The European Commission has spent years developing a balanced system of corporation tax in the European Union. About 5 years ago, The Commission came up with a proposal with the aim to significantly reduce the administrative burden, accordance costs and all legal incertitude that all businesses in the European Union are facing, because they need to comply with more than 20 national systems for properly defining their taxable profits. Now, when we consider the structure of the EU operations and US companies, and compare their European effective tax rates to those of European companies, we find that USA companies can successfully engage in tax planning, making use mostly of the Irish tax regime. While there may be some advantages to European companies from securing profits and loss in various EU countries, USA corporations continue to benefit from this system which effectively allows them to receive passive income in a low taxed and jurisdiction tax free regime.
Ireland’s economic structure Industry accounts for a higher level of output than is the case in other countries. The Irish economy relies very much on foreign trade. For example, the United Kingdom and the USA are Ireland’s largest trading partners. The benefits of trading with Ireland are that there are no exchange controls and there is no need for approval for foreign investment or capital import. When it comes to selecting a corporate structure for an investment in Ireland, whatever you choose you will be strongly influenced by tax considerations. What are those key futures of Irish attractive corporate regime? Those are 12.5 low corporate tax rate, an IP regime (intellectual property), a appealing holding company regime, an effective zero tax for foreign dividends, a very transparent tax system with more than 60 bilateral tax treaties, a special assignment relief program for administrators relocating to Ireland and many more.
The map below illustrates the corporation tax rates among the primary European economies.
More than 950 multinational corporations have chosen Ireland as their strategic base for Europe because facts mentioned above. Despite the economic crisis which has affected the whole world, Ireland continues to attract all inward investments from the USA. Irish tax regime has been a crucial part of this country industrial policy and their government still stays committed to the 12.5% corporate tax rates. The future for inward investment is very bright and its recent downward realignment of costs only brought them more competitiveness. Irish tax is definitely ideal for a first time investment but also for continuing to invest. Ireland has over 35 years of experience in life sciences, and it has become a globally recognized center of expertise, also it is a largest exporter of software in the world and has the largest number of stock exchange listed investment funds and many more. So whatever you want to invest in, you got yourself covered.
We could easily say that Ireland is a tax heaven. Their laws changed a bit in 2015, reversing the double tax law and now requiring the company which is incorporated in Ireland to be also its tax resident. Nonetheless, foreign investment is still very profitable because corporate tax rate is still at least 4.5 times less than that in the USA.