Income from foreign trade and corporate tax

J

jpquantin

Guest
Hello everybody,

I'm foreign and currently studying the setup of a small business, using a limited single member company. Part or all of my trade (consulting services) would come from activities in foreign countries, in Europe.

Would this income from activities in foreign countries be treated under Case III of Schedule D (corporate tax : 25%) or would it be considered under Case I (12,5%) ?

In terms of foreign income, the law for Schedule D, case III only mentions :

( e ) income arising from securities outside the State except such income as is charged under Schedule C;

( f ) income arising from possessions outside the State;

but some contacts with accountants in Ireland advised me that if I carry no trade in Ireland, the profit would be taxed at 25%. Who is right ?

Thanks in advance for your answer and help !

Regards.
 
Firstly, is using a company the right way to go? Have you taken advice?

If you are a company director concluding contracts and working abroad, it may be possible that you are creating a permanent establishment in the other country and have corporate tax issues there.

If you set up a company in Ireland, it could be a close service company and liable to surcharges in addition to the basic corporation tax liability - this would be another complication.

I would suggest you take professional advice before setting up a company. Then you could look at how income is taxed.

www.taxingtimes.ie
 
Domo,

I've taken some advice here and there (lawyers, accountants), but not a comprehensive professional advice.

It seems anyway that, in order for such a setup to be viable, I should have part of the business carried out in Ireland, and a physical business establishment there also. The second point is easy to achieve, but the first one ... it depends on the opportunities I will have, which spans all Europe. And I cannot predict in advance that my clients will be in a country or another ...

Thank you for your answer. I'm going to seek some comprehensive professional advice.
 
Firstly, will your company be classified as resident in Ireland i.e. Under double taxation agreements you will have to apply the following rule - Where does the central management and control of the company actually abides?

If Ireland, taxed on Worldwide Income.

Non-resident companies – Irish branch
A company which is not resident in Ireland (i.e. a non-Irish resident company) is only subject to corporation tax if it carries on a trade through a branch or agency in Ireland.



If it does carry on a trade in Ireland then it is subject to Irish corporation tax on:
  • Any trading income arising from the branch or agency.
  • Any income from property or rights used by, or held by, or for, the branch or agency, and
  • Chargeable gains arising from assets which are situated in Ireland and which are used in or for the purposes of the trade carried on through the branch or agency.
Non-Resident Companies – No Irish Branch
A non-resident company which does not have a branch or agency in Ireland will be subject to income tax on any income derived from sources in Ireland at 20%.

A non-resident company which does not have a branch or agency in Ireland and has no Irish source of income is not subject to Irish corporation tax.

In summary, I presume you want to reside the company in Ireland for tax purposes i.e. 12.5%. Just make sure you have directors meetings etc in Ireland (i.e. the company is being controlled and directed from Ireland). Once thats done, you are taxed on worldwide income under Case I/II.

Again, please seek specific professional advice as setting this up wrong, could cost you in the long run.

Hope that helps

Please feel free to contact me.
Patrick
 
Just to be clear, once company is resident in Ireland, taxed here.

Having a trade in Ireland etc is not relevant here.

Have an establishment eg rented office space and have your meetings here.

Lots of UK companies are 'based here' for the benefit of the CT rate of 12.5%. Based here, being that they have atiny office in the IFSC (usually a rented shared office facility) and the directors fly over for their meetings.
 
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