Ireland: a prime location for business
Ireland has become home to a host of giant global firms for the past 20 years, with Google, Amazon and others choosing the country as a base for their European operations.
But it’s not only the international behemoths that see Ireland as a prime business location, small and medium-sized businesses from around the world are also beating a path to Ireland’s door.
Often great things come from adversity. When the dotcom bubble burst at the turn of the millennium, it left Dublin with several large empty data centres gathering dust after the companies that operated them went bust. But without those data centres it is arguable that US search engine giant Google would not have made Dublin its European base back in 2003.
When Google’s top brass came to look at locations in Ireland, the availability of the data centres was crucial. It meant Google would not have to build their own from the ground up – everything was already in place for the US firm to move straight in.
Indeed, Google’s decision to set up in Dublin was a watershed moment for the city and the country. Taking the company’s lead, other tech heavyweights soon followed including Twitter, Facebook, Amazon, Etsy and Eventbrite.
But it is not just US tech giants that have set up in Ireland in the past few decades. Plenty of small and medium-sized businesses in a range of sectors have chosen to come to the country and there are a myriad of reasons for doing so.
As the brace of US and Asian companies quickly discovered, Ireland has no shortage of talented and highly qualified graduates. Indeed, the country is in the top 10 nations in the world for the quality of its education system and knowledge transfer between universities and businesses. In addition, Ireland has the most employable graduates in the world, according to IDA Ireland. More than 30% of third-level students in Ireland take up courses in science, technology, engineering or maths – providing the sort of graduates that overseas companies covet.
Meanwhile, schemes are afootby the Irish government and various educational bodies to provide training for a vast range of skillsets in the country. Skillnet Ireland, for instance, aims to increase participation in enterprise training and workforce learning, and supports more than 16,000 companies, providing learning experiences for 55,000 trainees each year.
Ireland also has one of the youngest workforces in Europe, with a third of the population aged under 25 years old. The workforce is industrious too – figures from the Organisation for Economic Co-operation and Development (OECD)for 2017 showed Ireland as first in the world for labour productivity.
Tax and spend
Another major pull for companies large and small is Ireland’s tax regime. In Ireland, corporation tax is just 12.5% – compare that to the UK’s 19% basic plus dividend taxes and 35% in the US. In addition, Ireland has favourable tax breaks, including just 6.25% for revenue from certain intellectual property.
Further favourable tax measures include a 25% tax credit against research and development costs. Moreover, Ireland has double taxation agreements with more than 60 countries, including every one of its major trading partners.
Nevertheless, it should be noted that Ireland is no tax haven – the Irish tax regime complies with OECD guidelines and EU competition law. While there is a relatively light-touch regime, this should not be confused with comprehensive measures to ensure businesses comply with national and international financial regulations.
However, as every company focuses on the bottom line, the opportunity to pay less tax – and to do it legitimately – means Ireland makes economic sense for businesses. Less tax is not the only financial consideration for businesses looking to set up in Ireland. The country is generally regarded as pro-business – and indeed was said to be one of the 10 best countries to do business in 2018 by Forbes. Ireland is also the second most competitive economy in the EU and the seventh most competitive in the world, according the IMD business school in Lausanne, Switzerland.
The country also has a generally lower cost of living than many other countries in Europe, especially when comparing Dublin(not to mention neighbouring counties in close proximity to Dublin) to other centres such as London. This can make a crucial difference to the bottom line and the lifestyle of expats and local employees alike.
The economy is also growing quickly – or at least it was until the Covid-19 pandemic hit–and had the fastest rate of GDP growth in any of the Eurozone countries for the past couple of years, according to IDA Ireland, as well as ahead of other leading global nations.
With the favourable and stable economic conditions in Ireland, it is unsurprising that it has been a hotbed of inward investment in recent years, especially in the ICT, life sciences and financial services sectors. Chinese investors in particular have been investing significant sums in Irish businesses in recent years, as they see the country as a convenient bridge to other European markets.
Local expertise is critical
But for businesses that want to relocate to Ireland, there are numerous factors that need to be given careful consideration.
Firstly, local expertise can be crucial and consulting with local accountants and legal professionals about a move from the UK to Ireland makes sense for business owners. While the UK and Ireland may be close geographical neighbours, the legal and financial regimes have significant differences. These regulatory differences must be known of and accounted for, or it could lead to legal trouble down the line if rules are breached.
Company owners should discuss their business and aims for it in Ireland with local lawyers and accountants at an early stage; the professionals can give advice on the best way to proceed and give the legal and financial information needed for the business to stay compliant and avoid any time-consuming pitfalls.
For instance, local accountants can advise on matters that include the most appropriate trading structures for the Irish business, such as whether it should be a private limited company or otherwise. They can give guidance on the likely tax liabilities of such structures and advise on the difference between accounting requirements and relevant withholding tax requirements. They can also tap into their existing professional networks to help identify business opportunities for investors.
Getting in touch with the Department of International Trade is also recommended for businesses that are moving to Ireland, especially if they want to keep trading with clients back in the home country.
Likewise, business owners should contact the Department of Foreign Affairs and Trade, which can give advice on the potential ramifications of Brexit and what may have to be done to set up an Irish operation.
Think carefully about relocating
Relocating to any country is complicated, and Ireland is no exception. For instance, managers have to think about acquiring an office or factory space and setting up the utilities for them, as well as shipping equipment out to the new premises and potentially relocating existing employees. However, there are local international relocation experts available who can manage a move on behalf of a business, helping the move to be as smooth as possible and letting the owners get on with running the business.
One of the most important steps in relocating to Ireland is establishing the company as an official business in Ireland by registering it with the Companies Registration Office. After the registration has been improved, businesses can enjoy all the benefits of trading in Ireland, including the aforementioned tax breaks and free trade access.
Nevertheless, business owners should not be tempted to run an Irish operation as a subsidiary to a UK business, for example, as they would pay tax in Ireland but also be eligible to pay Corporation Tax in the UK as well. For many UK companies, it may makefar more sense for the UK company to be dissolved and a new one is started in its place. Each jurisdiction is different, so it’s well worth checking all these potential grey areas before making the final decision.
EU and Brexit
Regarding that thorny question of Brexit, Ireland’s professional services are geared up to advise on the implications of Brexit – and what that means for UK. For the moment, access to EU markets is attracting many UK businesses to Ireland, and this will probably continue for some time to come. With the UK having left the 27-country strong trading bloc – the transition period ends on December 31 this year – it means Ireland is the only native English-speaking nation in the EU. For many companies, the ability to speak in English is a big plus, especially for North American, Australian and East Asia firms.
Whatever the outcomes of the trade deal between the UK and EU, Ireland will be a more attractive proposition for UK, US and global businesses going forward. For example, if there’s no free trade agreement, the UK will be subject to trade tariffs and barriers on certain products while Ireland will remain part of the EU free trade area. For SMEs, having a base in Ireland will be hugely beneficial for tariff-free and frictionless trade.
Furthermore, an Irish HQ will mean that any companies moving to Ireland will still be close to the UK.
Again, it’s worth noting that for a business to take advantage of these opportunities and mitigate any effects of Brexit, take expert legal and financial advice from the experts on the ground in Ireland. This is absolutely critical.
With such conditions in Ireland’s favour, the reasons to set up operations in the country are compelling and are set to remain so for many years to come.
For more information about the challenges and opportunities when running a business or expanding to Ireland please get in touch with Malone & Co via our website – https://www.maloneaccountants.ie/contact-us/
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