6 must knows for multinationals forming a company in Ireland

Entering the Irish market, in particular as a gateway to Europe, has long been an attractive path for multinationals. For businesses forming a company in Ireland, the new Irish entity must function both as a business operating under Irish law and as part of a wider international group.

That brings a number of early decisions. What name will the Irish entity adopt, given that this is dependent on availability on the Companies Registration Office (CRO) register? What entity type are you considering/eligible for? How will the Irish company be funded? What are the principal activities of the company? Who will be appointed as Irish Director(s)? Where will key decisions be made? And how will Irish tax, VAT and EU reporting requirements fit into existing group processes?

The answers can determine everything from the company structure and corporation tax position to payroll, transfer pricing and financial reporting. These considerations are also much easier to address before the Irish operation begins trading rather than waiting until contracts, employees and intercompany arrangements are in place.

In this article, we look at the critical decisions multinationals need to make when establishing a company in Ireland, some of the hidden challenges you may not be aware of, and highlighting what should be in place before trading begins.

6 key things multinationals need to consider before forming a company in Ireland

1. Branch or subsidiary: get the structure right first

One of the first decisions is whether to establish an Irish subsidiary or operate through a branch of an existing overseas company.

An Irish subsidiary is a separate legal entity from its parent company, while a branch is an extension of the overseas company. Each comes with different company law, accounting and filing requirements.

At its leanest, a limited company can have a single director and an appointed company secretary. Regardless of the number of directors appointed, at least one director must normally be resident in the European Economic Area, which is something not everyone is aware of. Although, exemptions are possible, where companies meet certain criteria.

The company will also need a registered office in Ireland, and the CRO stipulates that this is a physical location, as opposed to just a PO box.

Which structure works best will depend on what the Irish operation will do, how much autonomy it will have, its tax position and how it will transact with the parent and other group companies.

2. Think about tax before incorporation

Ireland’s corporation tax rate is 12.5% for trading income, while non-trading income and income from certain excepted trades is generally taxed at 25%.

For an international group, the activity taking place in Ireland is only one part of the tax picture.

If the Irish entity will receive funding from its parent, provide services to another group company, hold intellectual property or enter into other intercompany transactions, the tax treatment of those arrangements should be considered while the structure is being set up. Ireland’s transfer pricing legislation should be understood and considered, to ensure the company stays compliant for intercompany transfers.

Pillar Two also needs to be on the radar for groups within scope (generally groups with over €750 million revenue).

These considerations can influence how the Irish entity is funded, what functions it performs and how transactions with the rest of the group are structured.

3. Ensure the Irish registrations and CRO reporting responsibilities are in place

Once the company has been incorporated and receives its official CRO number, the company will have ongoing corporate filing requirements, as with most jurisdictions. For example, Irish companies are required to submit an annual return to the CRO each year.

Beneficial ownership needs to be dealt with early too. A newly incorporated relevant entity generally has five months from incorporation to register its beneficial ownership information.

For an international group, someone needs to hold clear responsibility for each Irish requirement, albeit they may choose to outsource certain functions. Agreeing who provides that information, who completes the filing and when it is needed is crucial.

4. Work through the VAT position before trading begins

VAT can become complicated quickly where the Irish operation will buy or sell across borders. The principal Irish VAT registration thresholds currently include €42,500 for businesses supplying services only and €85,000 for businesses supplying goods, with other thresholds and rules applying to different activities.

For an international business, however, the domestic turnover thresholds may not give you the complete answer. Revenue has specific rules for non-established traders doing business in Ireland, and certain supplies can trigger an Irish VAT registration requirement irrespective of turnover. Businesses may also have VAT obligations as a result of acquiring goods from other EU Member States or receiving services from abroad.

Before the Irish operation begins trading, map out the transactions it expects to make. Will it sell goods or services to customers elsewhere in the EU? Will it import goods from outside the EU? Will it receive services from its parent company?

Answering those questions early helps establish where VAT is due, which entity needs to account for it and what registrations or reporting will be required

5. Setting up a Company Bank Account in Ireland

At a basic level, setting up a bank account in Ireland needs to be understood and navigated and unfortunately, it’s not as simple as it sounds. To open a company bank account in Ireland, you need official corporate registration documents (such as the Certificate of Incorporation), personal identification for directors and beneficial owners, and a completed bank mandate. In most cases, the Register of Beneficial Owners (RBO) submission will also need to be fully completed and registered before an account can be opened with an Irish branch.

The major pillar banks and the digital banks will require Anti-Money Laundering (AML) documentation. Gathering the right documentation, in the correct format and with the right signatures, will determine how quickly you can turn this process around and secure your bank account number, though it can be time-consuming.

6. Get Irish payroll ready before the first hire is paid

If the Irish operation will employ staff, payroll needs to be set up before the first payment is made. The Irish entity must register the company with Revenue before making any payments to employees.

Employers are responsible for operating Pay as You Earn (PAYE) taxation, including deductions for Income Tax, PRSI, USC, and Pension Auto Enrolment (known as MyFutureFund), and payroll information must be reported to Revenue on or before the payment date.

An Irish incorporated company must also generally operate PAYE on income attributable to its directors, including non-resident directors.

What should be in place before you begin trading in Ireland?

Requirements will vary depending on the scale of the operation. A group setting up a small Irish sales presence will face very different demands than one establishing a European headquarters, employing a large local team, or carrying out substantial activity in Ireland.

Regardless of intended scale, before the Irish entity begins trading, you should be clear on:

• The name, legal structure and the Irish entity’s role within the group.
• Irish tax registrations and corporation tax.
• Intercompany arrangements and compliance with Irish transfer pricing rules.
• VAT registration and cross-border transactions.
• Payroll processes and MyFutureFund.
• Financial reporting and CRO filings.
• Beneficial ownership structure.
• Who will own ongoing compliance requirements with the CRO and Revenue regardless of which functions are outsourced.

How can AAB help?

For decades, our Corporate Tax Services have supported international businesses with the tax, accounting, and compliance requirements, as well as the practicalities associated with establishing and operating in Ireland. We bring the right experts together to ensure you enter the Irish market quickly, armed with the right information to make confident decisions from day one.

If you’re planning to establish an Irish entity or expand your existing operations in Ireland, contact Kate Mullahy, another member of the Corporate Tax team or your usual AAB contact.