A holding company is a type of legal entity established with the purpose of owning shares in other companies (subsidiaries) this way controlling their actions and obtaining certain advantages, such as small or exempt withholding taxes on dividends, interest and royalties or exempt capital taxes on profits. These advantages are realized due to some provisions of the tax law in Ireland.
Usually the Irish companies
must pay a corporate income tax of 12, 5% on profits of trading income or 25% on profits of non-trading income. The dividends, interests and royalties paid to non-residents are taxable with 20%. Our Irish lawyers
can help companies comply with the tax regulations available in the country.
The above withholding taxes are subject to the exemptions from which the Irish holding companies are enjoying if special conditions are met.
The dividends received by one Irish resident company from another Irish resident company are normally exempt from Irish withholding tax. Only the dividends paid to non-residents are subject to the withholding tax if no treaty was signed with the country of origin.
The dividends paid by a subsidiary which is resident in a EU or Tax treaty country and that have been already taxed at least 12, 5% corporate tax in the country of origin are not subject to the withholding tax on dividends.
There is no capital gain tax when the Irish holding company has held minimum 5% of shares with voting rights attached of the subsidiary for more than 12 months in the previous 2 years or if the country of the subsidiary is from an EU country.
The capital gains exceptions are also granted if the subsidiary is part of an active trading company or it is part of a group which is carrying trading activities for more than a half of the time.
Other condition to grant capital gains exemptions is when the subsidiaries are based in one of the country which has signed a double tax treaty with Ireland.
Non-Irish resident investors are usually exempt from Irish tax on any gains derived on the sale of listed shares in Irish companies.
The withholding tax on dividends paid to foreign companies is not charged
if one of the following conditions is met: the parent company is resident in an EU country and at least 5% shares are owned by that company in the Irish company
, if it’s a legal entity resident in an EU/tax treaty country which is not under the control of Irish resident, if the legal entity is resident anywhere but is ultimately under the control of persons who are resident in an EU/tax treaty country, or if it’s a publically quoted company.
For more details about the holding companies in Ireland, please contact our Irish lawyers