Irish Holding Company

Author:Mr Cormac Brown
Profession:Mason Hayes & Curran

In 2004 the Irish Government introduced a participation

exemption regime in respect of the disposal of subsidiaries. Since

then Irish tax law applicable to holding companies of a trading

group has been expanded and developed to make Ireland a very

attractive location for establishing holding companies.

In choosing a jurisdiction to locate a holding company essential

requirements include:

no additional tax on dividend income;

no capital gains tax on disposal of subsidiaries;

no outward bound withholding taxes on dividends or


an interest deduction for borrowings used to finance


no anti-abuse legislation such as controlled foreign

corporation (CFC), transfer pricing or thin capitalisation;


availability of a good treaty network with all major OECD and

EU countries.

As a result of legislative change Ireland now fulfils all these

essential requirements.

Ireland is a member state of the EU, it is the only English

speaking jurisdiction in the Euro zone and is a full onshore tax

jurisdiction. The recent trend of large UK companies (including a

FTSE 100 company) establishing their corporate headquarters in

Ireland reflects the attractiveness of the regime and it has

created considerable interest internationally.

Ireland can be used as the ultimate holding company location.

Alternatively it can be used as an intermediate holding company

location, particularly where there may be future capital

appreciation in a subsidiary and a capital gains tax exemption is

unavailable in the current location.

A summary of the Irish holding company regime is set out


Taxation of dividend income - Foreign Tax Credits

Ireland operates a comprehensive system of tax credits for

foreign withholding and underlying taxes incurred by overseas

subsidiaries of Irish companies. An Irish holding company may not

pay any additional Irish tax on foreign dividends by utilising a

combination of different credit methods and onshore dividend


Credit relief for foreign taxes is available in three ways:

EU Parent-Subsidiary Directive: Under this Directive credit

relief is available in respect of underlying taxes incurred on

dividends received from a minimum of a 5% participation in

companies in other EU Member States and Switzerland (25%

shareholding required).

Double taxation treaties (DTA): Under the terms of

Ireland's double tax treaties, credit relief is generally

available in respect of underlying tax paid in subsidiary companies

resident in the other tax treaty jurisdictions. Currently 45 tax

treaties are in place between...

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