A company is broadly regarded as resident in Ireland for tax purposes either by being incorporated in Ireland, or by virtue of it being centrally managed and controlled in Ireland (irrespective of where it is incorporated).
It is permissible under Irish tax legislation for an Irish incorporated company to migrate its residence to a foreign jurisdiction. In order to become foreign tax resident, the Irish company would have to transfer the location of the company’s effective management from Ireland to the foreign jurisdiction. To that end all the board meetings, strategic decisions and negotiation of contracts should take place outside of Ireland. Foreign tax resident directors may also need to be appointed to the board.
The company will be required to do a corporation tax return until the date of cessation of operations in Ireland. An important point to note is that an exit tax is imposed on companies that cease to be Irish tax resident in the form of a charge to capital gains tax on the market value of company assets at the date of cessation. It may be possible to defer the charge where the company becomes tax resident in another EU/EEA jurisdiction.
The exit charge will not apply where –
- The assets continue to be used in Ireland for the purposes of a trade carried on by a branch or agency, or
- At least 90% of the Irish company’s issued share capital is held by a non- Irish tax resident company which is ultimately controlled by residents of a country with which Ireland has a tax treaty.
The residency rules are also pertinent for companies looking to relocate to Ireland following Brexit. To that end it is important when considering moving your company to engage your advisors early to ensure all angles are covered.