Irish Corporate Tax Rates have received a lot of interest from overseas companies due to their attractive headline tax rate of 12.5%. While this is very advantageous for businesses there are a lot of other benefits to the corporate tax system in Ireland.
Headline Corporate tax rate of 12.5% in Ireland
In the 1999 Finance Act the Minister for Finance at the time, Charlie McCreevy, reduced Irish corporate tax rates from 32% to 12.5%. While the country had been successful in attracting foreign multinational companies to Ireland for decades, this laid the framework for some ambitious expansion plans by overseas companies.
It’s important to note that while the Irish corporate tax rate is low, it’s not the lowest in the world. When you couple the headline rate with the other favourable tax rates, it’s easy to see why Ireland is considered so business friendly.
One big benefit to having your company resident in Ireland is that you can avail of Ireland’s tax treaty network. These tax treaties with other nations secure a reduction or, in some cases, a total elimination of withholding tax on dividends, royalties and interest.
Ireland currently has tax treaties with 78 countries including Australia, Canada, China, Republic of Korea, Mexico, Japan, Russia, Saudi Arabia, United Kingdom and of course the European Union.
25% Research & Development Tax Credit
If a company allocates some of its budget towards research and development, these activities may qualify for the tax credit.
Qualifying activities include investigations and/or experiments in the areas of science or technology. The research can be basic, applied, or in experimental development. The goal must be to make a scientific or technological advancement and you must be able to prove you have resolved something previously considered an uncertainty.
The research maybe carried out in another region, but the tax credit can only be claimed if the activity hasn’t been used as a tax deduction in that other jurisdiction.
The tax credit is calculated as 25% of expenditure from the qualifying activity. This amount can then be used to reduce the company’s corporate tax bill.
Excellent intellectual property development tax incentives
Effective from 1 January 2016, Ireland created the Knowledge Development Box, which is a tax rate of 6.25% that applies to profits arising to certain intellectual property assets.
Any qualifying research and development activity carried out in Ireland that resulted in patented inventions or copyrighted software is eligible for this tax rate.
Any corporate tax relief owed to the company resident in Ireland will be calculated based on the total research and development costs used to develop the qualifying assets. For example, if 40% of the research and development work can be attributed to the Irish operation, then 40% of any income from that asset will qualify for the relief.
How can I find out more about Irish corporate tax structure?
If you want to know more about all the taxes applicable to overseas companies, why not give Smart MBS a call. We have experts in the Irish tax system that can help you navigate these waters. We can save you time, which means you will save money.
If you have any queries on expanding your business into Ireland, please also get in touch today. While you’re waiting for the call back, why not download our eBook for more information on Ireland as a location for business.