Limited Companies iIreland

On 24^th  December 2023, the EU Delegated Directive (2023/2775/EU) came into force which increased the total balance sheet and turnover thresholds for micro, small, medium and large companies, including groups, as set out in the Companies Act 2014 by approximately 25% to account for inflation.

E.U. member states have until 24^th December 2024 to bring this legislation into effect.

Today, 19th June 2024, Minister for Enterprise, Trade and Employment, Peter Burke, TD signed into law the European Union (Adjustments of Size Criteria for Certain Companies and Groups) Regulations 2024 (S.I. No. 301 of 2024) which comes into operation on 1st July 2024.

These size thresholds are contained in sections 280A to 280I of the Companies Act 2014.

Company size is typically determined by the company meeting two out of the three size criteria. Other relevant factors also apply.

These adjustments will result in more companies being categorised as micro or small which will, as a result, benefit from the abridgement and audit exemption.  These changes are to apply to financial years commencing on or after 1^st January 2024.

The increased size criteria/thresholds are as follows:

• Micro Company –a balance sheet total not exceeding €450,000, a net turnover not exceeding €900,000 and no more than 10 average employees.

• Small Company – a balance sheet total not exceeding €7.5 million, a net turnover not exceeding €15 million and no more than 50 average employees.

• Small Group- group balance sheet total not exceeding €7.5 million net (or €9 million gross), group turnover not exceeding €15 million net (or €18 million gross) and no more than 50 average employees.

• Medium Sized Company – a balance sheet total not exceeding €25 million, a net turnover not exceeding €50 million and no more than 250 average employees.

• Medium Group- group balance sheet total not exceeding €25 million net (or €30 million gross), group turnover not exceeding €50 million net (or €60 million gross) and no more than 250 average employees.

• Large Company – a balance sheet total not exceeding €25 million, net turnover not exceeding €50 million and more than 250 average employees.

FINAL POINTS

• The legislation comes into effect from 1st July 2024

• The measures apply for financial years beginning on or after 1^st January 2024.

• Companies may elect to apply the measures on or after 1^st January 2023.

• Large company continues to be one that does not qualify as micro, small or medium in accordance with the above.

• All other qualifying conditions remain the same.

Please click for Regulations: https://www.irishstatutebook.ie/eli/2024/si/301/made/en/pdf

For associated articles, please click:

Annual Return for Companies – Ireland – Accounts Advice Centre

CRO mandatory requirement for company directors to provide PPSNs from 11th June 2023 – Accounts Advice Centre

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

As part of Budget 2024, the government signed off on a package of €257 million for the Increased Cost of Business (ICOB).  The main aim of this Grant is to support small and medium sized businesses by contributing towards their rising business related costs including energy, labour, rent, etc.

To Qualify for the ICOB Grant

To qualify for the ICOB grant your business must meet the following conditions:

• It must be a commercially trading business, currently operating directly from a property that is commercially rateable.

• It must have been trading on 1st February 2024 and your intention must be to continue trading for at least three months.

• Your commercial rates bill must be equal to or less than €30,000 for 2023.

• You must submit confirmation of your bank details to the relevant Local Authority.

• The business must be considered rates compliant. This includes businesses with phased payment plans in place.

• It must possess a valid Tax Registration Number.

• It must be tax compliant.

The Grant Amount

The ICOB grant is a once-off payment based on the value of the 2023 commercial rates bill.

The grant is 50% of the commercial rates bill for eligible businesses with a 2023 bill of less than €10,000.

The grant is €5,000 for eligible businesses with a commercial rates bill of between €10,000 and €30,000.

Businesses, however, with a commercial rates bill over €30,000 are not eligible to receive this ICOB Grant.

Please be aware that Public institutions and financial institutions will not be eligible for the grant, except for Credit Unions and specific post office services.

Vacant properties will also not be eligible for the ICOB Grant.

It is important to keep in mind that this ICOB Grant is not a Commercial Rates waiver. Rateable businesses are still required to pay their commercial rates to their local authority.

