The corporation tax rate on trading income is 12.5%. The corporation tax rate on passive or investment income is 25%.
The 12.5% corporation tax rate applies to dividends from an EU / tax treaty country paid out of trading profits.
Ireland has an extensive tax treaty network.
Incremental research and development expenditure qualifies for a tax credit of 20% in addition to the normal deduction for research and development expenditure in the profit and loss account of the company.
An exemption from dividend withholding tax (at 20%) can be claimed by an Irish company in respect of dividend payments to certain types of shareholder including:
- Irish tax resident companies.
- Companies resident in the EU or tax treaty countries not under the control of Irish residents.
- Individuals resident in the EU or tax treaty countries.
- Non resident companies ultimately controlled by residents of EU member states or tax treaty countries.
Ireland is an excellent holding company location. Irish tax legislation provides for an exemption from capital gains tax for Irish tax resident companies which make disposals from substantial shareholdings (at least 5%) in trading subsidiaries tax resident in an EU or tax treaty country (including Ireland).
An excess tax credit arising in respect of a foreign dividend can be set against corporation tax arising on other foreign dividends. Surplus tax credits may also be carried forward to be set against corporation tax on foreign dividends paid to the Irish company in future years.