Tax Regime

-  IDA Tax Brochure 2011 - PDF

The key features of Ireland’s tax regime that make it one of the most attractive global investment locations include:

• a 12.5% corporate tax rate for active business; 
• a 25% Research & Development (R&D) tax credit which may be refundable over a three year period; 
• an intellectual property (IP) regime which provides a tax write-off for broadly defined IP acquisitions;
• an attractive holding company regime, including participation exemption from capital gains tax on disposals of shares in subsidiaries;
• 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.

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

Source: PricewaterhouseCoopers, 2011

* Regional corporation tax rates on top of federal/national corporation tax rates vary. We have therefore used a blended rate for these countries.    
   
** Berlin rate used for illustrative purposes. Corporation tax rate varies depending on location.   
*** Tokyo Metropolitan Area rate used for illustrative purposes. Corporation tax rate varies depending on location. Please note that the 2011 tax reform proposals for Japan include a 5% corporation tax reduction which is not reflected above.

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. The R&D tax credit is available to Irish resident companies and branches on the incremental cost of in-house, qualifying R&D undertaken within the EEA, provided such expenditure is not otherwise eligible for tax benefits elsewhere within the EEA. Incremental spend is calculated in comparison to a base year of 2003; therefore, for new entrants to the R&D sector the credit is essentially volume-based.

In order to qualify for the tax credit, it is necessary to seek to achieve scientific or technical advancement and involve the resolution of scientific or technological uncertainty.

Qualifying spend includes both revenue and capital expenditure. In practice, qualifying
expenditure includes wages, related overheads, plant and machinery, and buildings.

The credit regime also provides that up to:

• — 5% of the R&D expenditure can be outsourced to European Universities includes Irish Universities); and in addition
   
• — 10% of the R&D expenditure can be sub-contracted to other unconnected parties (i.e.,15% in total).

The tax credit can be refundable over a three year period where there is insufficient corporate tax liability to utilise the full credit in a particular year or otherwise carried forward.

For More Information - IDA Tax Brochure 2011 PDF

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:

1. Capital gains tax participation exemption on disposal of qualifying shareholdings;
2. Effective exemption for foreign dividends via 12.5% tax rate for qualifying foreign dividends and a flexible foreign tax credit system;
3. Double tax relief available for tax suffered on foreign branch profits and poolingprovisions for unused credits;
4. No withholding tax on dividends paid to treaty countries (or intermediate non-treaty subsidiaries) under domestic law;
5. Access to treaties to minimise withholding tax on inbound royalties and interest, and further domestic provisions to minimise withholding tax on outbound payments;
6. Extensive treaty network and access to EU directives. 

   For More Information - IDA Tax Brochure 2011 PDF