Today, the Government issued two important updates concerning the Increase in Grant Scheme (ICOB):

• They specifically targeted businesses in the Retail and Hospitality sectors. Businesses operating within these sectors are now eligible for a second grant payment which is equivalent to the initial ICOB Grant amount.

• The closing date for eligibility confirmation which was 1st May 2024 has now been re- opened from 15^th May to 29^th May 2024.

Local Authorities are expected to begin paying out the ICOB Grant to eligible businesses in the coming weeks.

For further information, please follow the links:

https://www.mycoco.ie/icob

https://www.dlrcoco.ie/sites/default/files/2024-03/ICOB%20User%20Guide.pdf

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

When setting up a foreign company in Ireland, the first step is to decide on the most appropriate structure – a branch or a subsidiary company.

• A branch is not a separate legal entity in its own right.
• Instead, it’s an arm of the external company operating in Ireland.
• In other words, a branch office is an extension of the parent company abroad.
• A branch performs the same business operations and operates under the legal umbrella of the parent/holding/external company.
• The parent/external/holding company has complete control over any of the branch’s decisions.
• All liabilities incurred by the branch are ultimately those of the head office located overseas.

• A subsidiary, on the other hand, is an independent legal entity.
• It can be either partially or wholly owned by the foreign company.
• It has the same compliance requirements as a that of a Limited Company in Ireland.
• A subsidiary is generally considered to be more tax-efficient than a branch because it’s liable to Irish Corporation Tax on its worldwide income.
• The subsidiary will be required to file an A1 and Constitution with the Companies Registration Office.

SUBSIDIARY

Registering a subsidiary is just like setting up a new company in Ireland.

It is an independent legal entity which is different to the parent or holding company.

Incorporation of a subsidiary requires the completion of Irish Companies Registration Office (CRO) statutory documentation and the drafting of a constitution. The only difference is that the parent company must be either the sole or majority shareholder of the new company i.e. holding at least 51% of the shares.

The subsidiary is generally registered a private company limited by shares.

When setting up a company with another company as the shareholder, someone must be appointed who is authorised to sign on behalf of the company.  This would usually be a Director or another authorised person.

The liability of the parent company is limited to the share capital invested in the Irish subsidiary

With a Parent company as the shareholder, all the existing shareholders of that parent company have the same percentage stake in the new Irish subsidiary.

As with all new Irish companies, the subsidiary will require at least one director who is an EEA resident and a company secretary.  It will also be required to have a registered office address and a trading office within the State.  The company must purchase an insurance bond if none of the directors are EEA resident, unless, the subsidiary can demonstrate that it has a “real and continuous economic link” to Ireland.

An Irish subsidiary company can avail of the 12½% Corporation Tax rate on all sales, both within Ireland as well as internationally.

BRANCH

A branch is not a separate legal entity.

It is generally considered to be an extension of its parent company abroad.

The parent company is fully liable for the Branch and its activities.

An Irish branch will only be allowed to carry out the same activities as the parent company.

In accordance with the Companies Act 2014, a branch must be registered within thirty days of its establishment in Ireland.

As a branch is deemed to be an extension of the external company, its financial statements would be consolidated with those of the parent company and legally it cannot enter into contracts or own property in its own right.

An Irish branch company only qualifies for the 12½% Corporation Tax on sales within Ireland.

A Branch is required to file an annual Return with a set of financial statements of the external company, with the CRO.

Disclaimer This article is for guidance purposes only. Please be aware that it does not constitute professional advice. No liability is accepted by Accounts Advice Centre for any action taken or not taken based on the information contained in this article. Specific, independent professional advice, should always be obtained in line with the full, complete and unambiguous facts of each individual situation before any action is taken or not taken.  Any and all information is subject to change.

On 29th July 2019 the Central Register of Beneficial Ownership was launched in Ireland.  This new legal requirement forms part of Ireland’s implementation of the 4th EU Anti-Money Laundering Directive.

The new Central Register of Beneficial Ownership requires that all companies file details of their Ultimate Beneficial Owners with the Companies Registrations Office.

