Immediately evoking images of shamrocks, Guinness and a pot of gold at the end of the rainbow, Ireland is known for its warmth and hospitality, thanks to its notably friendly and welcoming population.

However, its stable economy, robust infrastructure and plethora of tax incentives mean Ireland has also become an attractive location for overseas companies looking to expand internationally. In fact, these favourable business conditions and Ireland’s strategic geographical position have resulted in a considerable number of multinational companies — including Facebook, Apple and Google — setting up their European headquarters in the country.

The luck of the Irish

Ireland’s workforce is young and talented, fostering a culture of innovation and research in key emerging industries. It’s also super accessible for international organisations as most business operations are conducted in English. As a result, Ireland has attracted hundreds of tech companies, allowing the industry to thrive. And as for it’s ease of doing business, Ireland ranked 24th in the World Bank’s 2019 survey.

So, it’s little wonder that so many expanding businesses are choosing Ireland as one of their destinations. What stands out about Ireland, however, is its suite of corporate tax benefits.

Aside from the low corporate tax rate of 12.5%, the majority of Ireland’s stimulating tax incentives are designed to encourage investment in Ireland’s research and development (R&D) sector, typically within the fields of science, technology or engineering.

R&D tax credit

As a direct reflection of the country’s involvement in the progression of technology, the Irish government offers a 25% R&D tax credit to all Irish companies undertaking qualifying activities in Ireland or within the European Economic Area (EEA). In other words, any money spent on qualifying R&D activities will generate a 25% credit to offset the 12.5% corporation tax.

Qualifying R&D activities should fall within the field of science or technology and involve systemic, investigative or experimental activities seeking to make scientific or technological advancements.

Knowledge Development Box regime

The Knowledge Development Box (KDB) scheme is a corporation tax relief applied to income from qualifying assets, providing a deduction equal to 50% of these profits. In essence, this means qualifying profits are taxed at an effective rate of 6.25%.

The conditions for qualification are simple. A company’s accounting period must begin on or after 1 January 2016, the business must earn income from a usable qualifying asset, and the asset must be created by qualifying R&D activities.

If a business is developing new or improved processes or is investing in technology, they’re likely to qualify for an R&D claim. Usually, industries include technology and media (such as apps, online platforms and tools), manufacturing, construction and healthcare.

Intellectual property tax write-off

Closely linked to the KDB regime is an intellectual property (IP) scheme that’s enhanced Ireland’s IP tax framework and bolstered the country’s reputation as an attractive location for IP holding companies.

Not only do these businesses have access to the 12.5% corporation tax rate, but they’re also eligible for tax depreciation on any costs incurred whilst acquiring or developing IP. The 25% R&D tax credit also becomes available, as do deductions for interest expenses incurred on any loans used to fund IP acquisition.

IP holding companies can also participate in a regime that exempts them from paying tax on any gains when disposing of shares.

A network of double taxation treaties

Ireland’s double taxation treaty network is ever-expanding, with 73 treaties currently in effect. The function of the treaties is to help businesses avoid paying tax twice on the same income, as well as to determine which country has the right to tax the income. What’s more, the treaties allow revenue bodies to exchange information and provide mutual assistance in collecting taxes.

Navigating Ireland’s regulatory landscape

Of course, expanding your business anywhere in the world comes with a unique set of challenges and considerations. And in Ireland, the country’s laws come into play before you’ve even signed the contract.

Employers are prohibited from misrepresenting terms of employment in job adverts or during the interview stage, and all businesses must comply with several regulations around equality and access to work throughout the recruitment process.

Work-life balance is also highly valued in Ireland. Employees should never be expected to work late nights or weekends, with typical work policies encouraging this balance through paid leave provisions and conditions around flexible working hours.

Under the Organisation of Working Time Act 1997, employees are entitled to four weeks of paid annual leave, although businesses often provide more at their own discretion. And whilst there’s no statutory law in place for employers to pay their employees’ sick leave, employers typically also offer a sick leave policy that should be provided in writing.

It’s worth noting that employer costs sit at 8.8% of an employee’s salary towards pay-related social insurance (PRSI), paid by the 14th of the following month during which contributions were generated. This figure rises to 11.05% if an employee’s weekly earnings exceed EUR 410.

Supporting your expansion

Whilst the abundance of tax incentives makes Ireland a desirable location for expanding businesses, they’re often complex, and many companies can’t be sure if they even qualify.

Working with a professional employer organisation (PEO) ensures your business benefits from all the right schemes whilst complying with Ireland’s local employment and payroll legislation. The TopSource Worldwide team does just that: we’ll support your business’ expansion into Ireland from start to finish, facilitating the onboarding process, setting up contracts and handling paid leave requirements.

We’re also a certified global payroll service provider, offering a centrally managed payroll system plus consolidated invoicing that ensures each employee is paid the right amount on time and in their local currency.

TopSource Worldwide is the smart choice for expanding businesses. Get in touch to benefit from our comprehensive employer of record and payroll outsourcing services that’ll make employing in Ireland seamless and enjoyable.

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Published On: 27/04/22Last Updated: 14/09/22

About the Author: Sam Barnes

Sam is our Global Business Development Manager for Employer of Record services. For the last 10 years, he has assisted companies in the successful execution of their international expansion plans. Sam tells us “There’s something inherently exciting about growing a business into overseas jurisdictions. Each country does things slightly differently and it’s great to be able to share learnings on statutory requirements and cultural nuances”. Email: sam.barnes@topsourceworldwide.com

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