1E9Ct5D

8 I Why Ireland? A guide to doing business in Ireland I ByrneWallaceAllowance for Expenditure onKnow-howExpenditure incurred in relation to theacquisition of know-how purchased froma third party and not as part of a tradeis tax deductible. However, unlike thededuction for expenditure on scientificresearch, a deduction for expenditureon know-how is not available where it isnot related to the trade being carried onby the company in question.Know-how purchased from a relatedparty or acquired as part of a purchaseof a trade may qualify for bookdepreciation treatment.Expenditure on Scientific ResearchA deduction is available for revenueand capital expenditure on scientificresearch. This deduction is availableeven where the expenditure on theresearch is not related to the trade ofthe company in question.A deduction against profits is alsoallowable for payments, whether capitalor revenue in nature, to a body carryingon scientific research that is approvedby the Minister of Finance or to an Irishuniversity in order to undertake scientificresearch.REGULATED FUND REGIMELeveraging its favourable tax andregulatory regimes, Ireland has emergedas a world leading location for theregulated funds industry.From a tax perspective regulated fundsare subject to what is known as a “grossroll-up” regime whereby income orgains are generally not taxedimmediately and instead tax (known asexit tax) only becomes chargeable onpayments or distributions out of thefund to investors. Furthermore, non-residentinvestors are exempt from anycharge to Irish tax (including exit tax) inrespect of an investment in an Irishregulated fund.STRUCTURED FINANCE REGIMEOver a number of years, Ireland’sstructured finance legislation has beensteadily enhanced such that Ireland isnow one of the pre-eminent locationsfor the establishment of vehicles used instructured finance transactions.Irish tax law ensures that structuredfinance vehicles established in Ireland(known as S.110 companies) sufferminimal Irish tax leakage in relationto their activities and also minimisewithholding tax on payments of interestto investors in the vehicles.In particular, Ireland has emerged as thelocation of choice for US life settlementssecuritisations due to our favourable taxtreaty network which can minimise taxleakage in relation to US exit taxes.TAX ON INDIVIDUALSIncome TaxIreland has a progressive system ofincome tax which is levied at two rates.As of 2014, an individual is subject toincome tax at 20% on their first €32,800of income, though this is typicallyamended each year by the Minister forFinance. This threshold is increasedwhen the individual is married. Anindividual is then liable to a rate of 41%on the balance of their income over andabove the threshold.In addition to income tax, individuals arealso subject to two social contributions,known as the Universal Social Charge(c. 7%) and PRSI (c. 4%), on their income.Scope of Income TaxIn order to be within the charge to Irishincome tax, a person must either beresident, ordinarily resident or domiciledin Ireland.A person will be deemed to be taxresident in Ireland if they spend:• a total of 183 days in Ireland in anytax year; or• a combined total of 280 days overtwo tax years (assuming a minimumof 30 days in each tax year).If a person is resident in Ireland for threeconsecutive tax years, they then becomeordinarily resident for tax purposes. Anindividual is deemed to be domiciledin the country in which they have theirpermanent home. Domicile is generallydetermined initially by an individual’sdomicile of origin (generally the countrywhere their father is domiciled whenthey are born) and will be regardedas domiciled in that country unless adomicile of choice is acquired.Influence of domicile and residenceAn Irish resident, ordinarily resident anddomiciled person is liable to Irish incometax on worldwide income. A resident anddomiciled, but not ordinarily resident,person is liable to Irish income tax on Irishsource income and on any other incometo the extent remitted. A resident but notdomiciled person is liable to Irish incometax on Irish source income and on anyother income to the extent remitted.