Under the Regulations, the commencement date for the obligation to file on the Central Register was 22^nd June 2019 and companies must deliver their beneficial ownership information to the CRO by 22^nd November 2019.

Going forward, newly incorporated companies will have five months from the date of incorporation to register their information.

It is considered a breach of statutory duty not to file within the deadline date.

This is a new filing requirement, in addition to the other usual requirements, for example, filing a B1 annual return.

A beneficial owner is defined an individual/natural person who owns or controls directly or indirectly:

1. more than 25% of the equity
2. more than 25% of the voting rights or
3. has capacity to control the company by other means.

In situations where no beneficial owners can be identified, the names of the directors, senior managers or any other individual who exerts a dominant influence within the company must be entered in the register of beneficial owners.  In other words, where the beneficial owners are unknown, the company must take “all reasonable steps” to ensure the beneficial ownership information is gathered and recorded on the register.

The following information is required to be filed with the RBO in respect of each beneficial owner:

1. The name,
2. Date of Birth,
3. Nationality,
4. Residential Address,
5. PPS Number, if applicable – The Registrar will not disclose any PPS Numbers and will only use them for verification purposes.
6. A Statement of the nature and extent of the ownership interest held or extent of the control exercised,
7. The date of entry on the register as a beneficial owner,
8. The date of ceasing to be a beneficial owner.

For non-Irish residents who do not hold a PPS number, a Transaction Number must be requested from the Companies Registration Office.  This is done by completing and submitting a Form BEN2 and having it notarised in the relevant jurisdiction.

Failure to comply with the Regulations is an offence and shall be liable on summary conviction to a Class A fine, or conviction on indictment to a fine up to €500,000.

Going forward, any changes to a Company’s Internal Beneficial Ownership Register must be updated in the Central Register within fourteen days of the change having occurred.

Once a company has been dissolved the registrar will delete all information held in relation to that entity, after the expiration of ten years.

Who has access to this information?

As required by EU anti-money laundering laws, members of the public will have restricted access to the CRBO including:

• The name, month/year of birth, country of residence and nationality of each beneficial owner.
• The nature and extent of the interest held or the nature and extent of the control exercised by the beneficial owner.

The 2019 regulations provide for the following to have unrestricted access to the Central Register:

• An Garda Síochána
• The Revenue Commissioners
• Members of the Financial Intelligence Unit Ireland
• The Criminal Assets Bureau

If you are facing retirement or redundancy, it is important to understand the tax treatment of your severance package. The following attract beneficial tax treatment:

1. Statutory redundancy payments
2. Ex-gratia Termination payments
3. Pension lump sums

Statutory redundancy payments

Statutory redundancy payments are tax exempt.  They are based on two weeks’ pay for every year of service plus one additional week’s pay with maximum weekly earnings capped at €600 per week.  Income in excess of €31,200 is ignored when calculating Statutory redundancy payments.

Ex-gratia termination payment

Lump sum payments paid by an employer on retirement or redundancy may be taxable.

All or part of the ex gratia termination payment may qualify for tax relief.

The termination payment tax reliefs are not available, however, to any payments made to an employee under the terms of their employment contract. In other words, any contractual payments made by the company to its employee are treated in the same way as a salary payment.

Only complete years are counted for purposes of the reliefs i.e. part of a year cannot be taken into account for the purposes of the calculation.

There are three types of tax reliefs available:

1. Basic Exemption – This exemption is calculated as €10,160 plus €765 for each complete year of service.

2. Increased Basic Exemption – The Basic exemption may be increased by a further €10,000 less the current actuarial value of any tax free pension lump sum receivable now or in the future from the company/occupational pension scheme. This relief is available provided the employee hasn’t claimed an exemption in excess of the Basic Exemption within the previous ten years.

3. Standard Capital Superannuation Benefit (SCSB) relief – This Relief is based on the employees’ average annual remuneration for the last 36 months up to the date of termination.

The tax free amount is calculated as follows:

(A × B) − C

15

where

A = the average remuneration for the last 36 months of service up to the date of termination.  The value of any taxable benefits can be included in the figure for emoluments.

