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Ireland is a small but highly globalised economy, with a large exporting sector and a young highly-skilled and educated workforce. Ireland is the only English speaking country in the Eurozone, making it ideally placed for international companies to access the European Union market, containing over 500 million people. Ireland has a strong transport infrastructure, with easy access to ports and airports. These factors, combined with low tax rates, strong government subsidies and incentives for foreign direct investment, comprehensive intellectual property legislation, a modern company law regime and one of the most advanced and competitive telecommunications infrastructures in the European Union make Ireland an attractive location to start a business.

Companies locating in Ireland represent a diverse selection of industry sectors such as software, pharmaceuticals, banking, medical technology, financial services, internet services, engineering, international sales and marketing, research and development and industrial automation companies. Ireland is a leading destination for investment in areas such as cloud computing and information and communications technology (“ICT”). Many of the companies investing in Ireland are global leaders in their respective industries, and many are household names. Nine out of ten of the top global software, pharma and ICT companies are located in Ireland.

Ireland’s tax system allows foreign investors to enjoy one of the lowest corporation tax rates in Europe on trade profits. Corporation tax is charged on all profits (income and gains) of companies resident in the State and non-resident companies who trade in the State through a branch or agency. There are effectively four rates of corporation tax in Ireland: (1) 6.25% for “Knowledge Development Box” activities; (2) 12.5% for trading income; (3) 25% for non-trading income (investment and rental income) and excepted trades; and (4) 33% on capital gains.

 

The main features of Ireland’s favourable holding company regime are: (1) a participation exemption from capital gains tax on the disposal of shares in trading subsidiaries; (2) an underlying tax credit for foreign tax paid by the foreign subsidiary against Irish tax on dividends received, together with pooling of tax credits can eliminate any Irish tax liability for the holding company on receipt of the dividend; (3) outbound dividends can generally be paid with no Irish withholding tax; (4) Ireland has in place a network of over 72 double tax treaties (including with Canada, Japan, Korea, the United Arab Emirates and the USA) with low withholding tax rates; (5) there are no thin capitalisation rules or controlled foreign company rules; and (6) Ireland has implemented transfer pricing rules that follow OECD guidelines, do not apply to small or medium sized enterprises and do not require specific documentation formats (meaning documentation prepared for the other jurisdiction will often suffice).

The following features of Ireland’s tax regime are designed to foster the development of Ireland as a European hub for companies intending to develop intellectual property: (1) a special ultra-low tax rate of 6.25% on profits from activities qualifying for the “Knowledge Development Box” which has been designated as a ‘best in class’ knowledge box regime and complies with the OECD’s modified nexus approach; (2) tax credit for R&D expenditure of 25%; (3) tax amortization for IP expenditure (Specified Intangible Allowances); (4) exemption from stamp duty (transfer taxes) on IP transfers; and (5) an extensive network of tax treaties.

Ireland, as a member of the European Union, applies a sales tax called value-added tax (“VAT”). VAT is applied to both goods and services. VAT is generally borne by the ultimate customer, and so where a trader has full VAT input deductibility, VAT should not be a cost for it. There are special rules to simplify the treatment of cross-border supplies.

Company incorporation in Ireland is a highly developed and streamlined process, ensuring fast and efficient company incorporation. The Companies Registration Office is the central repository of public statutory information on Irish companies. All company types, with the exception of the private company limited by shares (“LTD”), must have one secretary and a minimum of two directors, one of whom is required to be a resident of the European Economic Area (“EEA”). An LTD may have just one director but that director must be an EEA resident and cannot be the same person as the company secretary. The company incorporation process can take between five and ten business days, depending on the mode of submitting incorporation papers (i.e. electronic versus paper).

There are a number of types of companies that can be incorporated under Irish law. The two main types of company in Ireland are private limited companies and public limited companies. The majority of companies registered in Ireland are private companies limited by shares. The shareholders of a private limited company have limited liability. The LTD is the default or “model” type of private company limited by shares under the Companies Act 2014 (the “Act”) and is designed to streamline compliance with that Act. Public limited companies tend to be incorporated for the purposes of listing or offering securities to the public.

In Ireland, freedom of contract is considered the main principle concerning intellectual property exploitation. Parties are mostly free to tailor any intellectual property contracts to their own specific needs, subject to EU and Irish competition law in relation to arrangements that may restrict or distort competition.

The patent system in Ireland is governed by the Patents Act 1992 (as amended). Irish patents are granted for either 20 years or 10 years. In certain circumstances a supplementary protection certificate may be obtained in relation to individual medicinal and plant protection products which extends the protection conferred by a patent beyond its 20 year term for a period of up to five years.

The European patent system is governed by the European Patent Convention (EPC) and the international patent system is governed by the Paris Convention and the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS). The Paris Convention provides the same protection in respect of intellectual property to each contracting party to the convention as would be afforded to them under their country’s national legislation. The EPC facilitates a streamlined application process for patent protection.

Under the Copyright and Related Rights Act 2000 a very broad range of subject matter is afforded copyright protection. As Ireland is a member of the Berne Union, no registration is required in order for copyright to vest in the copyright owner and works are protected as soon as they are recorded.

Trademarks are protected under the common law concept of ‘goodwill’ through the tort of passing off. Trade Marks are also protected by the Trade Marks Act 1996. Trade marks can be registered with the Irish Patent Office provided that such trademarks can be readily distinguished, be capable of graphic representation and do not conflict with any existing third party rights. Once registered, such trademarks subsist for a ten year period before requiring renewal.

