Those who want to open a non-profit organization should consider that this type of business is set up only for non-commercial purposes. In Ireland, investors can set up a wide variety of non-profit organizations and they have to be registered following the legal procedures applicable to othertypes of companies. Our team of specialists in company formation in Ireland can offer an in-depth presentation on the main requirements set up for this business structure.
Legal aspects regarding Irish non-profit organizations
Although non-profit organizations (NPOs) in Ireland are registered for non-commercial purposes, they can conduct a wide range of activities. Businessmen who want to open a company in Ireland operating as an NPO can register it as one of the following types of entities:
- • cooperative – it represents a type of company that is owned by a group of persons and it is set up for the founders’ benefit;
- • religious organization – it defines the roles and the procedures of the persons that belong to certain religious groups;
- • trade union – a type of entity that is registered for the purpose of protecting the interests of the employees of a specific economic sector;
- • residents’ association – it is represented by the residents living in a given area and it is founded with the purpose of protecting and promoting their interests;
- • foundation – it is set up with the main purpose of providing funds to other parties, such as institutions, organizations and natural persons, operating in specific fields (education, science, culture, and others).
More information on how to start a non-profit organization in Ireland is presented in the video below:
What are the company types available for Irish NPOs?
Although companies registered as NPOs in Ireland must be represented under a legal entity, it is important to know that most of the organizations are set under specific business forms. Those who are interested in the procedure of Irish company formation should know that most of the NPOs are set up under one of the following: a trust, a company limited by guarantee (most of the Irish NPOs are set up under this legal entity) or a designated activity company (DAC).
The latter business form, the DAC, is a newer type of structure that was regulated in Ireland under the new Companies Act. This business form was designed for businesses which need to define a specific purpose for their operations in Ireland. Our team of specialists in company registration in Ireland can provide in-depth information on the characteristics of this legal entity.
As presented above, the Irish DAC represents a common way to incorporate a NPO in this country. Considering this aspect, we will mention the basic characteristics of this company type, as well as the main procedures businessmen should complete when registering this business form. There are three types of designated activity companies in Ireland, namely the DAC limited by shares, the company limited by guarantee without a share capital and the DAC limited by guarantee.
Since the DAC limited by guarantee is the preferred legal entity for the registration of an Irish NPO, we have prepared a short presentation on its traits and registration requirements. For instance, this company must have at least two directors and it can be founded with a total of 149 members. When starting the procedure for company formation in Ireland, its founders should also draft and sign its statutory documents, just like in the case of other corporate entities operating in this country.
For this purpose, it is necessary to draft and sign the constitution, a document which is comprised of the articles of association and the memorandum. During this step, investors must clearly state the purposes for which the DAC is set up and these have to be mentioned in the memorandum. Our team of consultants in company registration in Ireland can provide more details on other compulsory provisions that must be included in the founding documents of an Irish DAC, which is regulated by the Part 16 of the Companies Act 2014.
Another type of company limited by guarantee that is suitable for NPOs and other charitable organizations is the company limited by guarantee without a share capital, abbreviated as CLG. In this particular case, the company’s founders do not have to buy shares in the company, as the legal entity can be set up without a share capital. It is regulated under the Part 18 of the Companies Act 2014.
If this business form will be selected for incorporation, its founders must first apply for the Charitable Status and they will also have to include specific provisions in the company’s founding documents, which are also represented by the constitution. Once the company starts operating, it is legally required to have the company’s accounts audited. This has to be done at the end of each financial year and the financial report must be deposited with the Companies Registration Office (CRO).
Another requirement that must be respected when opening a company in Ireland as a CLG is to have at least 2 directors who must not be related. The same requirement applies to the company’s members, with the mention that the company can be registered by a single member. It is also worth knowing that the members of the CLG can also be the company’s directors.
An important characteristic of the CLG without a share capital is that it is set up for non-financial purposes, which means that it is not registered for the purpose of carrying out a commercial activity, but rather to accomplish a specific goal, as a charitable organization, a sports organization, trade association and other similar entities that do not need to obtain financial gains.
