Understanding International
Business in Ireland
www.eidebai lly.com
Ireland’s Tech Cluster –
The Leading Location for US
Companies expanding to
Europe Deirdre Moran
IDA Ireland
June 2015
Why Internationalize?
R
3
World Leaders Choose Ireland….
4
….& the Next Wave of Fast Growing Companies
Why Ireland?
2014 Ranking
Voted Ireland as 1 of the Top 5 Best Countries
in the World
to do Business
6
Why Ireland?
ase of doing
Business
7
ARE THEY HAPPY?
“Ireland is increasingly one of the
world’s centres of talented people
with international language skills
and experience in working for fastgrowing internet companies. This
makes it the ideal place from which
to support our continuing growth in
Europe and further abroad.”
Connie Gibney, International HR
Director, LinkedIn
ARE THEY HAPPY?
“The calibre of highly qualified,
talented people and the
Government’s commitment to
science, technology and innovation,
gave us confidence that this was the
is increasingly one of the
ideal setting for our “Ireland
new Global
Technologies office.”world’s centres of talented people
with
international language skills
Rob Reeg, president,
MasterCard
and experience in working for fastTechnologies
growing internet companies. This
makes it the ideal place from which
to support our continuing growth in
Europe and further abroad.”
Connie Gibney, International HR
Director, LinkedIn
ARE THEY HAPPY?
“The calibre of highly qualified,
“Sligo is an important part of
talented people and the
Abbott's pharmaceutical
Government’s commitment
to
manufacturing network and we are
science, technology and
innovation,
pleased to expand it to support
gave us confidence that
this production
was the needs. The success
future
is increasingly
one
ideal setting for our “Ireland
new
Global
of our
Sligo
facility is due
to of
thethe
centres
ofstaff
talented
Technologies office.”world’s
dedication
of its
and people
with
international language skills
management.”
Rob Reeg, president,
MasterCard
Dr.experience
Azita Saleki-Gerhardt,
and
in working President,
for fastTechnologies
Global Pharmaceutical
Operations,
growing
internet companies.
This
Abbott.
makes
it the ideal place from which
to support our continuing growth in
Europe and further abroad.”
Connie Gibney, International HR
Director, LinkedIn
ARE THEY HAPPY?
“The calibre of highly qualified,
“Sligo is an important part of
talented people and the
Abbott's pharmaceutical
Government’s commitment
to
manufacturing
network
we are
city
of Dublin
offers and
a highly
science, technology“The
and
innovation,
pleased
to expandan
it to support
talented
workforce,
gave us confidence that
this production
was the needs. The success
future
extraordinary
culture, and
a of the
“Ireland
is increasingly
one
ideal setting for our
new
Global
of our
Sligo
facility is due
to the
diverse
array
of
thriving
centres
ofstaff
talented
Technologies office.”world’s
dedication
of its
and people
industries.”
with
international language skills
management.”
Rob Reeg, president,
MasterCard
Justin
Endres
– VP
Sales & Ops,
Dr.experience
Azita Saleki-Gerhardt,
President,
and
in working
for fastTechnologies
Global Pharmaceutical
Operations,
Webroot
growing
internet companies.
This
Abbott.
makes
it the ideal place from which
to support our continuing growth in
Europe and further abroad.”
Connie Gibney, International HR
Director, LinkedIn
ARE THEY HAPPY?
“The calibre of highly qualified,
“Sligo is an important part of
talented people and the
Abbott's pharmaceutical
Government’s commitment
to
manufacturing
network
we are
city
of Dublin
offers and
a highly
science, technology“The
and
innovation,
pleased
to expandan
it to support
talented
workforce,
gave us confidence that
this production
was the needs. The success
future
extraordinary
culture, and
a of the
“Ireland
is increasingly
one
ideal setting for our
new
Global
of our
Sligo
facility is due
to the
diverse
array
of
thriving
centres
ofstaff
talented
Technologies office.”world’s
dedication
of its
and people
industries.”
with
international language skills
management.”
Rob Reeg, president,
MasterCard
Justin
Endres
– VP
Sales & Ops,
Dr.experience
Azita Saleki-Gerhardt,
President,
and
in working
for fastTechnologies
Global Pharmaceutical
Operations,
Webroot
growing
companies.
This
“Dublin was chosen
due to internet
its
Abbott.the ideal place from which
strong technology makes
cluster,itthe
to support
our continuing growth in
availability of our required
skill
Europe
and further abroad.”
sets and the strength
of “Brand
Dublin” internationally”
Connie
Gibney, International HR
Kruti Patel Goyal, Vice
President
Director,
of International
at Etsy LinkedIn
ARE THEY HAPPY?
“The calibre of highly qualified,
“Sligo is an important part of
talented people and the
Abbott's pharmaceutical
Government’s commitment
to
manufacturing
network
and
we are
“The
city
of Dublin
offers
a highly
science,
technology
innovation,
“Dublin
was a naturaland
fitpleased
for
us – it
was
easy
to
to expandan
it to support
talented
workforce,
set
up,
easy
to
get
the
talent
we
needed,
&
has
gave us confidence that
this production
was the needs. The success
future
proximity
to
key
markets.
We
