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Tax Areas | Business Tax |

The benefits for MNCs and SMEs of using an Irish holding company


Holding Companies Structures in Ireland

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Ireland’s attractive tax, regulatory and legal regime, combined with an open and accommodating business environment are all factors which have contributed to the establishment of Ireland as a favoured location for the headquarters of many well-known and lesser known MNCs.

Ireland's flexible and attractive tax system, business-friendly and functioning court system, native English speaking population and low cost enviornment make it a compelling location for MNCs.

Equally, the legal protections afforded by holding companies coupled with Ireland’s tax regime for groups make holding companies an attractive asset protection and privacy structure for SMEs.

The reasons for MNCs to do business in Ireland include:-

  • At 12.5% Ireland has one of the EU's loweset rates of corporation tax with significantly lower effective rates achievable for companies with IP.
  • Participation exemption from CGT on subsidiary share disposals.
  • Tax exemption on foreign dividends and foreign tax credit tax regime.
  • Access to domestic and EU interest and dividend withholding tax exemption regimes for repatriation of profits.
  • Member of the EU and strong Tax Treaty network.
  • The only native English speaking population Member of the EU post Brexit.

Holding companies provide many unrivaled benefits to large and SME business owners.

  • The classic reason for establishing a holding company is creditor protection. As is all too apparent from the corona virus pandemic, protecting business reserves from interruption is also an important consideration.
  • The key-feature of a holding company structure is the ability that it provides for retained earnings to be held separate from trading activities.
  • Holding companies ring-fence accumulated reserves from internal and external trade-related risks. At the same time, cashflow is not impacted as the holding company may lend money to the trading company at any time and on a secured basis if necessary.

Shareholders and key employees are liable to income tax, PRSI and USC on salary, bonuses and other earnings often at rates up to 50%.

A significant reason for using a holding company is the ability to employ a variation - known as an 'Irish personal holding company' or "Irish personal holding company" - to invest cash reserves tax-efficiently.

With planning, an "Irish personal holding company" structure can divert earnings tax-free to a 'cashbox' company for the sole benefit of an individual. "Irish personal holding company"s are especially beneficial where there are a several shareholders in a company.

See here for more information on "Irish personal holding company"s.

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