Introduction

Multinational group structures face challenging times: uncertainty as to tax regime change - particularly directed at offshore tax havens, or otherwise at taxation of foreign profits - threatens the ongoing viability of current holding structures. There has been particular concern that US groups that carried out "corporate inversions" to Bermuda might be impacted by pending US tax changes. We have seen a number of large international groups - such as Ingersoll Rand, WPP, Henderson and Accenture - migrating their corporate holding companies to Ireland. The recently-enhanced Irish holding company regime compares very favourably with the holding company regimes in other European jurisdictions.

Why Ireland?  

Benefits in locating a holding company in Ireland include the following:

  • full exemption from capital gains tax in respect of the disposal of qualifying shareholdings, or assets relating to such shareholdings, in subsidiaries that are resident in an EU country or in a country with which Ireland has a double tax treaty.
  • beneficial regime in respect of the taxation of foreign dividends which in the majority of cases should avoid any Irish tax being incurred:
    • foreign dividends from subsidiaries resident in the EU or a tax treaty country paid out of trading profits are taxed at 12.5% with other foreign dividends at 25%; most dividends have a foreign tax credit attached which in many cases is higher than the Irish rate, so that generally no further charge to Irish tax should arise on receipt.
    • Ireland also offers a full "onshore tax credit pooling" regime which avoids the loss of unutilised tax credits and can reduce (or potentially eliminate) Irish tax on dividends paid to an Irish holding company from lower tax regimes.
  • wide domestic exemptions from withholding tax on dividends and interest – although Ireland imposes a dividend withholding tax and withholding on interest payments (both at a rate of 20%), domestic law provides for wide exemptions from these obligations.
  • wide tax treaty network - Ireland currently has 46 tax treaties in force with other countries (see table), 5 signed and to come into effect, and a further 18 under negotiation. limited thin capitalisation legislation and no relevant transfer pricing/controlled foreign companies (CFC) rules.
  • 12.5% corporation tax rate on any trading income generated in Ireland and enhanced research and development credits.
  • Ireland is a white-listed jurisdiction for the purposes of the US Stop Tax Haven Abuse Act and relevant OECD/EU codes.
  • an Irish holding company can be financed in a tax-efficient manner principally by way of debt, with tax deductions available for interest on monies borrowed to finance the acquisition, and exemptions from Irish withholding tax.
  • Ireland has a similar corporate governance regime to that in the USA, UK and a number of other jurisdictions. Corporate structures familiar in those countries and to public listed companies can be largely replicated in an Irish context.
  • shares in Irish companies can be transferred through the CREST and Euroclear Systems. They can also be deposited with depositary banks for trading as ADRs which trades are not subject to Irish stamp duty once the shares are listed on a US or Canadian exchange.
  • the incorporation of the Irish holding entity and approval of a prospectus (if necessary) by the Irish Stock Exchange (as competent authority responsible for public offers by Irish companies) can be achieved quickly and efficiently.  
  • other advantages include Ireland's membership of the OECD and EU/Eurozone; implementation of IFRS; status as an English speaking, common law jurisdiction; and its geographic convenience to the EEA and USA.  

In-force Irish Double Tax Treaties

How is migration achieved?

There are a number of options to achieve migration:

  • non-EU (e.g., Bermuda), and EU companies in common law jurisdictions, can effect migration using a share-for-share exchange, or a scheme of arrangement approved by the local courts (whereby the shareholders in the existing parent entity agree to the cancellation or exchange of those shares for shares in the new Irish holding company).
  • it is also possible to simply move the tax residence of the existing holding company to Ireland by establishing "central management and control" (for tax purposes) in Ireland.
  • if the parent entity is incorporated in the EU, that parent entity can convert to a Societas Europaea (SE, the new European public company) and move its registration to Ireland.
  • alternatively a new Irish public company can be incorporated and merged with the existing EU parent entity, using the EU Cross Border Merger Directive.
  • Any consequent reorganisations - to "tidy up" share capital in the Irish holding company (e.g., reducing share capital to free up reserves) or to take certain subsidiaries (or income streams) outside the scope of foreign CFC provisions - can be accomplished in conjunction with that migratio