that domestic CFC legislation is addressed on a case-by- case basis. However in the above example, Ireland does not appear on the list of preferential tax regimes or “black list” such as those of The Caribbean or The Channel Islands and this clearly places groups utilising Irish companies, with a sufficient degree of substance to avail of the 12.5% rate of corporation tax, at a significant advantage.
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hope this helps
ffbkdavid
22.02.2005, 15:05
Re: Unternehmer-Alp-Traum Irland?
Zitat von »"stemberger"«
Es ist wirklich wahr, Irland ist ein Paradies für Europäer. 12,5 % Steuersatz, SE Gründung mit 60000.- € Stammkapital und das Geld kann schadlos sofort wieder nach Deutschland zurück wandern. Ein besonderes Abkommen macht dies möglich. Nahezu alle großen deutschen Firmen haben eine Niederlassung in Irland. Dazu gibt es auch ein irisches Consulting Unternehmen in Wiesbaden das dazu motiviert.
Interessant? Ich wäre da sehr vorsichtig.
Moin, moin, H.H.Held
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