knew
that
we
extraordinary
culture,
and
a of the
“Ireland
is increasingly
one
ideal setting for our
new
Global
of
our
Sligo
facility
is
due
to the
could get a high quality
workforce
here
&
we
diverse
array
of
thriving
world’s
centres
of talented people
Technologies
dedication
were able to office.”
get set up very
quickly”of
– its staff and
industries.”
with
international
language skills
management.”
RobJames
Reeg,
president,
MasterCard
Sherrett
& Ali
Rayl,
Slack Technologies
Justin
Endres
– VP
Sales & Ops,
Dr.experience
Azita Saleki-Gerhardt,
President,
and
in working
for fastTechnologies
Global Pharmaceutical
Operations,
Webroot
growing
companies.
This
“Dublin was chosen
due to internet
its
Abbott.the ideal place from which
strong technology makes
cluster,itthe
to support
our continuing growth in
availability of our required
skill
Europe
and further abroad.”
sets and the strength
of “Brand
Dublin” internationally”
Connie
Gibney, International HR
Kruti Patel Goyal, Vice
President
Director,
of International
at Etsy LinkedIn
ARE THEY HAPPY?
“The calibre of highly qualified,
“Sligo is an important part of
talented people and the
Abbott's pharmaceutical
Government’s commitment
to
manufacturing
network
and
we are
“The
city
of Dublin
offers
a highly
science,
technology
innovation,
“Dublin
was a naturaland
fitpleased
for
us – it
was
easy
to
to expandan
it to support
talented
workforce,
set
up,
easy
to
get
the
talent
we
needed,
&
has
gave us confidence that
this production
was the needs. The success
future
proximity
to
key
markets.
We
knew
that
we
extraordinary
culture,
and
a of the
“Ireland
is increasingly
one
ideal setting for our
new
Global
of
our
Sligo
facility
is
due
to the
could get a high quality
workforce
here
&
we
diverse
array
of
thriving
world’s
centres
of talented people
Technologies
dedication
were able to office.”
get set up very
quickly”of
– its staff and
industries.”
with
international
language skills
management.”
RobJames
Reeg,
president,
MasterCard
Sherrett
& Ali
Rayl,
Slack Technologies
Justin
Endres
– VP
Sales & Ops,
Dr.experience
Azita Saleki-Gerhardt,
President,
and
in working
for fastTechnologies
“The
ongoing
success
of McAfee
Global Pharmaceutical
Operations,
Webroot
growing
internet
companies.
This
“Dublin was chosen due to its in Ireland and the high quality of
Abbott.the ideal place from which
strong technology makes
cluster,itthe
workforce
here led
to support
ourthe
continuing
growth
in to the
availability of our required
skill
decision
to locate this R&D
Europe
and
further
abroad.”
sets and the strength of “Brand
investment in Cork.”
Dublin” internationally”
Paul
Walsh, VP Engineering,
Connie
Gibney,
International
HR
Kruti Patel Goyal, Vice President
McAfee
International
Director,
of International
at Etsy LinkedIn
ARE THEY HAPPY?
“The calibre of highly qualified,
“Sligo is an important part of
talented people and the
Abbott's pharmaceutical
Government’s commitment
to
manufacturing
network
and
we are
“The
city
of Dublin
offers
a highly
science,
technology
innovation,
“Dublin
was a naturaland
fitpleased
for
us – it
was
easy
to
to expandan
it to support
talented
workforce,
“
Ireland
is
a
great
place
to
run
set
up,
easy
to
get
the
talent
we
needed,
&
has
gave us confidence that
this production
was the needs.
future
The success
proximity
to
key
markets.
We
knew
that
we
extraordinary
culture,
and
a of the
our
business.
We
have
access
to
is increasingly
one
ideal setting for our “Ireland
new
Global
of
our
Sligo
facility
is
due
to the
could get a high quality
workforce
here
&
we
diverse
array
of
thriving
creative,
youngcentres
peopleits
who
see
world’s
of
talented
Technologies
dedication
staff
and people
were able to office.”
get set up very
quickly”of
–
industries.”
Dublin
as
a international
desirable
place
to
with
language
skills
management.”
RobJames
Reeg,
president,
MasterCard
Sherrett
& Ali
Rayl,
Slack Technologies
Endres
– VP
Sales & Ops,
People
are coming
to
Dr.experience
Azita
Saleki-Gerhardt,
President,
and
in working
for fastTechnologieswork.Justin
“The
ongoing
success
of McAfee
Global
Pharmaceutical
Operations,
Webroot
Ireland
from
other
parts
of
growing
internet
companies.
This
“Dublin was chosen due to its in Ireland and the high quality of
Abbott.
Europe.makes
We
are
growing
itthe
the ideal place from which
strong technology
cluster,
workforce
here led
significantly
in skill
Dublin.
We
are growth
to support
ourthe
continuing
in to the
availability of
our required
decision
to locate this R&D
very
committed
here
and
we’re
Europe
and
further
abroad.”
sets and the strength of “Brand
investment in Cork.”
going to continue.”
Dublin” internationally”
Paul
Walsh,
VP Engineering,
Eric
Schmidt,
Chairman,
Google
Connie
Gibney,
International
HR
Kruti Patel Goyal, Vice President
McAfee
International
Director,
of International
at Etsy LinkedIn
How Can We Help?
M
16
Thank You
Deirdre Moran
High Growth Companies/Emerging Tech
IDA Ireland
Tel: +1 408 796 8771
deirdre.moran@ida.ie
Twitter: @DeeMorany
www.idaireland.com
17
HLB Sheehan Quinn & Eide Bailly
Considering International Opportunities
25 June 2015
Inspired to work together
HLB Ireland