An advantage of this structure is given by the fact that its founders benefit from limited liability in the event in which the company will have financial difficulties, and it represents a separate legal entity than its founders. This company type can also be used for the purpose of acquiring and selling properties in the name of the organization. As a general rule, this business form can be registered in a short period of time, of approximately 2-3 days, as long as all the documents are prepared as required by the local institutions.
What is the legislation regulating NPOs in Ireland?
Although the NPOs fall under the regulations of the Companies Act 2014, they are also regulated by other numerous acts; when opening a company in Ireland that will operate as a non-profit organization, investors should also verify the stipulations of the following legal acts, which can be presented by our specialists:
|the legislation defines what types of activities are considered charities in this country and it also establishes the main institution which has the legal right of regulating this sector, represented by the Charities Regulatory Authority
|Friendly Societies Act
|it stipulates that the Ministry of Industry and Commerce has the right to regulate certain parts of the non-profit activities developed in Ireland
|The Taxes Consolidation Act
|it regulates the manner in which various taxes are calculated and imposed to Irish businesses
|VAT Consolidation Act
|it stipulates that certain NPO activities in Ireland are to be charged with the VAT provided that they offer their services outside their defined scope or the ones that are included in Annex 1 of the Act
Non-corporate forms for non-profit organizations in Ireland
There are two forms under which NPOs can be set up in Ireland. These are the unincorporated association and the trust. Because these are easy to create, they are often selected by both local and foreign citizens.
The unincorporated association relies on membership of participants under the form of an agreement. If many years ago, this agreement was concluded orally, nowadays, written forms are the most common. The members of the association are liable for the structure’s debts and obligations with their personal assets.
The agreement contains the terms and conditions that are written in the association’s constitution. As it has no legal personality, it cannot enter various commercial relations on its own. Also, associations fall under the Irish Contract Law.
When it comes to trusts, these are preferred by many foreign citizens seeking to protect their personal assets. Ireland is a very popular trust destination thanks to the many tax benefits it offers.
The creation of a trust implies drafting a deed of trust where the settlor, the trustee (s) and beneficiary (ies) are appointed. In the case on an Irish trust set up as a non-profit organization, the settlor will allow a trustee to administer and estate or various assets which are left to the beneficiaries under certain conditions.
Just like an association, the trust does not have a legal personality and the services provided by the trustee relies on a contract under which he or she accepts personal liability during the administration of the assets.
There is also the option of setting up a trust as a corporate entity under the Charities Law. In this case, the trustees must register the trust with the Charities Regulatory Authority (CRA). In this case, the trust will obtain several rights among which the one related to land ownership.
If you need advice on the best structure to use when setting up an NPO, our Irish company formation officers are at your disposal for guidance.
How to register an NPO with the Charities Regulatory Authority in Ireland
The registration of a non-profit organization with the Charities Regulatory Authority requires the completion of several steps, among which:
- choosing the legal form of the organization,
- draft the organization’s Constitution and Rules of Conduct,
- file the documents with the CRA.
The most important part about the creation of the NPO is drafting the Constitution. Just like in the case of Irish companies, constitution models are available for quick registration and our company formation advisors can help you complete them in accordance with the requirements of the CRA.
The Constitution must contain information about the purpose of the entity, the objectives and the selected form of the NPO. Moreover, it is possible for a DAC company or CLG (company limited by guarantee) to be incorporated with the CRA.
Among the requirements related to the creation of a trust and its registration with the Irish CRA, it should be noted that a minimum number of 3 trustees that are unrelated to each other must be appointed. They will also form the board members.
When it comes to the registration of a company limited by guarantee as an NPO, the CRA requires it to have at least 3 directors that act as trustees, out of which at least one must be an Irish resident.
Also, just like in the case of companies incorporated with the Irish Companies Registration Office, DAC, GLC or trusts must have their own names which are stated in the registration documents.
The creation of an NPO and its registration with the Charities Regulatory Authority has various advantages, among which tax exemptions which have been agreed upon by the CRA and the Irish Tax Commissioner’s Office.
