Ireland as a holding company location

International tax

Why chose Ireland as a holding company location?

If you are considering investing in a holding company your research will highlight the importance of your chosen country’s taxation regime. This research should point you to the option of Ireland as a holding company location due to our very competitive key features such as:

Interest deduction

An interest deduction that is available to Irish companies borrowing funds to
1. purchase shares in trading subsidiaries or
2. lend on to such trading subsidiaries
Ireland will be adopting the EU Anti-Tax Avoidance Directive (ATAD) in relation to interest deductions from 1 January 2024 at the latest. Initially, this rule was to be introduced by 1 January 2019, however Ireland availed of a derogation, on the basis that its current interest deductibility rules are equally effective as the ATAD interest limitation rules. The new ATAD rules will see interest deductions limited to 30% of a taxpayer’s earnings before interest, tax, depreciation and amortisation deductions (EBITA).
- The ATAD allows for a de minimis threshold of €3 million to be deducted in advance of the interest limitation rules applying in any give tax year. It is expected that the de minimis threshold will be included in Ireland’s domestic legislation.
- It should be noted that the purpose of the changes, are to limited base erosion through artificial means rather than to necessarily limit the overall deductibility of genuine finance costs.
- The practical impact of the provisions of the ATAD on taxpayers in Ireland with cross border operations will largely depend on how the provisions are implemented into Irish law.

Capital Gains Tax exemption

Specific provisions relating to Participation exemption rules are included in Irish tax legislation which provide for a Capital Gains tax exemption on the disposal of shares in qualifying domestic and foreign subsidiaries. The exemption will apply to the disposal of shares and/or assets that are related to shares (e.g. share options) where the companies are resident in an EU member state or in countries with which Ireland has concluded a double taxation agreement.

Foreign dividend income

Foreign dividend income received by Irish resident companies from trading subsidiaries in either an EU member state or a country with which Ireland has concluded a double tax treaty, and where that dividend has been paid out of trading profits, is taxed at the 12.5% trading rate of corporation tax.
A system of onshore pooling of excess foreign tax credits applies to dividends from 5% or greater corporate shareholdings, and excess credits in the dividend pool can be carried forward indefinitely.
- The unused credits can be carried forward and offset in the same way in subsequent accounting periods. Therefore, with appropriate planning, it may be possible to ensure that no Irish tax arises on foreign dividends.
- A similar pooling system applies to some related party interest and also to foreign branch income.