Federation of firms

Growing network

Coverage

Ambitious growth plans

Joined up Thinking
Inspired to work together
Who we are – HLB Sheehan Quinn

Respected brand

Growing ambitious firm

Range of clients across sectors

Track record of assisting international clients

Focus on FDI
Who we are – HLB Sheehan Quinn

Industries
•
Technology
•
Agri & Food Processing
•
Manufacturing
•
Construction
•
Property
•
Hotel & Leisure
•
Renewables
Who we are – HLB Sheehan Quinn

Services
•
International tax structuring
•
Formation of business
•
Registration and Banking Relationships
•
Outsourcing
•
Compliance
•
Advisory
Who we are – HLB Sheehan Quinn

International tax
□
IDA network
□
Legal firm and Banking network
□
Experience in “Double Irish” and other structures
□
Working knowledge of other jurisdictions
□
Deep understanding of International Tax Directors’ objectives
T
Tax System Highlights







12.5% corporation tax rate on trading
profits
Holding Company Regime
Foreign Dividend Income Regime
Advantages for non resident shareholders
R&D Credits/Knowledge Box
Intellectual Property tax relief
Transfer Pricing Regime
Typical Structure
Co A
Co B
low profits
low profits
Irish Co
high profits
Services
Services
Inspired to work together
Case Study 1
US “born on the web” company
 Irish operation set up, 4 people – tech and
management
 Moved all non-US IP out of the US
 Non-US worldwide income effective tax rate
reduced from 28% to 9%
 Additional funds being used for reinvestment
in expansion
 Very satisfied with Ireland as a location and
quality of staff

Case Study 2






US company, supplier of services to Google
Operations expanding globally
Decided to keep HQ in the US
Moved ancillary functions to Ireland –
accounting, tax compliance, marketing,
treasury and growing
30% of group profits now in Ireland, at 12.5%
corporate tax rate
Considering R&D functions in Ireland
Our People – Mark Butler

Managing Partner

Founder of HLB Ireland

Good sector knowledge
□
Food and general manufacturing, property,
hotel & leisure, renewable energy &
technology

Key advisor to entrepreneurs


Email
: mbutler@hlbsheehanquinn.com
LinkedIn : https://ie.linkedin.com/in/butlermark
Our People – Maura Duffy

Partner – Head of Owner Managed Business

Specialises in structuring options.

Construction, property investment, retail and private clients.

Works closely with clients to
improve profitability and
efficiencies.

Trusted advisor.

