Tax Regime

IDA Ireland Tax Brochure 2012 - PDF

The key features of Ireland’s Tax Regime

• Corporate tax rate of 12.5% for active business.
• 25% Research & Development (R&D) Tax Credit
• An Intellectual Property (IP) regime which provides a tax write-off for broadly defined IP acquisitions.

Ireland’s Tax Regime also offers:

• an attractive holding company regime, including participation exemption for gains on disposals
  of most shares;
• An effective zero tax rate for foreign dividends (12.5% tax rate on qualifying foreign dividends, with flexible onshore pooling of foreign tax credits).
• An EU-approved stable tax regime, with access to extensive treaty network and EU Directives.
• Generous domestic law withholding tax exemptions.

These features all go to make Ireland one of the top global investment locations.

In the following table we compare Ireland’s corporate tax rate with the rates of other top global investment countries.

Corporate Tax Rate - A corporate tax rate of 12.5% applies to all corporate trading profits % Corporation Tax Headline Rates

Source: PricewaterhouseCoopers, 2012

* The marginal federal corporate income tax rate on the highest income bracket of corporations (for 2011, USD 18,333,333 and above) is 35%.
** Berlin rate used for illustrative purposes. Corporation tax rate varies depending on location.
*** This tax rate illustrates the effective tax rate for the Tokyo area where a company has paid-in capital of more than JPY 100 million.

Ireland's Research and Development Tax Credit

Ireland has had an R&D Tax Credit scheme since 2004. Qualifying R&D expenditure will generate a 25% tax credit for offset against corporate taxes in addition to a tax deduction at 12.5%. Its purpose is to encourage both foreign and indigenous companies to undertake new and/or additional R&D activity in Ireland.

Holding Companies

Thanks to its attractive tax, regulatory and legal regime, combined with its open and accommodating business environment, Ireland’s status as a world-class location for international business is well established.

In recent years Ireland has increasingly emerged as a favoured onshore location for MNCs establishing regional or global headquarters to manage the profits, functions,and shareholdings associated with their international businesses.

Ireland’s main tax advantages for holding companies are:

• Capital gains tax participation exemption on disposal of qualifying shareholdings;
• Effective exemption for foreign dividends via 12.5% tax rate for qualifying foreign dividends and a flexible foreign tax credit system;
• Double tax relief available for tax suffered on foreign branch profits and pooling provisions for unused credits;
• No withholding tax on dividends paid to treaty countries (or intermediate non-treaty subsidiaries);
• Access to double taxation agreements to minimise withholding tax on inbound royalties and interest, and additional domestic provisions to minimise withholding tax on outbound payments;
• Extensive double taxation agreement network and access to EU directives