Set up a company in Ireland

Reasons to set up a company in Ireland

Non European residents that want to do business in Europe often choose to set up a company in Ireland. Ireland is an easy place to do business and has a low corporate tax rate (12.5%). It also has tax treaties with about 70 other countries.

Impact of Brexit on a decision to set up a company in Ireland

Ireland is part of the European Economic Community (EEC). This means that goods and people can move freely between Ireland and other European countries. The Republic of Ireland is not part of the UK and few people think Ireland will leave the EEC, at least in the short-term.

Practical points for your Irish company

Steps to determine how to set up a company in Ireland

To set up a company in Ireland you will need to pay a bond or have a European director

There is a requirement that companies set up in Ireland must have either:

  • at least one director that lives in Europe (by Europe, we mean the European Economic Area – EEA); or
  • a non-resident directors’ bond of €25,000, which is paid to the Irish authorities.

What type of company should you set up in Ireland

There are three main types of business companies:

  • private limited liability company (Ltd);
  • designated activity company (DAC); and
  • public limited liability company (PLC).

A company is a legal entity in its own right. It is separate and distinct from the directors that run it and the shareholders that own it. Shareholders own shares. Their financial risk is usually limited to the value of their financial investment plus any unpaid share capital. If the company fails then they will not usually lose more than this. The table below shows the main factors to consider when setting up a company in Ireland.

Table – Points to consider when setting up a company in Ireland

Private limited liability company (Ltd) Designated activity company (DAC) Public limited liability company (PLC)
Minimum share capital No minimum capital requirement No minimum capital requirement Minimum of €25,000, of which at least 25% must be paid up
Minimum number of directors 1 2 2
Company secretary Must have a company secretary, who cannot be the sole director Must have a company secretary, who may also be a director Must have a company secretary, who may also be a director
Number of shareholders 1-149 1-149 1 or more
Objects clause No objects clause (can undertake any activity) Activities limited to the objects clause in the memorandum Activities limited to the objects clause in the memorandum
Annual General Meeting Can dispense with an AGM Must have an AGM Must have an AGM
Audit requirement Not for “small” companies Not for “small” companies Required for all companies
Other Cannot offer shares or debentures to the public Can offer debentures, but not shares, to the public Can offer shares and debentures to the public

Companies usually qualify for a “small” audit exemption if any 2 of the following apply: turnover of no more than €8.8 million; assets worth no more than €4.4 million; 50 or fewer employees on average. Note that the audit exemption does not apply to PLCs.

Most people set up Irish private limited liability companies

The majority of people who set up companies in Ireland will choose a private limited liability company. Few will set up designated activity companies or public limited companies. The main reasons for this are that Irish private limited liability companies:

  • have no minimum share capital requirements;
  • are more flexible;
  • have low annual compliance costs; and
  • administrative running rules are not very burdensome.

A private limited company can become public, and vice versa.

Who can run and set up a company in Ireland

Any person of any nationality, can run and set up a company in Ireland.  However, to open a company in Ireland one needs to have either a director that is resident in the EEA or to post a €25,000 bond.

Who can work in Ireland

Anyone can set up a company in Ireland. However, to work in Ireland, people from outside of the EEA will need a visa. Most entrepreneurs that come from outside of the EEA to set up a company in Ireland will apply for an Immigrant Investor Visa or a Start-up Entrepreneur Visa. The requirements for these are as follows:

  • Immigrant investor visas require at least €1 million investment into an Irish business for a minimum of 3 years; and
  • Start-up visas allow non-EEA nationals, with an innovative business idea and funding of €50,000, to set up a business in Ireland.

To see the Visa requirements in more detail click here.

The Irish corporation tax system

A company set up in Ireland will pay tax on its worldwide profits (income plus capital gains). Foreign companies that trade in Ireland through branches pay tax on the profits of the branches. Companies that have no physical presence in Ireland pay tax on the income earned from Ireland. There are two main corporate tax rates in Ireland:

  • Standard rate on trading profits: 12.5%
  • Higher rate on non-trading profits: 25%

Irish trading companies pay corporation tax at a rate of 12.5%. This is less than the average corporation tax rate paid in the US of 35-40% and the tax rate that companies will pay in the UK (17%, from 1 April 2020).

Where will the Irish company that you set up be taxed

The standard rule for companies operating in Ireland

The normal rule is that the laws of the country concerned determine the tax residency of a company. This can lead to problems if a company is deemed to be tax resident in more than one country. In such cases, there is usually a double tax treaty that provides a “tie-breaker” rule. These tie breaker rules will determine the company’s tax residency. The tie breaker rules, contained in most of Ireland’s tax treaties state that a company will pay tax in Ireland if it is:

  • managed from the UK; and
  • economically active in the UK; and
  • not established in the UK only to avoid paying taxes in another country.

Companies will normally pay tax in Ireland if they follow all these rules. If they don’t, then they will pay tax where they operate or where their management makes decisions. For example, consider an Irish company that has an establishment in Italy, or where its directors make decisions in Italy. In these cases, the company will probably have to pay tax in Italy. Click here – Ireland / Italy Tax Agreement – , which is a fairly typical Irish tax treaty.

The rule for US companies

The tie-breaker clause contained in most Irish tax treaties says that a company managed in one country will pay tax in that same country. The Ireland / US tax treaty is different in that it is the company’s place of incorporation that is important.  If a US incorporated company is managed from Ireland then the treaty says that it is up to the US and the Irish authorities to agree its tax residency. The treaty then goes on to say that if the authorities don’t agree, then the company will not be able to claim normal Irish tax treaty benefits. This can mean that a company normally be able to claim Irish tax residency may not be able do so. Click here for the US / Ireland tax treaty.

Time to set up an Irish company

We can usually set up an Irish company (Ltd, DAC or PLC) in a day. In the case that it may need special rules it will probably take a little longer.

Cost to set up an Irish company

The cost to set up a company in Ireland is relatively low. However, as well as setting the company up you will usually need to register it for VAT and payroll. You will also need to set up and open a bank account. These will normally take two or three weeks.

What documents will you receive

The Irish Companies Registration office will send to you an incorporation certificate and a statute when you have set up your Irish company. The first confirms that the Irish company has been formed correctly. The second will contain the rules that the company and its directors must follow. Shareholders will receive share certificates.

Rules the Irish company must observe

Directors must act in the interest of the company and not in their own, personal interest. At the end of each fiscal year an Irish company is required to present financial statements in accordance with the rules of Ireland and pay Irish taxes.

Information needed to open an Irish company

To set up a company in Ireland you will need to complete Form A1 and a constitution. Limited companies need just one document. Other types of company usually need a memorandum and articles of association. Click here for more details.

Irish Companies Registration Office