Ireland as a Platform for European Expansion, Tax Considerations

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Transcript Ireland as a Platform for European Expansion, Tax Considerations

“Ireland as a Platform for
European Expansion”
Tax Considerations
Adrian Crawford
KPMG Tax Partner
Dublin & New York
Ireland – Basic Tax Attributes
Tax Rate:
10% & 12.5% tax on manufacturing profits
10% expired on 31 December 2010 for “pre-98 manufacturers”
12.5% rate applies to all other trading activities
No “ruling” required to avail of 12.5% tax provided activity is “trading”.
Rulings often obtained for treasury and IP licensing activities.
12.5% tax on certain trading dividends
25% tax on other passive profits (e.g. interest etc)
0% WHT on dividends paid to US controlled groups
R&D Tax credit of 25% available against all profits
Exit charges can be avoided
Stamp duty/ transfer tax but exemptions
Ireland as a holding company location
Recent inversions include Accenture, Covidien & Warner-Chilcott.
Participation exemption on disposal of certain shareholdings (5%,
12 months, trading, EU/DTA).
12.5% rate on “trading dividends”:
dividends paid out of trading profits of EU/DTA resident companies,
dividends paid out of trading profits where payer is quoted or a 75% sub of
quoted company,
dividends paid out of mixed profits or non-trading profits of a company
where not less than 75% of that company's profits are trading and not less
than 75% of the assets of the recipient and its subsidiaries are trading
portfolio dividends (shareholding of 5% or less), exempt if trading receipt
Pooling of excess foreign tax credits on dividends
Ireland as a holding company location
WHT exemption on dividends paid to EU/DTA residents
Intangible asset tax depreciation regime
Interest relief for investments in subsidiaries
Limited thin cap rules
Wide treaty network
Regulated onshore regime
EU Member State
R&D tax credit –
Further reduces effective tax rate below 12.5%
25% tax credit on qualifying R&D spend
Available in addition to the 12.5% deduction => net subsidy of
37.5% for R&D spend
Can be used to shelter a group’s corporation tax liability or
carried forward indefinitely to reduce a company’s future tax
“Above The Line” accounting treatment possible
Royalty payments
No wht on royalty payments, save certain patent royalties
Patent royalties exempt from WHT if:
the payee is a company which is neither resident in the State nor carrying
on a trade in the State and is the beneficial owner of the royalty payment;
the royalty is payable in respect of a “foreign patent”, under a licence
agreement executed overseas and subject to foreign law;
the payment is being made in the course of the paying company’s trade;
the payment is not part of a back-to-back or conduit arrangement.
Royalty receipts
12.5% rate if trading i.e. brand management
Withholding taxes creditable for treaty & non-treaty
countries where trading
No pooling of excess withholding tax credits (yet!)
Interest receipts
Active treasury income taxed at 12.5%
Withholding taxes creditable for treaty & non-treaty
countries where trading
Pooling of excess foreign tax credits where:
Interest is paid from treaty country, and
25% relationship.
Transfer pricing
Introduced with effect from 1 January 2011
Grandfathering for arrangements in place at 30 June
Only applies to trading activities (i.e. not to interestfree loans)
User friendly regime – can rely on existing
documentation from other jurisdictions
Typically total effective tax rate 2.5-5% depending on pricing
(assumes no repatriation to US and Sub-part F issues managed)
Cost Sharing
NRI – Irish Registered but Non Irish Resident company,
e.g. managed and controlled in the US or Bermuda
IP Owner - “Super profit” taxed at 0%
Profit Strip via royalties
EMEA profits
Routine profit taxed at 12.5%
Structured Finance
Special Tax Regime – the “Section 110” company
Irish resident company engaged in the holding/management of “financial
Includes shares, bonds, options, swaps and similar instruments, all types
of receivables, leases, loan and lease portfolios, commercial paper, carbon
credits, insurance and reinsurance contracts.
May also hold plant and machinery and carry on a leasing trade.
Must conduct business at arms’ length.
Minimum day-one value €10m.
Structured Finance
“Section 110” company – Tax Treatment
Deemed to be trading so expenses deductible.
Profit participating debt fully deductible, save certain anti-avoidance
Treaty network can reduce/eliminate withholding taxes on income
No minimum profit required for tax purposes.
Wide range of domestic exemptions for withholding tax on interest.
No Stamp Duty on issue or transfer of notes issued by S.110 company.
Contact Details
Adrian Crawford
Tax Partner
Phone Dublin:
Phone New York:
353 1 4101351
(212) 872 7792
[email protected]
Kevin Corcoran
Senior Tax Manager
Phone New York:
(212) 954 1334
[email protected]