Tax Implications of Incorporation
The establishment of an Irish subsidiary would be required in most cases to maintain access to the EU market in services. An Irish resident subsidiary is generally required from the perspective of obtaining the requisite authorisation or regulatory status within the EU, provide services and establish further branches and subsidiaries.
Most Western jurisdictions apply the same broad OECD criteria for taxation. In broad terms, an Irish resident subsidiary as a separate legal entity is always taxable in Ireland Establishment of an Irish subsidiary is generally advantageous and attracts the lower Irish corporation tax rate of 12.5%..
Even if a UK citizen has dual Irish and UK citizenship, or it a branch could be readily established, it may be advantageous to trade through an Irish resident company. It shields the the persons or company who form it from liability for its debts and obligations (subject to following basic company law obligations.Detailed personal and group taxation advice would be required specific to the circumstances.
There may be UK restrictions and tax consequences on transferring residence and changing the structure of overseas interests. It may require notification and in some cases the consent of Treasury. This raises issues under EU freedom of movement rules which would apply prior to the effective date of Brexit whether the end of the transitional period or an earlier hard Brexit.
This article refers to the taxation implications and obligations within the Republic of Ireland. UK taxation advice should be taken on the UK taxation issues in forming and operating an Irish subsidiary.
The taxation implications of the particular structure and ongoing earnings from a UK perspective should be considered in conjunction with the UK company or group requirements. If there is a transfer of assets the availability of capital gains tax reliefs must be considered.
The treatment of an Irish resident company from the perspective of favourable group treatment such as by way of transfer of losses and excess expenses under EU derived requirements should be considered.
Relief for certain oversea losses on a group basis may be allowed provided the subsidiary is resident has a permanent establishment the EEA and cannot be otherwise relieved. The group relief provisions are supported by EU fundamental laws and may be affected post-Brexit.
Generally, the profits of an Irish subsidiary are subject to tax only under Irish law being its place of residence. Dividends remitted to the UK from EU subsidiaries are treated are exempt from UK corporation tax in most cases under a number of exemptions. The particular circumstances should be considered.
This presumption places the UK tax treatment of foreign dividends on the same footing as UK dividends. There are two sets of exemption rules, one for “small” UK companies, and the other for medium-sized and large UK companies
In. accordance with the EU Parent-Subsidiary Directive, profits distributed by a subsidiary in one member state to its parent company in another member state will be exempt from withholding tax provided that the parent company holds at least 10% of the subsidiary.
The Member States may require that the parent company maintain the holding for an uninterrupted period of up to 2 years, an option utilized by a number of Member States.