B = The number of complete years of service.

C = Any tax free lump sum received or receivable under the employer/occupational pension scheme.

There is a lifetime cap of €200,000 on the tax-free amount of a termination payment an employee is entitled to receive.

The amount of the termination payment in excess of the relevant exemption/relief is liable to Income Tax and Universal Social Charge at the employee’s marginal rates.

There is no employee and employer’s PRSI payable on a termination payment.

Before making any decision, please keep in mind that claiming either (i) the Increased Basic Exemption or (ii) the SCSB Relief can affect an employee’s ability to receive a tax-free lump sum from their employer pension scheme on retirement.

Pension Lump Sums

When you retire, you can opt to take a tax-free retirement lump sum which is capped at €200,000 under current legislation.

The amount between €200,001 and €500,000 is taxable at the standard rate of tax being 20%

Any amount over €500,000 is taxed under the Pay As You Earn system at the taxpayer’s marginal tax rate of 40%.

For further information on Termination Payments, please click: https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-05/05-05-19.pdf

Please be aware that the information contained in this article is of a general nature.  It is not intended to address specific circumstances in relation to any individual or entity. All reasonable efforts have been made by Accounts Advice Centre to provide accurate and up-to-date information, however, there can be no guarantee that such information is accurate on the date it is received or that it will continue to remain so. This information should not be acted upon without full and comprehensive, specialist professional tax advice.

On 24^th October 2013 the Finance (No. 2) Bill 2013 was published which confirmed the measures introduced by the Budget.

As the main priorities in Ireland at the moment are job creation and enterprise growth the following tax packages were introduced:

I.            ENTERPRISE RELIEF– This is a new Capital Gains Tax relief which is aimed at entrepreneurs investing in assets used in new productive trading activities.  The purpose is to encourage individuals to reinvest the sales proceeds from the sale/disposal of a previous asset into new productive trading or a new company.  The main aspects of the relief are as follows:

(a)          It applies to an individual

(b)         who has paid Capital Gains Tax on the sale/disposal of an asset and

(c)          invests in a new business

(d)         at a cost of at least €10,000

(e)          between 1^st January 2014 and 31^st December 2018.

(f)           The investment cannot be disposed of earlier than three years after the investment date.

(g)          Once the new investment is sold the Capital Gains Tax arising with be reduced by the lower of:

• the C.G.T. paid by the individual on a previous disposal of assets from 1^st January 2010 onwards and
• 50% of the C.G.T. arising on the disposal of the new investment.

What type of assets are involved?

The assets must be chargeable business assets.  Goodwill is included in this definition as are new ordinary shares in micro, small or medium sized enterprises after 1^st January 2014.  The main conditions are:

• The investor has control of the company and is a full time working director and
• The company is carrying on a new business.

NOTE: Please be aware the commencement of this measure is subject to E.U. State Aid approval.

II       START YOUR OWN BUSINESS – This is an exemption from Income Tax but not from Universal Social Charge and PRSI for a long term unemployed individual who is starting up a new, unincorporated business.

What is meant by long term unemployed?

         It means some one who is continuously unemployed for the previous fifteen months.

What does this measure actually provide?

         The first €40,000 of profits earned per annum will be exempt from Income Tax for two years.

III     ENHANCEMENT OF EMPLOYMENT & INVESTMENT INCENTIVE – The main points of this new measure are:

• The initial 30% relief available for investments under the E.I.I. has been removed from the High Earners Restriction for three years.
• A maximum of €115,000 can be invested per individual per annum.
• The aim is to encourage individuals to invest more funds in the E.I.I. Scheme which focuses on job creation and expansion.

IV        STAMP DUTY – The transfer of shares listed on the ESM (Enterprise Securities Market) of the Irish Stock Exchange will be exempt from Stamp Duty.  The ESM is the ISE’s market for growth companies.

The current stamp duty rate is 1%.

NOTE:  Please be aware that this measure is subject to a commencement order.

