Why Ireland remains a key base for international business

Mark Braude

Welcome to TLT's International Tax Video Series, Five Essential Questions, where we explore key tax issues for businesses operating across borders, in just 10 minutes.

I'm Mark Braude, Head of Corporate Tax and Real Estate Tax at TLT, and I'm delighted to be joined today by Anthony Smyth, Head of Tax at Byrne Wallace Shields in Ireland. Anthony has over 15 years' experience advising clients on all aspects of tax law, with particular experience in financial services, real estate, cross-border financing, mergers and acquisitions, and inward investment.

In this episode, I'll be putting five key questions to Anthony to discuss why Ireland continues to be an important destination for international investment, the practical tax considerations for businesses entering the market, and developments organisations should be watching.

Welcome, Anthony. Thanks for joining.

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Anthony Smyth

Thanks, Mark. It's great to be here.

Mark Braude

Could I start by asking: why does Ireland continue to be an attractive destination for international investment?

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Anthony Smyth

Yeah, I think there are probably three main reasons for that. The first is that it's part of the EU 27. I think the second reason is that it's a common law jurisdiction. So, similar to the UK, and Mark, you probably find this as well, when you're dealing with, say, a general counsel over in the US, they're able to read the documents and digest them. So, a lot of the time, I think there's just a general comfort with that. And then I think the third thing is that it's also English-speaking. I keep referring to a lot of the advantages that the UK would have had pre-Brexit as well. But I think, at that level, those are the primary reasons for me. Then there's an overarching point, which is the ongoing stability of the tax regime here.

So, people will gravitate towards the corporate tax rate. But I think, when you speak to most clients, whether you use Ireland for, say, a holding company jurisdiction or as part of a wider transaction, it's actually the stability of the legislation that they look towards, rather than, you know, the effective tax rate being X, Y or Z. So, I think those are really the reasons in a nutshell.

Mark Braude

Thanks, Anthony. Let's explore that a little bit further in terms of some of the key features of the Irish tax system. What would you say international businesses should fundamentally understand about the Irish tax system before investing?

Anthony Smyth

I think there are a couple of points to it. Number one is the fact that we have the 12.5% tax rate. So, that's been in existence since the early 2000s, and that's a cornerstone of the planning environment here.

Separate to that, I think if you look to, again, more at an EU 27 level, people tend to use Ireland as a hub across Europe, particularly for things like insurance, and we act for a number of clients on the tax side as well. Ireland works really well as part of the EU 27, say, from a VAT perspective and from a customs perspective, where Ireland can be the sole admitter, even though the group as a whole could be doing business all over Europe. And it avoids the need to be filing tax returns in all 27 jurisdictions if they're doing business there.

So, I think it's more the case that it can very much be a one-stop shop. There's a speed of execution here as well in terms of how quickly one can get a company established. And I think the rules are also quite transparent, in terms of needing to do this by this point in time. Everything is very much legislative-based, and I think there is a certain level of credibility and certainty from that perspective, which is very important for planning, particularly when so many private equity or partnership structures are being put in place. They are trying to identify, ultimately, if I bring a dollar into the structure and take it out the other side, what's my effective tax rate? And what is the impact in terms of interest deductibility, payment of dividends and so on?

So, I think it's important to have legislation that's been around for a long period of time because that creates stability from a planning perspective.

Mark Braude

Thanks, Anthony. That's really interesting. Could we perhaps explore the practical side a little bit more? Would you be able to tell us some of the key tax compliance and reporting obligations that businesses should be aware of when they're operating in Ireland?

Anthony Smyth

Sure. So, what tends to happen is that most people work on a calendar-year basis. So, that's a 12-month basis. From a corporate perspective, or a corporate income tax perspective, you work off 12 months, and that's filed broadly nine months after the year end. It's eight months and 23 days, but we tend to say it's around nine months.

And what then happens after that period of time is that the annual accounts are typically filed around November. So, we're in this compliance cycle at the moment where, let's say, for example, we have a company or a client with a December 2025 year end. They're filing their tax return in September, which was last month, on the 23^rd. And they may well have some folks who are filing income tax returns as well. Those get filed towards the end of October or into November. Everything is ready on the online system, so it's typically online.

And then the last point is that, from a Companies House perspective, accounts and so on all get filed in November. VAT runs on a bi-monthly basis, so there are typically six returns per annum. Then there is a true-up after the year end whereby, if somebody has partial recovery, there may be a true-up at that point. And that's put through at the year end, around November or December into January, when that return is made.

Mark Braude

Thanks, Anthony. That's really interesting. I think something we both love as tax advisers is how tax is ever-changing. There are always new developments and things that become hot topics. In the same way as we see in the UK, I'm interested to know what recent developments there have been in Ireland on the tax side that are having the greatest impact on businesses operating now.

Anthony Smyth

So, thanks, Mark. I think that's actually a really good question because, a little bit like the UK, we're right in the middle of our legislative cycle. In the last quarter of each year, in terms of Q4, that's generally when we have our budget and then our Finance Bill. There is a list of different amendments to that as it passes through both Houses. Then it usually gets signed and enacted into law. There have even been some years when the President has signed it on 25 December.

So, what are the main drivers at the moment? Certainly, from an Irish perspective, there's a massive drive towards trying to simplify some of the rules. At an EU level, people will be facing domestic rules around interest limitations, which have been there for a long period of time, most of which we've inherited, or certainly taken, from the UK side. We have the interest limitation rules, and then there are various hybrid rules as well in terms of misclassifications and so on. If you put all those together, that's very complicated for a compliance user.

And certainly, from an Irish perspective at the moment, there's a massive push to encourage our Department of Finance to try to create a level of cohesion between all those different, disparate pieces of legislation, so that there is a core approach and focus. We would certainly have clients who may face five or six different pieces of legislation. That's ongoing at the moment, and I think it'll probably play out over the next 12 to 24 months. And as well as that, again, like in all jurisdictions, there are the reactionary pieces in budgets around the red tops and so on, where, you know, the cost of living is a massive issue. So, you tend to see things in the budget cycle that happen all of a sudden and need to be put in place to address those cost-of-living challenges. But I suppose, from a tax-planning perspective and so on, it goes back to the corporate tax rate being very much enshrined in law at 12.5%. And there's a strong focus on trying to simplify, say, R&D regimes because, if you look at Ireland as a jurisdiction, it obviously attracts a lot of Indian headquarters, certainly from the US.

So, it's about looking at the regime, looking at amortisation of IP, ensuring that the legislation is well understood, and making sure that it's actually clear and transparent in terms of the intentions and effects of the legislation. It's similar in terms of interest deductibility and so on.

It's almost a gravitational push towards saying, okay, we have all of these different tools from a legislative perspective, but now it's about aligning them so that, if one wishes to use Ireland as part of their planning platform, the legislation is well understood and isn't overly complex. I think that's, you know, it might put us out of a job, Mark, but that's certainly the drive at the moment from an Irish perspective, I would say, over the next 12 to 24 months. Probably no different, actually, from the UK at times.