Forming a company in EU Ireland

The Brexit date of 29 March 2019 is fast approaching and unless the country remains part of the single market, trade with Europe could become increasingly costly. How can UK businesses make sure they continue to operate in the EU in case of a “hard” Brexit? Unfortunately, there is no ‘one size fits all’ answer to this question. It really depends on the specific circumstances.

As an example, for e-commerce, the “hard” Brexit would mean that goods from UK to the EU will be treated as sold from a third country to the EU and therefore will be subject to customs duties making EU trade more expensive for UK retailers. Business may consider forming a company in Ireland to mitigate the increase in costs and ensuring the company can continue operating unrestricted in the single market.

Benefits of Irish Company

1. The free movement of goods within the EU means that no customs duties currently arise on imports and exports between Ireland and other EU Member States.
2. No need for local VAT registration for trade with EU
3. Financial services firms located in Ireland will have the certainty they need around continued access to the common market and use of the EU’s passporting regime.
4. Low rates of Corporation tax rate of 12.5% for trading companies
5. Dividends can be paid to UK parent company with no Irish withholding tax.

Types of Irish companies

The most common type of company in Ireland is Private Limited Company (Ltd) which can be incorporated with one director, a simplified Constitution and, because it does not have stated objects, can engage in any lawful activity

Ltd company requirements

• Registered office must be in Ireland.
• Every limited company must have a company secretary. In a single director company, there must be a separate company secretary.
• The company is required to have at least one director who is resident in an EEA member state failing which a 25k euro insurance bond is required or a certificate (from the Registrar of Companies) that the company has a sufficient economic link is necessary (alternatively, the UK resident director could be supplemented with another director who is resident in an EEA member state)
• There is no restriction in relation to foreign ownership of companies. An Irish company can be 100% owned by non-Irish residents.

Structuring option

1. Irish Branch of UK Company – The branch is viewed as an extension of the UK parent company
2. Irish Subsidiary Company – 51% or more of this company’s shares are owned by the existing UK company
3. Irish Holding Company – This is a parent company that typically exists to hold shares of various subsidiary companies
4. Stand Alone Irish Company – This would entail registering a company in Ireland and transferring all assets of the existing overseas company

Tax position

Companies incorporated in Ireland will be regarded as tax resident if the company’s central management and control lies within Ireland. This includes the company head office and the majority of directors, meaning that a company registered in Ireland with an EEA director from a member state must have at least two directors resident in Ireland.

An Irish incorporated company may be UK tax resident where its ‘central management and control’ lies in the UK, e.g. the company is centrally managed and controlled in the UK. Central management and control means the highest level of decision making and not, for example, operational control. The profits of the company which is tax resident in the UK will be subject to UK Corporation Tax irrespective of country of incorporation.

Conclusion

• The companies relying heavily on trade with EU will have to relocate or establish new operations in the EU to have free access to the single market.
• Relocation of business to Ireland is likely to bring tax savings only where a significant part of operations is moved to Ireland.
• For smaller businesses with activity in the EU, setting up a foreign company/branch will be costly and complicated.
• If you are interested in relocation to Ireland, then please seek professional advice and contact Slava on 01634 731390.

This document should not be relied upon as comprehensive guidance but as a reminder of some key planning questions and resources for businesses who may be interested in establishing a company in the Republic of Ireland in an event of a no-deal Brexit. No responsibility for loss occasioned to any person acting as a result of the material in this document can be accepted.

All information included is correct to our understanding as at 27 February 2019.