The advantages of NPOs registered with the CRA in Ireland
There are several benefits local and foreign citizens can obtain when registering a non-profit organization with Charities Regulatory Authority. Among these, we mention the following:
- – the association can start as a small unincorporated entity, however, it can acquire assets which will enable its growth and development,
- – it is very easy and cheap to register,
- – it can attract volunteers who can work for it.
The main disadvantage of the NPO is the unlimited liability of its members.
The creation of a non-profit organization in Ireland can take both corporate and non-corporate forms depending on the assets the settlor wants to protect.
Ireland is known for the advantageous tax planning and asset protection tools available for Irish residents and non-residents and if you have any questions on these matters, our consultants can answer them.
What are the main tax exemptions for Irish NPOs?
In terms of taxation, foreign entrepreneurs who want to start the procedure of Ireland company formation should know that they can benefit from relevanttax exemptions. For example, when a local entity obtains the status of a charitable organization from the Charities Regulatory Authority, the respective entity is entitled to receive a Charitable Tax Exemption, which is provided by the Irish Revenue. As a general rule, tax exemptions refer to the following: the income tax, the corporate tax, the capital gains tax, the stamp duty and the withholding tax of dividends.
How to apply for tax exemptions as an Irish NPO
In order to benefit from a tax exemption in Ireland, it is first required to register with the relevant institutions, which will analyze the status of the respective organization. Further on, it is necessary to complete specific forms, which must be submitted through the Revenue Online Service.
The application must contain information regarding the NPO’s financial accounts and a statement of the current activities developed through this entity. In the case in which the applicant NPO is set up as a charity, it is necessary to provide a copy of its incorporation document, which in this case, is represented by the charity’s constitution.
It is necessary to know that once the institutions have approved the application, the entity is not required to apply each year for a tax exemption. However, this regulation is applicable only in the situation in which the NPO did not change its activities for which the tax exemption was granted.
In order to benefit from the tax exemptions available in this country for charitable institutions, an NPO has to comply with the definition under which the Irish Revenue can provide these tax benefits. According to the Irish Revenue, a charitable organization may obtain tax exemptions as long as it develops activities that are related to the reduction of poverty, the development of education or the promotion of sports activities and other types of activities that are useful for a given community of persons.
Investors must also know that tax exemptions and benefits can also be granted in Ireland for bodies that promote education in the field or arts or to those that promote the provisions of the Universal Declaration of Human Rights; our specialists can assist with more details on any other matter concerning Irish NPOs.
When is an Irish NPO liable for VAT?
As mentioned above, one of the tax exemptions available for an Irish NPO refers to the VAT. Still, this type of entity can also be charged with the VAT, in certain situations. When an NPO (operating as a charity) receives a donation, the respective sum of money is not charged with the VAT, provided that the donation does not mean an exchange of services or goods.
In the case in which the donation is received, but the NPO provides something in exchange, this relation can be considered taxable, which can also lead to the payment of the VAT. Our team of consultants in company formation in Ireland can further advise on other situations in which a charitable organization can be imposed with the VAT.
What are the characteristics on the Irish non-profit sector?
Just like in the case of the legal entities registered for commercial purposes, most of the Irish non-profit organizations operate in Dublin, the country’s capital city and the most important financial center of the country. Irish NPOs operate in fields such as: advocacy, law and politics, arts, culture and media, research and education, environment, health and others. With regards to the value of the industry, we mention the following:
- • in 2018, the value of the Irish non-profit sector accounted for EUR 12 billion;
- • the Irish NGO sector accounts for approximately 29,000 entities, divided in specific sub-sectors;
- • from these, only 3,5% obtain an yearly turnover of more than EUR 5 million;
- • the large proportion of the Irish NPOs (64,3%) has a turnover of maximum EUR 250,000;
- • the largest source of funding for Irish NPOs is represented by the local government, which invested more than EUR 5,5 billion;
- • the sector employs 158,000 persons and in Dublin, there are 24,4% of all the Irish NPOs;
- • Cork, another important city in Ireland, accounts for 9,7% of all the Irish NPOs.
Businessmen are invited to contact our team of consultants in Irish company formation for more details referring to the registration of an Irish NPO, as well as for further advice on the tax exemptions that are applied to an NPO, depending on its main scope.