Ireland Tax & Business Guide - Deloitte

Basic facts
Population 4.2m Inflation 3.9% (2006)*
Main languages English, Irish (Gaelic) GDP per head US$51,170*
Currency Euro (ƒ) GDP growth 5.8% (2006)*
Economic communities European Economic Area, EU, OECD, WTO
GDP sources 4% agriculture, 38% industry, 58% services
*Economist Intelligence Unit estimates.
Political environment

Ireland is a parliamentary democracy. A constitutional president, with largely ceremonial duties, is elected by universal suffrage.

The current government is a two-party centrist coalition between Fianna Fail and a smaller liberal party, the Progressive Democrats. The prime minister (taoiseach) is Bertie Ahern, the Fianna Fail leader. The president is Mary McAleese. The next elections are due in May 2007.
Foreign trade and investment
Exports US$119.8bn (2006)* Imports US$87.4bn (2006)*
*Economist Intelligence Unit estimates.

Leading exports: Chemicals and pharmaceuticals, machinery and transport, and other manufactures.

Major export markets: The US, the UK, Germany and France.

Ireland is the worldÌs largest exporter on a per-capita basis.

Significant levels of exports are driven by foreign-owned firms in the technology and chemicals industries.

Foreign investment is welcomed. Although state aid is set to decline, Ireland still offers substantial incentive packages, particularly for investors offering sustained high-skill jobs and net exports with significant local content.
Business and financing
Business forms Private and public limited liability companies

Most foreign investors choose the private limited company form since they are less expensive to set up and easier to operate. Foreign investors may also choose to set up a local operation by establishing a branch.

Access to capital is growing easier, as competition intensifies in the banking sector and emerging pan-European capital markets lower the costs of financing.
Labour environment
Unemployment rate 4.3% (2006)* Minimum wage ƒ1,326 (monthly)
*Economist Intelligence Unit estimate.

Social welfare insurance (PRSI) is compulsory for all employed persons aged 16Ò66, covering healthcare and retirement funding.

Employers of workers who are not nationals of the European Economic Area (EEA) or Switzerland must obtain work permits. For individuals qualified in information technology, construction and healthcare, an alternative work visa scheme operates.
Taxation
Corporate tax
Main rate 12.5%

Resident companies are subject to tax on their worldwide income; non-resident companies pay tax only on Irish-source income. A company incorporated in Ireland is generally deemed to be resident for tax purposes. The standard rate of corporation tax is 12.5%, which applies to Irish trading profits (excluding some land-dealing activities and income from minerals and petroleum activities). A 25% rate applies to passive income, including dividends, royalties and rents, dealing in and developing non-residential land, and the exploitation of oil, gas and minerals. A 0% rate applies to patent royalties where the work leading to the patent is carried out in Ireland.
Individual tax
Progressive rates to 42%

Resident individuals are liable to tax on their worldwide income; non-residents are charged tax only on Irish-source income. Individuals who are not resident but ordinarily resident are taxed on worldwide income, with the exception of income from a trade or employment that is carried out entirely abroad and investment income not exceeding ƒ3,810. An individual is resident if present for 183 days in a tax year or 280 days in two consecutive tax years, disregarding any tax year where the individual is in Ireland for 30 or fewer days. An individual is ordinarily resident if resident in Ireland for the previous three tax years. Income tax is charged at progressive rates, rising to 42% on income above ƒ32,000 for single taxpayers. A higher threshold would apply to married taxpayers.
Capital gains
Gains generally taxed at an effective rate of 20%

Company gains are generally taxed at an effective rate of 20%. Companies are generally exempt from gains on the sale of shareholdings of more than 5% held for more than one year. Individuals pay capital gains tax at 20%.
Indirect tax
VAT standard rate 21% Lower rates 13.5%, 4.8%, 0%

Value-added tax (VAT) applies to most transactions. The standard rate is 21% and a reduced rate of 13.5% applies to certain supplies, including buildings, building work, domestic fuel and restaurant meals. A 4.8% rate applies to supplies of livestock by unregistered farmers to registered businesses within the EU. Zero-rating applies to exports, food, childrenÌs clothing and the rendering of services outside of Ireland. Exempt items include banking and insurance services, medical and educational services, and the letting of immovable property under leases of less than ten years.

The registration threshold is ƒ55,000 where 90% of turnover is from the sale of goods, and ƒ27,500 in most other cases.
Tax administration and compliance
Tax year Corporations: accounting year; Individuals: calendar year

Companies must make an advance payment of tax one month before the year-end. This estimate must be 90% correct to avoid interest and penalties. The balance of tax payable is due by the date on which the company files its tax return. Employment income of individuals is taxed at source.
Additional tax information
Withholding taxes Dividends, Interest, Royalties 20%.
Tax treaties Ireland has concluded more than 44 tax treaties.
Dividends Taxable, but companies are not taxed on domestic dividends received.
Revenue protection There is no general transfer-pricing legislation, thin-capitalisation or offshore company (CFC) legislation.
Groups Transfer of losses between group companies is possible.
Incentives Holding companies; research and development tax credit; patent exemption; stamp duty relief for intellectual property transfers.
Other taxes Capital acquisitions tax, Customs and excise duties, Local rates on immovable property, Stamp duty.