Trade marks may also be registered with the EU Trade Marks Office. An EU trade mark is valid for ten years. As Ireland is party to the Madrid Protocol, a further protection can be added to any trade mark registration by requesting the Trade Mark Registry of Ireland to extend the trade mark protection to every country that is also a party to the Madrid Protocol.

Ireland also has robust national and EU legislation that covers databases, designs, performance rights, e-commerce and data protection.

Owners of intellectual property have access to the Commercial Court, a division of the High Court. This has created an efficient and swift process of intellectual property litigation and, together with a comprehensive legislative framework, affords ample protection and safeguards to intellectual property owners in Ireland.

In order to work in Ireland, a non-EEA National, unless they are exempted, must hold a valid employment permit. The Department of Jobs, Enterprise and Innovation (“DJEI”) has an Employment Permits Section which administers the employment permits system. New applications for employment permits can be made by the prospective employer or employee to the Employment Permit Section of the DJEI. The status of an application can be checked through the DJEI’s online status enquiry facility. The application processing times are also available on the DJEI’s website. The official processing of the application will either grant or refuse the application for specific reasons and a refusal can be appealed within 28 days.

Extensive labour laws in Ireland provide a comprehensive and sophisticated level of employee protection. The concept of “at will” employment does not exist in Ireland. It is considerably more difficult to terminate an employee’s contract of employment in Ireland than it is in other jurisdictions, such as the United States. An employee can only be summarily dismissed where he or she is found guilty of gross misconduct. Where an employer dismisses an employee without adhering to fair procedures this may amount to unfair dismissal.

Generally Irish payroll taxes must be applied to payments made to employees who carry out duties of employment in Ireland. This applies whether the employee remains on the foreign company’s payroll or is transferred to the Irish company’s payroll. In respect of temporary assignments there are different rules which depend on the duration of the employee’s assignment (i.e. not more than 30, 60 or 183 days).

Ireland has a Special Assignee Relief Programme (SARP) which can relieve a portion of an employee’s employment income from Irish income tax. The amount relieved is equal to 30% of the employee’s employment income over €75,000. SARP only applies to Irish income tax. SARP does not apply to Irish USC (social contribution) or (if applicable) Irish PRSI (social insurance). Certain travel and re-location expenses of employees can be paid tax free.

Most foreign direct investment projects will involve the acquisition of interest in Irish real estate, with associated regulatory formalities (e.g. planning permission, compliance with building regulations and environmental regulations). In general, there are no restrictions on foreign individuals or corporations purchasing or leasing land. In addition to engaging the services of a property lawyer and an engineer, potential purchasers will liaise with local authorities and utility companies to ensure that there is adequate infrastructure and that there will be adequate utilities for any proposed development.

Special statutory planning schemes are in place for some areas in order to attract development. The most well-known of such areas is the IFSC in Dublin’s docklands area. Local planning authorities have set up strategic development zones in order to foster investment and development in those zones. Such zones may be exempt from compliance with any local authority development plans or have reduced compliance requirements.

Title to land in Ireland can be held as freehold (perpetual) or leasehold (for a term of years). Commercial leasing is quite common in Ireland, with many commercial developments under leases from five to 25 years.

A transfer tax called stamp duty will arise at the rate of 2% on the acquisition of commercial property. VAT may also arise on the acquisition or rents. However, this VAT is often neutral for trading companies provided they have a full entitlement to VAT input credit. Annual commercial rates (payable to local authorities) will also arise. On a subsequent disposal of the property, Irish capital gains tax would be payable on the uplift in its value since acquisition.

Ireland offers a range of financial incentive packages which contribute to the reduction in start-up costs for companies investing in Ireland. The Industrial Development Authority of Ireland (“IDA Ireland”) offers funding and grants to those making foreign direct investments in Ireland. The availability of grants and financial packages in addition to the support services offered by IDA Ireland are strong incentives for foreign direct investment.

IDA Ireland can offer capital, employment, research and development and training grants to both new and existing foreign direct investors in Ireland. The application process for a grant can take as little as six to ten weeks from first contact and submission of a formal business plan to IDA Ireland. Following approval of the grant, a grant agreement is entered into between the IDA, the Irish entity and/or its promoter/parent company. Grants are typically paid once the relevant expenditure is incurred. For more information visit www.idaireland.ie.

The RDJ Startups Guide

Startups GuideGetting Started

A thoughtful and thorough business plan is essential for presenting your ideas to potential business partners and finance providers.

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Startups GuideChoosing the right business Vehicle

What kind of company should you form? As a new venture, it's vitally important that you choose the right business structure.

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Startups GuideFinancing your startup

Funding is a critically important topic for all new startups. Learn about the options available for financing your business idea.

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Startups GuideTAX

Just like any business, a startup needs to pay its taxes. Getting tax advice as early as possible can avoid problems down the road.

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Startups GuideIntellectual Property

For the vast majority of knowledge-based startups, intellectual property (“IP”) is the business’s most important asset.

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Startups GuideKey Contracts

Once a new company has been formed, a number of key legal agreements and documents must be put in place.

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Ronan Daly Jermyn regularly hosts events and workshops with a focus on education, mentorship and networking. Topics of discussion include early stage financing, licensing, contracts, employment and tax issues.

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