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www.sentinel.ie |
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Irish Holding Company Regime The Irish holding companies regime has now been approved by the European Commission since September 2004. This regime applies to all Irish companies. A company can be entitled to this regime and be involved in manufacturing, shared services, financial services or any other activity in Ireland. Alternatively, the company can, simply, be a pure holding company. The regime provides for an exemption from Capital Gains arising from the disposal of shares, or assets related to such shares, in certain subsidiaries. It is part of a package of measures which enhances Ireland’s attractiveness as a holding company location and already there has been enormous international interest. The tax exemption is also likely to result in increased M&A activity among Irish corporates, as they can now restructure and sell subsidiaries without a tax charge. Furthermore, the tax treatment of dividends from outside Ireland has become significantly more generous. These measures were made effective on 2 February 2004. Another significant part of the package is the introduction of full onshore “tax credit pooling” for dividends. These measures come with a flat 5% shareholding requirement, but there are no monetary thresholds. In order to avail of the exemption, the company in which the shares are disposed of, termed the “investee company”, must at the time of the disposal: · Be tax resident in an EU Member State (including Ireland) or a country with which Ireland has a Double Tax Treaty (of which there are 48 in force, with 8 more being negotiated or due to come into force shortly): and · Carry on a trade or be part of a trading group. The company making the disposal must be a “parent company”, that is it must have held 5% of the shares in the investee company for a period of 12 months within the previous 2 years. Where a parent company disposes of shares in an investee company, or assets related to such shares, (e.g. options to acquire or dispose of shares and certain securities related to such shares) any gain arising will also be exempt from tax. Tax Credits on Foreign Dividends The credit available against Irish tax on dividends received by companies on certain foreign shareholdings allow a spillover of excess credit from highly taxed dividends to lower taxed dividends and the carry forward of any unused balance. Again, there is a similar minimum 5% shareholding requirement. Additional features of Tax System making Ireland a Key Location Ireland is a major centre for international trade, manufacturing and financial services. These activities are attracted by the many advantageous features of the Irish economy, its intra-EU location and its favourable taxation and flexible regulatory regimes. The Irish authorities constantly seek to enhance and add to these attractive features, which includes: · A 12½ % tax rate for trading activities; · Ireland’s present extensive tax treaty network with 44 countries; · Favourable withholding tax treatments for dividends and interest paid from Ireland; · No ‘controlled foreign company’ (CFC) rules; · No ‘thin capitalisation’ rules; · Tax deduction for funds borrowed in most cases (including situations where the new holding regime is availed of); · A tax incentive regime for research and development (R&D) activities carried on in Ireland and the EU (plus Norway, Iceland and Liechtenstein); and, · Flexible VAT, capital duty and stamp duty (transfer tax) regimes. |
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