Ireland is one of the most appealing countries to do business in the world, considering it ranked 5th in the 2021 Economic Freedom Index. There are several types of companies that can be started here, and two of them can take the form of holding companies. These the private and the public limited liability company.
If you want to open a holding company in Ireland, our company formation agents are at your disposal with various services.
|Legal entities used in Ireland
Holding companies can be registered as private or public limited liability companies, however, the second type is often preferred
| Incorporation method
|Holding companies are registered as other domestic businesses with the Irish Companies House
|Approx. 14 working days
|Types of assets owned by the holding
Stock, shares, intellectual property rights, real estate, etc.
|Requirement for local bank account (Yes/No)
| YES, a holding company must have
a local bank account in Ireland
|Residency requirements for the founder(s)
NO, there are no residency requirements for the sharholders in a holding company in Ireland
The low corporate tax, access to the EU market, possibility to access EU Parent-Subsidiary Directive
|There are no specific requirements to mind when creating a holding company in Ireland
| An Irish holding company must have
at least one shareholder
|The minimum share capital for a public entity is 25,000 EUR, out of which 25% must be paid upon incorporation
|The holding company must pay the 12.5% corporate tax, however, it takes advantage of capital gains tax deductions and double tax treaty rules
| Full foreign control over the Irish holding over
its subsidiaries in available
|Registered agent requirements
| There is no need for a registered agent, however,
one can be appointed
|Accounting and reporting
|Financial statements must be drafted in accordance with GAAP standards, audited financial statements must be filed with the Irish authorities
|Number of double taxation treaties
|Ireland has approx. 70 double tax agreements
Steps to create a holding company in Ireland
Irish holding companies can be incorporated under the Company Act 2014 and the registration imply the following steps:
- reserving a trading name (at least 3 names mut be proposed in order to ensure uniqueness);
- drafting the Articles of Association and filing them with the Companies Registration Office (CRO);
- applying for a tax identification number with the Revenue Commissioner.
Our Irish company formation officers are at your disposal if you decide on this type of structure for your local business.
Special features of holding companies in Ireland
Irish holding companies are not subject to specific criteria they need to meet, however, their main trait is that they cannot engage in trading activities. They will usually own and have management decision over the assets in their subsidiaries. Additionally:
- they can have one or more subsidiaries under their control;
- their liability is limited to the value of the assets they own;
- they can distribute the assets among the subsidiaries.
It is also quite common for foreign companies to expand their operations in Ireland through holding companies. This happens because of the favorable tax system on corporations. These are taxed at a rate of 12.5%.
It the case of foreign companies, they can set up Irish holdings that would become the main shareholder of the foreign establishment by owning at least 51% of its shares which will attract the favorable tax regime. However, the holding can also take other companies under its umbrella. By far, the private limited liability company is the most employed legal entity for the establishment of a holding.
There are a lot of reasons to choose to set up a company in Ireland. For example, it is one of the best countries in Europe to start a business in. The same goes for foreign companies seeking to expand their operations which can take into account the tax environment, accessibility, the consumers’ market, and a variety of other aspects.
We can also help open another type of company in Ireland. We provide full business registration services, so you can start your activities right away. We also invite you read more on Irish holdings in the infographic below:
Control over subsidiaries
Setting up an Irish holding company implies having control over its subsidiaries. This aspect is important as taxation is based on whether the business is based in this country where strategic management decisions must be made in order to be considered an Irish tax resident and benefit from the 12.5% rate.
A holding can have subsidiaries in Ireland, but also abroad and still benefit from the favorable corporate tax. Moreover, as an EU state, it can also benefit from the EU Parent-Subsidiary Directive. Feel free to discuss with our agents the main requirements to meet under this directive.
Why choose Ireland to open a holding company?
One of the basic reasons for which investors choose to open an Irish holding company refers to the country’s corporate taxation system. Ireland has signed over the years numerous double taxation treaties and it now has an extended network of agreements on the avoidance of double taxation; besides this, the country provides one of the lowest corporate tax rates in Europe, which makes it an ideal business destination for starting a holding company.
Also, as an EU and OECD (Organization for Economic Co-operation and Development) member state, Ireland provides a well-regulated jurisdiction for holding companies. Due to the participation exemption, Irish holding companies may dispose of their shares in any other company within the European Union or a country Ireland has a treaty with, thus obtaining a from a capital gains tax exemption.
This exemption applies if at least 5% of the ordinary shares have been held for minimum a year and if the trading condition is respected. For complete information about the participation exemption for holding companies you can ask our specialists in company incorporation in Ireland. No matter the way you choose to start a business in Ireland, our team is at your disposal in order to help you comply with all the legal requirements available in this country.
Registering a holding company in Ireland
There are two ways to incorporate a holding company in Ireland: as an Irish private limited company oras a public limited company. The main advantage when registering an Irish holding company as private limited company is that there are no minimum share capital requirements.
For public limited companies, the minimum share capital required in Ireland is of approximately EUR 38,000 and 25% of it must be paid upon incorporation. For more details on how to start a holding company, you can address to our team of consultants in company registration in Ireland.