Email
: mduffy@hlbsheehanquinn.com
LinkedIn : https://ie.linkedin.com/in/mauraduffy

Our People – Donal Leahy

International Tax Partner

Extensive experience advising MNCs on optimum
structures for Ireland as a European base

Established networks



IDA, EI, banking, legal advisors
Email
:dleahy@hlbsheehanquinn.com
LinkedIn :https://ie.linkedin.com/in/leahydonal
Our People – Paddy Kiernan

FDI Services – Manager of Division

Extensive experience in assisting clients meet their compliance needs

Payroll services

Company Secretarial services

Accounts preparation

VAT & other compliance


Email
: pkiernan@hlbsheehanquinn.com
LinkedIn : https://ie.linkedin.com/in/paddykiernan
Our People – Tom O’Reilly

Senior Manager

Audit – Head of Division

Leading standards

Latest audit processes

Excellent working knowledge
of business

Advisory


Email
: toreilly@hlbsheehanquinn.com
LinkedIn : https://ie.linkedin.com/pub/tom-o
-reilly/55/316/546
Our People – Simon Byrne

Audit – Manager

Works closely with clients

Owner managed business advisor

Knows inner workings of a good
range of businesses

Relied on by clients for extra
advisory services


Email : sbyrne@hlbsheehanquinn.com
LinkedIn: https://www.linkedin.com/pub/simon
-byrne/82/36a/902
Contact Details

