Ireland is another destination in Europe which can be worth looking deeper into if it is about setting up your business in the EU.
Like in the case of Germany, you need to be aware of different requirements and possible pitfalls.
Overall, incorporations in Ireland can be interesting for three groups of entrepreneurs. Let’s have a look at each of them.
Ireland offers to business registered and operated out of Ireland pretty attractive tax rates which are in most of the cases at 12,5%. Important to keep in mind, that the business should really operate out of Ireland and not, for example, in Spain, Italy or Germany. Else, your real permanent establishment or headquarters of your limited will be in the country from where you operate with the taxes in that one country.
Still, incorporating a company in Ireland can be attractive even if you plan to have your headquarters in another EU country. Even though, the applicable tax law in this case will be that of the country of operation. But you still can benefit from the corporation law of Ireland, which is also very attractive in regards of the conditions of incorporation, operation, and closure of businesses.
And after Brexit, Irish companies became an even more attractive alternative to UK Ltd. as UK companies do not benefit from certain EU regulations anymore, like EU parent subsidiary directive, liability limitation (if you operate your small business as a UK Ltd. in the EU, it might not be considered a corporation anymore for liability purposes – you might be fully liable as if you were an independent entrepreneur or freelancer in your country) etc. There might be bilateral agreements and DTAs between the UK and your home country, but for each single country of operation you would need to do separate checks when deciding whether a UK Ltd. still makes sense for you.
Incorporating and maintaining an Irish limited is more expensive than a UK Ltd. But an Irish limited is a good and comparably cost-efficient alternative to UK Ltd. if you plan to offer your services in the EU, as all EU regulations, which are void for UK Ltd. after Brexit, are fully valid for an Irish Ltd. On top, an Irish Ltd. has a better reputation than, for example, Estonian OÜ for which many banks in the recent past simply refuse the account opening and overall conditions of maintaining an Estonian ÖU get more and more restrictive and less attractive in the current times.
From that perspective, if you live somewhere in the EU and are looking for a relatively cost-efficient option to do your business with a limited capital invested (incorporations are possible from one-euro paid-up capital) and a limited liability, you belong to the first group of persons who might want to consider an Irish Ltd. for your business.
Important to keep in mind, that in this case you benefit only from the Irish corporation law, but not from the tax law. The taxes will be charged as per the law of your home country. But you can easier and cheaper register and deregister your Irish Ltd. than, for example, a German GmbH, which – in case of striking off a GmbH – has to follow the German corporate law and remain in the German corporate registry for another year (a so-called lock-down year) which is not the case for Irish Ltd. During the lock-down year you still have to submit your annual returns and accounts to the tax authorities and eventually have appropriate submission costs, costs for the tax advisors and accountants as well as for the publishing your accounts in the German Federal Gazette (Bundesanzeiger). Other countries might have their own rules for striking off the existing company, the above example was intended just show you some advantages of an Irish Ltd. compared to companies incorporated in other countries.
Surely, if you create an economic substance in Ireland (having a business address – the registered address is not sufficient for the full-business purpose – and having some employees in place) so that you can prove to tax authorities in your country that the business and all managerial decisions are happening in Ireland, you might be able to have the taxation of your Irish Ltd. in Ireland even if you live in another EU country. But an economic substance is always linked to additional costs, so that you should evaluate first whether it would really make sense in your individual case, if you would maintain a business address with an office provider in Ireland, engage employee and pay salaries, social security etc.
The second group of entrepreneurs who might strongly benefit from an Irish Ltd. are persons living outside of the EU and wishing to sell goods or offer services in the EU countries being an EU company.
Compared to the first group, there is a small difference in regards of maintaining an Irish Ltd. First of all, depending on the regulations in your home country outside of the EU you might be required to prove an economic substance in Ireland as well. Also, if you wish to get an Irish VAT ID, you will not be able to get it without a real economic substance in the country. Irish Revenue has a sharp eye on checking all the requirements for the economic substance before providing you with a local VAT ID. Secondly, not having anybody at hand who would be a resident of any EU country and would be registered as your representative within EU, you will be charged additionally with a so-called non-EU resident security bond. It is charged for a period of two years and repeats every two years again and again. In order to avoid this additional security bond payments, you can nominate one of your trusted employees in Ireland as your representative. Surely, such functions might eventually require a higher salary as they might go with additional potential risks for the impacted employee. Alternatively, Singabiz can be your EU representative for just a fraction of the costs for a representative employee. However, the payment of the security bonds would be a cheaper option in any case.
The third group are freelancers and independent entrepreneurs residing directly in Ireland. You can provide your services or sell your products just as a freelancer. But in this case your personal liability might be unlimited, and in the worst case you might be liable for any caused damage to your customers with all your personal possessions and belongings.
Surely, you would be more relaxed in doing your business if you knew that your liability is limited to the paid-up capital of your limited liability company. And being a resident of Ireland, you do not need any assistance of local service providers. You simply can register your company on your own, have your own registered and business address at your home (even though we still recommend separating your personal address from your business address). All this would result in the fact that the costs of the incorporation and annual maintenance of your company would be just a fraction of the costs for other customer groups. If you feel comfortable with all the formalities, you can incorporate at any time on your own. If you do not feel sufficiently comfortable with it, Singabiz can assist you as well with the incorporation and maintenance providing the service of the corporate secretary and a registered address.
Another topic coming along is local taxation. Your income on personal level is taxed at the rates between 20% and 40% in Ireland (you have to be registered to PAYE – “pay as you earn” scheme), deductions to PRSI (pay-related social insurance) as well as Universal Social Charge (USC) are coming on top.
Company tax rates are usually at 12,5% (with certain exceptions in regards of the passive revenues or capital gains). Furthermore, certain expenses on your personal level are deducted from your net earnings after taxes. When a company has similar expenses, it could deduct it from its gross revenue, reducing at the same time its total tax burden.
A critical point in this case is how you can tax-efficiently take out the profits of your company for personal use. Either you set up a minimal salary to you from your company or pull-out dividends out of your company, taxes on personal level would apply in this case anyway. Remember that your salary and related expenses are tax-deducted when preparing accounts and tax assessment for your company. A further option might be setting up a holding structure which would be subject to the EU parent subsidiary directive. It’s just the question of how to optimize any of the setups or a combination of them in the best way. Here we would recommend you a detailed consultation with a local Irish tax advisor who perfectly knows the matter and could suggest an optimal strategy to you.
As you can see, an Irish limited company can be favorable for different groups of customers. If you are interested in incorporating your Irish ltd. do not hesitate to contact us.
