Home About Us Services Tax Booklet 2011 International Services Useful Links Contact Us                      Be part of Ireland's Smart Economy Advantages of locating in Ireland        Latest Economic Commentary Budget 2012 An Assessment        Starting your own Business? Tax Exemption for Start-Up Companies        Useful Resources: Key Tax Planning Dates for 2012 Tax Planning Tips for 2012                               Treasury Operations        Loans to and from Ireland          Ireland also has generous withholding tax exemption in relation to interest payments (similar to the dividend exemption above) to non resident lenders. The withholding exemptions are available for most interest payments (provided that the recipient is resident in a state in the EU or in a country with which Ireland has a double taxation treaty, and is taxable in that state on the interest). As Ireland has a large network of double tax treaties, encompassing the majority of developed countries, most payments by the Irish treasury operation can be made without withholding tax. For the purposes of receiving interest payments into Ireland, where a withholding is made in the payee’s country of residence, Ireland’s double tax treaties generally provide a credit for any withholding tax suffered.          Treasury Operations        As Ireland has no thin capitalisation rules, it is an excellent base for treasury operations, either using the Irish company as a means of distributing cash which is being generated in another group company, or alternatively obtaining financing from a third party lender, and then in turn lending the money onwards to various group companies. Profits would be earned in Ireland on the margin of lending, and as most borrower companies are likely to be resident in a country with a higher corporate tax rate than Ireland, then a tax arbitrage between rates would exist. The group company paying the interest should be allowed a deduction in the interest payments made. The Irish company receiving the interest payments should be assessable to tax at 12.5% (provided income is trading income).        Example:        Foreign Company (FC) (based in a country which has a tax treaty with Ireland which provides for no withholding tax on interest payments) requires a loan of €20m. Irish Co has built up significant cash reserve (or borrows the funds at a lower rate) and agrees to provide the finance to FC with annual interest of 5% (subject to any transfer pricing regulations in FC jurisdiction). Interest payments of €1,000,000 claimed against profits of FC Effective Corporate Tax Rate in FC = 37% FCs tax liability reduced by = €370,000 Irish Co receives interest payment of €1,000,000 Tax on profits at 12.5% = €125,000 Tax saving = €370,000 - €125,000 = €245,000 As noted above, in order to qualify for the trading rate and ensure that this structure is sufficiently robust, it is important to ensure that the Irish Co is genuinely managed from Ireland, with sufficiently qualified staff employed in order to manage the proposed operations.               If you require more information in relation to this matter please email or call us on +353 1 6120580 today.                                                          Byrne & McCall, Core B, Block 71, The Plaza, Park West, Dublin 12, Ireland   Tel: +353-1-6120580   Fax:+353-1- 6205625   Email: info@byrnemccall.ie Privacy Policy          powered by go2web