‘Double Irish’ might sound like the name of a particularly lethal whiskey cocktail, but for many foreign entrepreneurs and multi-national companies those two words were sweeter than a bucket of Baileys. This was because Double Irish was the name of a scheme in Ireland that saved certain companies billions of pounds in income tax.
Over the last few years, big hitters such as LinkedIn Corp and Google Inc took up the Irish government’s offer that permitted companies to collect profits through Irish subsidiaries and then re-route them through other Irish subsidiaries in tax havens such as the Isle of Man or Bermuda.
But after the outcry from international authorities questioning such tax schemes, Ireland’s Finance Minister Michael Noonan recently announced in his budget speech that the Double Irish will be phased out. By January 2015, the scheme will be closed to new applicants and by 2021 it will be entirely disbanded (which still allows the companies already on board another six years to enjoy their tax breaks.)
So now the last orders bell has been rung on the Double Irish, will Ireland still be able to cling to its reputation of being the dream location for foreign entrepreneurs?
Despite the new austerity measures being put in place by the Irish government to try and buoy the economy, there are still some sweeteners that exist for entrepreneurs wanting to set up in Ireland. For a start, the country’s 12.5% corporate tax rate is the biggest draw for international companies.
This low tax rate is available as long as a company can prove it has a ‘resident company’ status – meaning it has a trading address in Ireland and contributes to the Irish economy by either using Irish suppliers or employing an Irish workforce.
Another tax incentive which Noonan hopes to introduce with EU approval is the ‘knowledge development box’ which will allow companies in the tech and medical sectors to pay a low tax rate of about 3% on income garnered from patented innovations – an incentive that Michael Noonan called a “key element in attracting future foreign direct investment to Ireland.”
After its disastrous economic and real-estate collapse, the renaissance of Ireland as a hub for inventors and tech entrepreneurs is a crucial selling point for the country. Many US startups have decided to put down roots in Ireland purely due to the speedier EU approval process that can get their products into the European market place a whole lot sooner than would be possible in their home country.
In line with that, the Irish Revenue Commissioners also announced that new startup companies registered in Ireland before 2016 will now benefit from a 3 year tax exemption.
This 0% corporation tax scheme is linked to Irish employee/employer benefits in new companies that don’t exceed certain tax levels and have a substantial presence in Ireland. Luckily, the current influx of tech talent coming out of Ireland’s universities makes hiring employees particularly easy so startups that need an Irish workforce to qualify for tax incentives are sure to gain.
The other good news is that although most non-EEA nationals need to pay a bond and get permission from the Minister for Justice and Equality to set up a business in Ireland, they can apply for the Start-up Entrepreneur Programme which also reduced its minimum investment threshold this year.
So despite global regulators calling for an end to tax-cutting structures, the Irish authorities seem to be doing everything they can to attract foreign investment and raise Ireland’s international profile. This even extends to providing capital grants for land, equipment and buildings, employment and training, as well as research and development.
But for entrepreneurs looking for major tax breaks and billion pound savings, the days of the Double Irish are well and truly numbered and those multi-national companies will need to look elsewhere to magic up that legendary pot of gold.
By company formation agent Euro Start Entreprises – helping foreign businesses and entrepreneurs open their companies and expand their operations throughout the UK, Europe, US and the Emirates.