MAJOR DEVELOPMENTS
The special 10% corporation tax rate that applies to manufacturing companies is due to expire in 2010, and the 10% rate for activities in the International Financial Services Centre and Shannon will expire in 2005. However, the Irish government has proposed that once these deadlines have passed, all trading income will be subject to
corporation tax at 121/2%, and all nontrading profits will be subject to corporation tax at 25%, thus maintaining Ireland as a low-tax location.
In addition, the Finance Act 1997 provides for the following developments:
q Relief for pre-trading expenses incurred in a three-year period prior to commencement. This measure will benefit companies that commence trading on or after January 22, 1997.
q A charge to capital gains tax where certain companies become non-Irish resident and the assets become situated and used for a trade outside Ireland. This provision does not apply to companies with a 90% or greater ownership from a treaty country (see item 19).
q The abolition of annual property residential tax (previously 11/2% on the excess of the property market value over IR?01,000).
q A number of tax incentives to promote the Irish Stock Exchange proposed developing companies market, aimed at attracting smaller companies to the market.
INCOME TAXES ON CORPORATIONS
1. Rates
Companies resident in Ireland are liable to corporation tax at the rate of 28% on the first IR?0,000 of taxable income (excluding capital gains). In the case of associated companies, the taxable income to which the 28% rate applies is capped at IR?0,000. A tax rate of 36% applies to taxable income in excess of IR?0,000. A special tax rate of 10% applies to all manufacturing and qualifying services companies
until December 31, 2010, and in areas designated for regional
incentives until December 31, 2005 (see item 34).
2. Local Income Taxes
None.
3. Capital Gains Tax
Chargeable capital gains realized by companies are subject to tax at 40%.
Relief for inflation is granted if the holding period is more than one year. Special rules apply to development land. In the absence of advance clearance by the Tax Authorities, purchasers must withhold tax of 15% of the consideration when acquiring certain Irish assets costing in excess of IR?00,000. This requirement also applies to nonmonetary transactions, with the 15% calculated by reference to market value.
4. Branch Profits Taxes
A branch of a foreign corporation in Ireland is subject to corporation tax on the profits of the branch at the same rate as would apply to an Irish company.
5. Foreign Tax Reliefs
Credit is allowed for taxes paid in territories outside Ireland either under the unilateral provisions of domestic legislation or under the bilateral provisions of double taxation agreements. In the absence of bilateral relief, unilateral relief generally treats the foreign tax paid as an expense in arriving at profits chargeable to Irish taxation, although in certain circumstances it treats the foreign tax paid as a
credit in arriving at the Irish corporation tax payable. Under
bilateral provisions, foreign tax credit is given only to residents of Ireland, which does not include branches of foreign corporations.
6. Classification of Corporations
Corporations are classified for Irish tax purposes as either resident or nonresident. A company is deemed to be resident where its central management and control are exercised.
Companies controlled by five or fewer persons are subject to
special rules with respect to loans to and by shareholders and certain undistributed income.
7. Payment of Taxes
Corporation tax is payable in one installment six months after the company accounting year-end.
8. Other Matters
Tax-Exempt Government Securities. Irish resident subsidiaries or branches of foreign companies controlled from tax treaty countries may invest in certain short-term Irish Government securities that are exempt from Irish tax. The securities are denominated in the major trading currencies.
INCOME TAXES ON INDIVIDUALS
9. Rates
The rates of individual income tax on taxable income from April 6, 1997, computed after deducting the individual personal and other allowances, are as follows:
Married Couples
Taxable Income
Tax on Percentage
Over Not Over Lower Amount on Excess
IR? 0 IR?9,8
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