V         RESEARCH & DEVELOPMENT TAX CREDIT – The aim of this change is to assist smaller companies to access the tax credit without reference to the base year.  The following changes have been made and will take place in the accounting periods starting on or after 1^st January 2014:

• The amount of expenditure eligible for the R&D Tax Credit (without reference to the 2003 base year) has increased from €200,000 to €300,000.
• In order to qualify for the R&D Tax Credit, the limit on the amount of expenditure on research and development outsourced to third parties has increased from 10% to 15%.
• With regard to existing clawback provisions, under Section 766(7B)(c), the Bill provides that the tax foregone can be recovered from the company instead of the employee.

VI        VAT – There have been two major VAT changes:

• The annual threshold for VAT on a cash receipts basis has increased from €1.25m to €2m.
• This comes into effect on 1^st May 2014.
• The 9% rate for Tourism related goods and services has been retained so as to encourage growth in small businesses within the Irish Tourism Sector.

PART II

The construction and building sectors saw the introduction of welcome changes:

I          LIVING CITY INITIATIVE – The urban regeneration initiative has been extended to include residential properties constructed up to and including 1914 and covers the cities of Cork, Dublin, Galway and Kilkenny.

The aim is to stimulate regeneration of retail and commercial districts as well as to encourage families to return to historic buildings in Irish city centres.

II          HOME RENOVATION INCENTIVE – This is a new incentive for home owners who:

1. carry out repair, renovation or improvement work on their principal private residence
2. from 25^th October 2013 to 31^st December 2015.
3. Qualifying expenditure carried between 1^st January 2016 and 31^st March 2016 can be treated as having been incurred in 2015 if planning permission was granted before 31^st December 2015.

What kind of relief is available?

Relief is available in the form of an Income Tax Credit of 13½% on qualifying expenditure between €5,000 (minimum) and €30,000 (maximum).

What does “Qualifying Work” mean?

Building extensions, window fittings, plumbing and tiling, plastering, etc. carried out by tax compliant builders.

How does the relief work?

1. The tax credit will be split over two years after the year in which the work was carried out.
2. Any grant aided compensation or tax relief received will reduce the relief available.
3. The home owner must be LPT (Local Property Tax) compliant.

Note: It is essential to keep in mind that the Revenue on-line system will track information on contractors involved and work carried out.

PART III

There were a number of other budget changes which will have a huge impact on our economy:

One Parent Family Tax Credit

• The One Parent Family Tax Credit was replace by a new Single Person Child Carer Tax Credit.
• This takes effect from 1^st January 2014.
• There is no change to the value of the credit or the additional standard rate band.
• The new credit will only be available to the principal carer of the child.

Medical Insurance Tax Relief

• The Bill restricted the Medical Insurance Tax Relief.
• The maximum amount of the Medical Insurance Premium which can qualify for relief at the standard tax rate will be €1,000 for an adult and €500 per child.
• No tax relief will be available on any excess amounts.
• This charge relates to contracts entered into or renewed on/after 16^th October 2013.

Top Slicing Relief

Top Slicing Relief has been abolished completely for all ex-gratia lump sums paid on or after 1^st January 2014.

D.I.R.T. (Deposit Interest Retention Tax)

• The standard D.I.R.T. rate has increased from 33% to 41%.
• The D.I.R.T. rate of 36% has been abolished.
• All deposit interest will be liable to tax at the 41% rate.
• These changes apply to payments made on or after 1^st January 2014.
• The exemption for interest on “Special Term Accounts” will be abolished for accounts opened after 15^th October 2013.
• Credit Union “Regular Share Accounts” will be subject to D.I.R.T. on interest and dividends paid on or after 1^st January 2014.

COMPANY TAX RESIDENCE

There were changes to the company tax residence rules.

The company will be regarded as Irish resident for tax purposes where an Irish incorporated company is managed and controlled in another E.U. member state or treaty state and is not regarded as tax resident in any territory.

This applies from 24^th October 2013 for companies incorporated after that date or 1^st January 2015 for companies incorporated before 24^th October 2013.