Email
:
mbutler@hlbsheehanquinn.com

Phone
:
00353-1-2915265

Skype
:
hlbsheehanquinn

Website :
www.hlbsheehanquinn.com
Understanding International
Business in Ireland
US International Tax Planning
Considerations
www.eidebai lly.com
U.S. Tax Principles
O
•
Controlled Foreign Corporations (CFCs)
•
•
A CFC is a foreign corporation owned 50 percent or more by U.S.
shareholders.
Generally, US shareholders of a CFC are not subject to US tax on
income earned by such CFC until it is distributed, unless it earns
Subpart F income.
•
Subpart F
•
In general, if a foreign corporation is a CFC, a U.S. shareholder
must include in gross income its pro rata share of the corporation’s
Subpart F income.
“Subpart F income” includes, foreign base company sales income
(FBCSI) and foreign base company services income (FBCSvI),
which are described in the following slides.
•
www.eidebai lly.com
U.S. Tax Principles
Foreign Base Company Sales Income (FBCSI)
•
•
In general, this is income from property purchased from (or sold to)
a related party if the property is manufactured and sold for use
outside the CFC’s country of incorporation.
Unless exceptions apply, the US shareholder(s) of the CFC will be
currently taxed on such Foreign Base Company Sales Income as if
it were a deemed dividend.
www.eidebai lly.com
FBCSI Example
Parent Co
(US)
Foreign Distribution Example
• Parent Co sells manufactured product to
Irish Sub.
• Irish Sub does not engage in
manufacturing modification or assembly
prior to selling the product to customers
inside and outside of Ireland.
Sale
of
goods
Irish Sub
(distributor)
(no mfg)
Payment
is Sub F
Payment
is not
Sub F
Sale
of
goods
3rd party
customers
(Foreign - Outside
Ireland)
3rd party
customers
(Inside Ireland)
www.eidebai lly.com
Result
• Parent Co will have Foreign Base
Company Sales Income on the sales
made from Irish Sub to 3rd party
customers outside of Ireland and such
income is currently includible in Parent
Co’s income as a deemed dividend.
FBCSvl
Foreign Base Company Service Income (FBCSvI)
•
In general, this is income derived from the performance
of specified services for, or on behalf of, a related
person outside the country where the CFC is organized.
• Unless exceptions apply, the US shareholder(s) of the
CFC will be currently taxed on such Foreign Base
Company Services Income as if it were a deemed
dividend.
www.eidebai lly.com
FBCSvl Example
Sale of goods
Parent Co
(US)
Sale of goods
Contract for
services
Distribution only
3rd Party
Customers
(Inside Ireland)
Irish Sub
Provides
services
related to sale
of goods from
US
Provides
services
related to (i)
sale of goods
and (ii)
contract from
US
3rd Party
Customers
(Foreign - Outside
Ireland)
www.eidebai lly.com
Foreign Services Example
• Parent Co sells manufactured products
directly to customers inside and outside of
Ireland.
• Parent Co also contracts with customers
outside of Ireland to provide services.
• Irish Sub provides services related to Parent
Co’s sale of goods to customers inside and
outside of Ireland.
• Irish Sub also provides services related to
Parent Co’s contract for services to
customers inside and outside of Ireland.
Result
• Irish Sub services income related to the sale
of goods by Parent Co is Foreign Base
Company Services Income and is currently
includible in Parent Co’s income as a
deemed dividend.
Irish Principal Trading Company
Irish Principal Operations
•
•
Parent
Co
US
Inventory related
to US sales
Payment for
US inventory
Dividend
0 percent
withholding
tax
•
Chinese
Suppliers
Inventory
related to
non-US sales
Parent Co forms Irish Principal Company.
Irish Principal purchases inventory from Chinese suppliers
and holds such inventory in Irish warehouse for ultimate sale
and delivery to European customers.
If sales are planned for Asia or Latin America, Irish Principal
has the option of keeping some inventory in a warehouse in
Asia or Latin America for shipment to local customers in those
regions. Under most tax treaties, the holding of inventory for
delivery to local customers does not create a taxable
permanent establishment. This option must be analyzed
further to determine suitable warehousing jurisdictions.
Irish Tax Consequences
inventory
•
Earnings
accumulate
in Irish Co
with 12.5%
tax rate
Irish
Principal
Company
Sale &
delivery
of goods
payment
Payment for
non-US
inventory
payment
Asian or Latin
American
Warehouse
Drop
shipment
of goods
•
•
•
•
•
European
Customers
Asian or Latin
American
Customers
•
www.eidebai lly.com
12.5% corporate rate applies on active trading income, which
should apply as long as there is a credible physical presence,
including premises and staff in Ireland.
The withholding rate is 0% for dividends remitted to a US
parent.
The value added tax (VAT) outcome should be neutral
regardless of which country is based in, but the administration
of the VAT would need to be considered:
Where goods are sold within Ireland, 23% VAT is applied.
Ireland also has a startup companies tax holiday that can
relieve €1m of profits in total for the first three years if it can
be shown that the new company will be starting a new trade.
The effective rate may be reduced further if IP (e.g., trade
name) was transferred to Ireland because capital allowances
(tax depreciation) may be claimed in respect of IP.
Irish CGT should arise on the sale of Parent Co shares.
Transfer Pricing
C
•
Transfer pricing consistently ranks as the single most important international tax issue.
•
Companies strive to increase shareholder value by maximizing after tax cash flows
through transfer pricing planning.
•
Governments around the world are actively working to protect their tax base from erosion
and ensure they receive their “fair share” of taxable income.
•
The following types of payments between US Parent Co and its related Irish Sub will need
to meet the “arm’s length standard” in order to comply with US transfer pricing rules:
-
•
Irish Sub’s purchase of products, components or services from the US
Irish Sub’s licensing of IP from US parent
Loans between Parent Co and Irish Sub
Intercompany payables/receivables
A controlled transaction meets the arm's length standard if the results of the transaction
are consistent with the results that would have been realized if uncontrolled taxpayers had
engaged in the same transaction under the same circumstances (arm's length result).
www.eidebai lly.com
Typical IP Migration Transaction
IP Issue
• The use of Parent Co’s US intangibles outside the US via sale of product or
transfer of manufacturing IP results in current US taxation at high rates.
• Many US companies with substantial foreign sales transfer IP related to
foreign exploitation to an IP HoldCo in a low tax jurisdiction.
• Sale of IP to foreign affiliate can be costly:
Parent Co
(US)
CSA
-
Buy-in
payment
IP
Most companies transfer IP using a qualified cost sharing arrangement.
•
Royalty
Foreign Subs
•
Transaction Steps for Cost Sharing Arrangement
Parent Co transfers the economic rights to exploit existing IP to IP HoldCo
(Buy-in).
• IP HoldCo enters into cost sharing arrangement (CSA) with Parent Co to
share in the costs of further IP development. HoldCo enters into licensing
agreement with foreign manufacturing and distribution subsidiaries for use of
manufacturing or marketing IP.
IP HoldCo
(Ireland)
License
-
Sales price related to transfer would be consistent with what the price would
be if sold to an unrelated party.
Transfer pricing requires a study to substantiate the sales price (TRAP FOR
THE UNWARY).
US Tax Consequences
• U.S. current taxation on buy-in payments from IP HoldCo.
• Development costs of further IP development will be paid for under the CSA
between Parent Co and IP HoldCo.
• Royalty Income of IP HoldCo qualifies for look-through 954(c)(6) exception
to Subpart F.
• On distributions from IP HoldCo, Parent Co entitled to a foreign tax credit for
corporate taxes paid by IP HoldCo.
www.eidebai lly.com
Our People – Donal Leahy

International Tax Partner

Extensive experience advising MNCs on optimum
structures for Ireland as a European base

Established networks



IDA, EI, banking, legal advisors
Email
:dleahy@hlbsheehanquinn.com
LinkedIn :https://ie.linkedin.com/in/leahydonal