More than 1,200 multinational companies have chosen Ireland as their platform for international expansion, employing almost 200,000 people in Ireland as of January 2017. This includes some of the world’s largest companies from sectors such as technology, life sciences, financial services and fintech, internet, engineering and business services. Many of these companies are undertaking strategic activities in Ireland including advanced manufacturing, research and development (R&D) and global business services.
Ireland’s ability to continually attract foreign multinationals is a testament to the breadth of incentives available to prospective investors, as well as its sophisticated, but flexible, business environment. Key incentives for foreign investors include the Irish government’s positive attitude towards promoting foreign direct investment (FDI), committed membership of the European Union, a highly skilled and English-speaking workforce, a favourable corporate tax regime and the general ease of doing business in Ireland. Ireland’s strength as an investment location is perfect for attracting Chinese business seeking to build a successful European business.
The Irish government is keen to ensure that there are no barriers to entry for international trade or investment. Through organisations like IDA Ireland (the Irish government’s inward investment promotional agency), the Irish government seeks to foster a pro-business environment, which has led to the country being one of the most open economies in the world. In the 2016 IMD World Competitiveness Yearbook, Ireland ranked seventh of the 61 countries benchmarked globally, making it one of the most attractive business locations in the world.
We advise many companies on establishing successful operations in Ireland. Below are some of the frequently asked questions we answer.
Q: Is it easy to set up a company in Ireland? A: Yes, it is very fast and cost efficient to establish an Irish company. There are a number of different company types to choose from but a standard private limited company is the most common type of company used and takes just up to five business days to incorporate. Legally only one director is required to be appointed and this director can be a Chinese national but the director must be an individual and not a body corporate. A company secretary must also be appointed, which can also be a company. Unless the company is engaging in a regulated activity in Ireland (e.g., an insurance company) no governmental approvals are needed to incorporate the company.
Q: What is the minimum share capital required for an Irish company? A: The share capital can be as low as 1 euro/US$1 (or any currency denomination) and the shares can be held by a Chinese or another foreign company. The company can have one or more shareholders. Subject to tax advice, and other than the minimum share capital noted above, the company can be funded for its activities through debt.
Q: What are the tax benefits for establishing a business in Ireland? A: Ireland has a low corporate tax rate of 12.5% for companies trading in Ireland. In addition, Ireland has introduced tax legislation intended to make Ireland an attractive location for holding companies and as regional headquarters, particularly for jurisdictions in Europe, the Middle East and Africa (EMEA) – e.g., no capital gains tax on gains from the sale of certain shares, and reduced tax on foreign dividends.
Other key tax benefits of investing in Ireland include: (1) tax relief on the acquisition cost of intellectual property (IP) and other intangibles; (2) a general R&D tax credit system giving an effective tax deduction of 37.5% for qualifying expenditure; (3) the first OECD compliant patent box regime (the Knowledge Development Box [KDB]) with 6.25% effective tax rate on profits arising from certain types of IP; (4) extensive domestic exemptions from withholding tax on interest and dividend payments; (5) no withholding on royalties paid to EU/treaty countries and potentially on payments to non-EU/non-treaty countries; (6) no thin capitalisation rules; (7) no controlled foreign corporation tax rules currently; (8) no capital duty; (9) benign transfer pricing rules; and (10) a wide, and growing, treaty network with 72 treaties currently signed.
Q: What industries thrive in Ireland for foreign direct investment? A: Companies in a variety of industries have built very successful businesses in Ireland as summarised below and the list continues to expand.
Pharma & life Science. The top 10 global pharmaceutical companies are all located in Ireland; seven out of 10 pharmaceutical blockbusters produced are located in Ireland; 163 pharmaceutical and life science companies are located in Ireland.
Medical technology. Ireland is the second-largest exporter of medical devices in Europe. 15 of the world’s top 25 medical technology companies manufacture in Ireland. Ireland has the most med-tech personnel per capita in Europe.
Financial services. Ireland is ranked first for hedge fund administration and stock exchange listed investment funds. 14 of the top 15 aircraft leasing companies are located in Ireland. 250 global financial institutions are located in Ireland.
Technology and internet. Three of the world’s top five gaming companies are based in Ireland. Ireland is a top five exporter of software in the world. Nine of the top 10 US information and communications technology companies are operating in Ireland. Top 10 “born on the internet” companies are all based in Ireland.
Marie O’Brien is a partner at A&L Goodbody in Dublin and head of the firm’s China business group. She can be contacted on +353 1 649 2705, by email at [email protected], or by adding the WeChat account of marieobrienALG