Why is Ireland chosen by investors for starting a holding company?
We have presented at the beginning of the article some of the basic reasons for which investors generally prefer to invest in Ireland through a holding company or through another type of company. Ireland has become the home of numerous international businesses due to a set of financial advantages, some of which are presented below:
- Ireland applies the capital gains participation exemption (which is available for holding companies);
- it is also a country that applies the foreign tax credit system;
- Ireland is a member state of the European Union (EU), which offers a set of benefits for business purposes;
- it has signed an extensive network of double tax treaties (more than 70);
- the dividends paid by a company to another company are generally exempted from taxation;
- the taxation of dividends for companies that are not based in the EU or that are not regulated by a double taxation treaty is done at a rate of 12,5%, which represents one of the lowest corporate taxes in Europe;
- the Irish administrative system applicable to companies is very simple compared to other countries.
What are the accounting requirements for Irish holding companies?
The holding company in Ireland must respect a set of regulations with regards to its accounting system. The company’s financial statements have to be prepared in accordance with the regulations of the Generally Accepted Accounting Practice (GAAP), as well as with the regulations of the Companies Act 2014.
As Ireland is the home of large multinational companies, including US companies, it is necessary to know that the local tax legislation was harmonized in such a way that US companies can use the US GAAP for their subsidiaries operating in Ireland. However, this can be done in specific conditions, which can be detailed by our team of consultants in company registration in Ireland.
Taxation of capital gains of a holding company
As a holding company can own various types of assets, such as real estate, shares and other financial instruments, it can dispose of, it will be levied with the capital gains tax. One of the main tax benefits from this point of view is that it can obtain a participation exemption on certain shareholdings. The following conditions must be met:
- the shareholdings must be at least 5% and must be owned in subsidiaries registered in EU states, or in countries that have double tax treaties with Ireland;
- the shareholdings must imply the rights of 5% of the profits in the subsidiary and an additional 5% of the assets in case of company liquidation;
- the shareholdings must be owned at least 12 months and they cannot be disposed of less that 2 years after obtaining them.
Another requirement is for subsidiary to be engaged in trading activities at the time of the disposal.
We can put you in contact with our accountants in Ireland for more information on the tax benefits you can obtain for your holding company.
Transfer pricing rules for holdings in Ireland
Ireland introduced transfer pricing rules in order to ensure inter-company transactions are completed in a transparent manner. In this case, the arm’s length rule applies which provides for the taxation to occur in the country of the receiver. There are also exemptions from this rule that apply to small and medium-sized companies that have less that 250 employees, and a turnover of less that 50 million EUR, assets valued at less than 43 million EUR.
Our company registration representatives in Ireland can provide more information on transfer pricing rules applied here.
Furthermore, our local consultants invite you to watch this useful video about the holding companies in this country:
The taxation of holding companies in Ireland
As presented earlier, the corporate tax rate applied in Ireland is one of the lowest in the European countries. Irish holding companies are subject to a 12,5% corporate tax rate on the profits resulted from a trading activity. All other passive income earned by an Irish holding company is taxed at a rate of 25%. Capital gains that do not qualify for the participation exemption are applied at a 33% tax rate. With regards to the taxation of the holding companies in Ireland, the following are also available:
- the exemption on the payment of the capital gains tax is applicable if the holding company owns at least 5% of the company’s ordinary share capital;
- the regulation is available if the holding company is entitled to at least 5% of the annual profits;
- these 2 conditions have to be met for a continuous period of at least 12 months;
- the disposal of shares can be done in a period of 2 years;
- the regulation can also be applied if the company owns less than 5% of the shares, in certain conditions.
Investors must also be aware that holding companies registered in Ireland can benefit from financing through debt, which can be used for the purpose of acquiring shares in companies which operate as one of the following: trading company, real estate company or a holding company that owns shares in other trading companies or real estate companies.
As a general rule, it is necessary to know that the holding company in Ireland will not be liable to the payment of the value added tax (VAT). This is applied as long as the holding company’s main purpose is to acquire shares. This means that the company will be exempted from registering for VAT purposes.
Still, the obligation to register for VAT (and pay VAT) can arise in specific conditions, even in the case of holding companies. For example, the company needs to be registered with the Irish institutions for VAT when referring to the acquisitions of goods or when employing the services of various types of entities, such as the services provided by lawyers, accountants, consultants, but only as long as such entities are represented by persons from abroad.
When referring to the obligation to register for VAT, the holding company may be required to register for this tax if it has a direct or indirect role in the management of companies registered as subsidiaries. This obligation applies if the holding company charges a fee for the respective management services; for more information related to the obligation to pay VAT, we invite you to address to our team of consultants in company registration in Ireland.
When it comes to the repatriation of dividends, the Finance Act of 2013 introduced a tax credit for certain foreign dividends received by an Irish resident company. In all other cases, the withholding tax on dividends is levied at a 20% tax rate. For details about the taxation of holding companies, please contact our experts in Irish company formation.
Our representatives can also present the procedures that have to be followed upon the liquidation of a holding company registered in Ireland; investors can request information on the distribution of the company’s shares during the liquidation of a holding company operating here.