Over the last thirty years Ireland has become one of the preferred jurisdictions for multinational companies to base their main operating companies or other key functions. The activities carried out in Ireland by these companies include finance, intellectual property, research and holding companies. Indeed Ireland has regularly been the largest recipient of foreign direct investment from key jurisdictions such as the US.
The reasons for multinational companies setting up their operations in Ireland are numerous, but in various surveys over many years, a number of prominent factors have emerged: Ireland is a long standing member state of the EU and a member of the Eurozone.
- Ireland has a highly skilled and mobile work force.
- Ireland is an English speaking country.
- There is a significant IT sector with very good broadband and cloud-based facilities.
- Ireland has a developed regulatory regime.
- Significant tax advantages with a transparent and user-friendly tax system.
- A common law system which is very similar to the UK and therefore is familiar to international companies.
- Significant governmental support for inward investment, including grants and financial incentives.
From January 2016, Ireland will have the first OECD compliant regime taxing the income on certain qualifying profits at a tax rate of just 6.25 %. The new rate will apply to tax on profits from qualifying Research & Development undertaken in Ireland. Significantly for foreign companies is the fact that the Knowledge Development Box can be applied proportionately to the level of R&D carried out in Ireland – therefore, the more R&D relating to an asset that takes place in Ireland, the more income from that asset qualifies for the special 6.25% tax rate.
The ‘regular’ rate of corporation tax payable by an Irish company – i.e., income that does not fall within the Knowledge Development Box – is 12.5% of its trading profits and 25% of any passive or non-trading income. Any taxable gain is taxed at 33% but there is a wide exemption from tax arsing on the gain on the sale of shares in any trading company where the Irish company holds at least 5% of the shares.
R&D Tax Credits – A 37.5% Deduction:
Ireland has a generous R&D tax credit system whereby an Irish resident company is entitled to claim a corporation tax credit of 25% of the incremental spend on qualifying R&D expenditure carried out in the European Economic Area by a company within the charge to Irish corporation tax. The combined result of the normal corporation tax deduction of 12.5% and the R&D credit means an effective tax deduction at 37.5% on R&D expenditure. The R&D credit is separate to the Knowledge Box rate of tax.
Double Taxation Treaties:
Ireland has signed comprehensive double taxation agreements with seventy-one countries, including the EU, the USA and Israel. The agreements cover all direct taxes (income tax, corporation tax and capital gains tax). Potentially, this has far-reaching implications for companies wishing to expand into the US or European markets from 3rd countries. Take, for instance, an Israeli start-up company embarking on significant hi-tech R&D: if it performs and maintains the R&D in Ireland, the profits from any IP which is later sold as part of an ‘exit’ to a US or European-based buyer will only attract Irish tax (as opposed to the far higher US, European and Israeli taxes, combined). Indeed if this IP is housed in a subsidiary the subsidiary could potentially be sold tax free.
STATE GRANTS & FINANCIAL INCENTIVES
There are a number of organisations that help companies invest, grow and develop their business through a range of grants and financial incentives. These include:
The Industrial Development Authority (“IDA”) is the Irish state authority which provides support, information and grant aid to new companies incorporated in Ireland.
Europe’s largest VC fund is a state authority which also provides significant support for new business activities. Enterprise Ireland maintains different funds for companies relocating to Ireland, depending on their size and potential. These include:
- The €10m Fund for International Start-Ups: Enterprise Ireland’s €10 million fund for international start-ups offers equity investments to highly innovative companies, usually in the region of €100k-500k per company, to locate their start-up business in Ireland.
- High Potential Start-Ups (HPSU): Start-ups with the potential to create 10 jobs and €1m in sales within 3 to 4 years of starting up are eligible for the Competitive Start Fund, which makes investments of around €50k per company.
- SME and Large Company Funding: A range of funding options is available to companies that already have an established presence abroad.
Science Foundation Ireland:
Science Foundation Ireland encourages the research, development and export of new technology in Ireland and provides grants and support to new and existing businesses operating in this area.
START UP INCUBATORS & ACCELERATORS
Dogpatch Labs & Google Tech Hub Network
The recently-announced partnership between Google and Dogpatch Labs is possibly the most exciting thing happening on the Dublin tech scene right now. Dogpatch has a stellar track record in cultivating companies that have gone on to become household names (such as Instagram) and works with some of the most promising start-up companies in Ireland today. Many of the companies using Dogpatch’s facilities are innovative international clients of the IDA who are scaling operations in Europe for the first time. Located in the heart of Dublin’s thriving Silicon Docks area, it has recently announced ambitious expansion plans to redevelop the vaults below the historic CHQ building.
The collaboration between Dogpatch Labs and Google means that Dogpatch members can take advantage of the Tech Hub Passport scheme, allowing them free access to over 20 Google for Entrepreneurs Tech Hub centres around the world, including the Galvanise centre in San Francisco, Factory in Berlin and the Google campuses in London and Tel Aviv. This scheme is supported by tailored start-up support programmes jointly offered by Dogpatch and Google mentors.
The NDRC, a Microsoft Ventures partner accelerator, is one of the world’s leading early stage investor in tech companies. It runs a number of highly popular investment programmes, each providing capital and a lot of hands on support to early stage companies.
NDRC LaunchPad is a three-month programme aimed at helping entrepreneurs develop their ideas into commercially viable start ups. It is particularly valuable for founders who need the skills and experience of the NDRC’s mentors to develop a digital business model.
NDRC Catalyser is an early stage investment programme aimed at startups and founder teams with deep research-based know-how and technology that addresses a significant global unmet market need or problem. It is offering an investment of up to €100k along with support and mentoring through a six month acceleration programme.
NDRC VentureLab, the accelerator’s flagship project, is a programme aimed at sci-tech intensive companies developing innovative and groundbreaking IP in key industries such as healthcare and e-commerce. There is a serious amount of funding on offer, with NDRC providing a €100k investment as well as a 6-month programme to prepare start-ups for seed investment. A key element of the programme is the intensive support from top technical and business talent made available to participating companies.
Propeller Venture Accelerator
This project, run by Dublin City University’s Ryan Academy, was recently judged the 7th best accelerator in Europe. It offers €45k in seed funding for a modest 7.5% stake in the company, along with an intensive programme of support and guidance by a leading team of over 80 leading mentors from a wide variety of backgrounds and specialisms. It runs a popular series of workshops dedicated to sharpening skills in customer development, enterprise sales, organization, planning and investor readiness.