Setting Up A Subsidiary In Ireland

Due to favourable laws encouraging high ease of doing business, setting up a subsidiary in Ireland is relatively seamless. If businesses have a comprehensive understanding of incorporation of  a foreign subsidiary in Ireland, registering for taxes and compliance, then the process is pretty straightforward. 

This article will cover all you need to know about establishing a subsidiary business in Ireland.

When expanding into Ireland, businesses can choose to set up a subsidiary or a branch office. 

While a branch office is suitable for businesses planning to extend their parent company in Ireland, a subsidiary is more suitable for businesses who want their Irish entity to be a separate legal entity and yet handle business affairs in Ireland.

This is important because of the way these entities are taxed. Generally, both business structures are taxed at 12.5%. However, a branch company needs to pay taxes on its revenue within the state. In contrast, an Irish subsidiary company incur taxes on 12.5% sales in Ireland and internationally.

Both branch offices and Irish subsidiary companies can incorporate their legal entity using the following business vehicles – Designated Activity Company (DAC) and Private limited companies (LTD).

Private Limited Companies (LTD)

A LTD is the most common business structure in Ireland. Foreign businesses can incorporate their Irish subsidiary when share holders wish to separate liabilities from the individual and the entity.

Designated Activity Company (DAC)

When setting up a subsidiary in Ireland, foreign investors can use this business vehicle to establish an entity which will not perform activities beyond thos mentioned in the Memorandum of Association.

Foreign employers must choose between a DAC limited by shares and the DAC limited by guarantee while incorporating this Irish entity.

Ireland branch office

Although this is outside the scope of this article, employers need to be aware of using a branch office to expand into Ireland.

Foreign investors must be aware of the following characteristics when setting up a branch office in Ireland:

• Business decisions are madce by the parent company
• Liabilties fall on the parent company
• They incur a corporate tax of 12.5% 
• Must have a registered Irish address
• All accounts must be carried out by the parent company

Setting up a subsidiary in Ireland shall cost you a minimum of €50 on account of application costs (online) and €100 when a paper application is used.

Follow the steps below when setting up a subsidiary in Ireland.

Step 1: Constitute the Memorandum of Association

According to the provision of the Companies Act 2014, before the incorporation of a foreign subsidiary in Ireland, employers must draft the Memorandum and Articles of Association. 

The MoA is viewed as the constitution for the company. The document contains details such as the company’s name, structure of the company, business activities, list of shareholders, limited liability clause, capital clause and association clause.

The MoA must be signed by the company’s director/s and company’s secretary for the document to be enforced.

Step 2: Register with the Irish CRO

The incorporation of a foreign subsidiary in Ireland is done at the Company Registration Office. Businesses must complete Form A1 and the MoA. Once all statutory documents are signed and submitted, the CRO starts to validate the application.

Step 3: Register for Irish taxes

All businesses must take care of all rules around taxation of foreign subsidiaries in Ireland. Foreign investors must register for taxes when incorporating their Irish subsidiary. This can be done with the Revenue Commissioner. 

Generally, businesses register for corporation tax, social insurance and VAT.

Step 4: Open a corporate bank account

Businesses open a bank account solely for business purposes to separate any liabilities and financial transactions from their personal affairs. The bank account shall also contain the minimum share capital – if any – deposited during incorporation.

Step 5: Appoint Directors, Company Secretary & share holders

To complete the company incorporation process, business owners must appoint a minimum of two directors and a company secretary. A private limited company can also have upto 99 shareholders.

• Parent organization maintains a greater level of control: A branch office receives all instructions from the parent company, as well as reports to it in all its decision-making processes, providing the parent company with greater control.
• Easier to integrate due to the same the laws and policies of the parent company/head office: Since a branch must be incorporated under the documentation of the parent company, the policies and culture of the parent company are easier to implement into the branch’s operations.
• It costs less to establish: Branches to not require any share capital to be provided beforehand, and the set-up costs to set up are considerably less than those of a subsidiary company.
• Offers the parent company greater tax benefits: In a majority of cases, any revenue that is earned by a branch office are handled by tax treaties signed between the country of the parent organization, and the country of the branch (eliminating double taxation). So, any taxes that the branch office has to pay are handled by the parent company, who can benefit from the taxation laws and benefits of the branch office’s location.
• It is the simplest form that a business may take for business expansion: A branch is often the simplest and safest way for a company to expand its brand into a foreign country and explore new markets. Other company types require more regulation, documentation, and compliance measures.

The following is a list of documents to fulfill compliance for foreign subsidiary in Ireland:

• Memorandum and Articles of Association
• Form A1
• Form 12 or 13 (depending on the company’s location)
• Registered office address
• Business address
• Copy of publicly filed accounting documents of the foreign company
• TR1 registration form & TR2 registration forms for VAT registration

Although 85% of businesses are Private Limited Companies, employers can use the following business vehicles to set up a foreign subsidiary business in Ireland:

• Private Limited Company (LTD)
• Designated Activity Company (DAC) limited by shares
• Designated Activity Company (DAC) limited by guarantee
• Companies limited by guarantee
• Public limited companies
• Public unlimited companies with shares
• Public unlimited companies without shares
• Branch company
• Partnerships

The Companies Act of 2014 stipulates all laws concerning all forms of business vehicles, including subsidiaries. 

The Act has chapters laying out regulations for the following aspects of establishing a subsidiary in Ireland:

• Incorporation
• Drafting the Articles of Association
• Name of the company
• Corporate capacity and authority
• Contracts
• Registered office
• Conversion of existing private company to private company limited by shares
• Allotment and transfer of shares
• Profit distributions
• Procedure for general meetings

Employers must follow changes to the Company Act of 2014 to ensure compliance for their foreign subsidiary in Ireland.

Post incorporation of a subsidiary in Ireland, employers need to ensure they are compliant with the local tax, payroll and employment laws. 

Register for taxes – An Irish subsidiary has the same compliance requirements as of an Irish company – the subsidiary must register for social security taxes, Irish taxes, file tax returns. This must be done through the Revenue’s Online System (ROS). 

Businesses must also register for Value Added Tax (VAT) and obtain a VAT number. This can take upto 28 days.

Beneficial owner – The beneficial owners is the person who owns more than 25% of the shares in a company. Businesses must declare their beneficial owner within 5 months of registration. This can be done online through the RBO website; the beneficial owner must have a Personal Public Service Number (PPSN).  

Setting up payroll – Once businesses start employing staff, they must start processing payroll – maintain financial records, salaries, issue payslips, deduct social security contributions and taxes.

Companies can do this in-house or use a payroll solution liek Multiplier to pay Irish employees.

‍Compliance in employment – All Irish employment laws apply to Irish subsidiaries. Employers need to stay cognizant of changes to laws around employment contracts, statutory benefits, minimum wages when hiring in Ireland.

As mentioned earlier, subsidiaries are subjected to the same taxation as Irish businesses. 

• Standard tax – 12.5%
• Higer rate tax – 25% (applies to income generated wholly outside Ireland; income from mining, real estate, oil extraction)
• Capital gains tax – 33%

Multiplier’s global employment solution helps you expand into Ireland without a subsidiary. 

With Multiplier, you can directly hire in Ireland without a subsidiary and any building local infrastructure. You also avoid the hassles of acquiring physical addresses, completing paperwork, setting up payroll, etc. 

With Multiplier’s SaaS-based EOR solution, you can set up sales teams to explore your product’s potential or market opportunities in the island.