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The Legal 500's In-House Lawyer Magazine - Doing Business In Ireland

AUTHORs: Emma Doherty, Pat English co-author(s): Seóna O'Donnellan, Dorothy Hargaden Services: International Business DATE: 09/11/2023

What lies behind Ireland’s enduring attraction as an FDI location?

Ireland’s status as a leading FDI location has long been internationally recognised.

Ireland is the only English-speaking common law jurisdiction in the European Union (EU). Its currency is the euro. The country is an investment gateway to the lucrative EU market of almost 500 million consumers. Ireland has a young, diverse and highly-educated population and access to an EU-wide talent pool.

With its commitment to EU membership, excellent international relations and continued investment in pro-business infrastructure, Ireland is home to eight of the top 10 financial services companies, 14 of the top 15 medical technology companies and the top five global software companies.

Government policy continues to be directed towards the creation of a stable economic environment that supports the needs of business. Ireland has a proven track record as the location of choice for established and high-growth companies.

Ireland’s economy is open and resilient. The 2023 IMD World Competitiveness Ranking named Ireland the second most competitive economy in the world and the first in economic performance.

A range of grants and other incentives is available to companies locating in Ireland. IDA Ireland (Ireland’s FDI agency) has partnered with over 1,700 entities in establishing and expanding their Irish presence. One in three multinationals are now in Ireland for over 20 years which is testament to the country’s favourable business environment and talent pool.

What are the key legal requirements for establishing a business presence in Ireland, and how does it differ for foreign entities compared to domestic ones?

Ireland’s open and agile economy means that establishments are relatively straightforward.

Restrictions on investment into Ireland are minimal and no specific commitments are imposed on foreign investors.

Ireland must comply with information-sharing requirements applicable to all member states under the EU Investment Screening Regulation (EU 2019/452). Legislation to introduce an Irish FDI screening regime is well-advanced. Under the proposal, investments into Ireland by non-EU entities would be reviewed on security and public order grounds.

Private companies limited by shares tend to be the business entity of choice for inward investment projects, although other corporate structures are available. Ireland has a modern company law framework and most incorporations can be completed in less than a week.

Companies must have a registered office and carry out an activity in Ireland. At least one of the directors of an Irish company must be resident in the European Economic Area (EEA) unless the company obtains a bond to the value of €25,000 as security for compliance with Irish tax and company law.

Under an EU-wide regime, most Irish companies must maintain a register of individuals deemed by law to be their ultimate beneficial owner. In-scope companies must file this information on a national beneficial ownership register to which there is currently very limited access.

Can you provide an overview of the Irish regulatory environment and any specific industry regulations that may apply to our business?

Ireland has a stable and well-resourced regulatory infrastructure.

Regulatory authorisations are needed in certain sectors such as banking, financial services, pharmaceuticals and telecommunications. These requirements apply to both Irish and foreign investors.

Some of the main regulators in Ireland are:

  • The Central Bank of Ireland which has a compliance and enforcement role for credit institutions, investment firms and other financial service providers. The EEA passporting regime allows authorised financial firms to export financial products and services out of Ireland.
  • The Competition and Consumer Protection Commission which is responsible for assessing mergers, acquisitions and takeovers, the enforcement of competition law and the enforcement of consumer protection law and product safety regulations.
  • The Data Protection Commission which has extensive investigative and enforcement powers and acts as the lead supervisory authority for cross-border processing of personal data by organisations with their main data processing establishments in Ireland.

Ireland has a dual-use exports regime governing goods and technologies normally used for civilian purposes but which may have military applications.

What are the tax implications of doing business in Ireland, including corporate tax rates and any incentives available for foreign investors?

Ireland, with its efficient and accessible business tax system, frequently ranks as the most effective EU member state in which to pay taxes. Ireland is also recognised as one of the best countries in the world for ease of paying taxes.

The primary taxes for business are corporation tax on income and chargeable gains, VAT, withholding tax and stamp duty. The applicable corporation tax rate depends on whether the profits arise from trading (broadly, operational) activities (12.5%) or non-trading (for example, passive) activities (25%). Chargeable gains arising from the disposal of capital assets are taxed at 33%.

Ireland is party to an extensive and expanding double tax treaty network that includes most of the world’s largest economies. Key incentives for investors include amortisation for qualifying IP, a refundable R&D tax credit regime, an attractive holding company regime, and broad exemptions from withholding tax on interest, royalties and dividends.

There are no specific thin capitalisation rules but there are circumstances in which interest payments may be considered non-deductible in calculating a company’s taxable profits.

Ireland has implemented the multilateral convention to implement tax treaty-related measures to prevent base erosion and profit shifting. Ireland has also agreed to implement the OECD’s two-pillar solution to address the tax challenges arising from the digitalisation of the economy (OECD Two Pillar Agreement), in accordance with the EU implementing directive (see below).

Are there any specific labour and employment laws in Ireland that we should be aware of when hiring and managing employees?

Irish employment law derives from statute, common law, the Constitution, EU law and decisions of the Workplace Relations Commission (WRC). Significant employment protection is afforded to employees working in Ireland, particularly in the areas of dismissal, working hours, leave entitlements, minimum wage and whistleblowing. Recourse is to the WRC or the courts for breaches.

Employees have a constitutional right to join a trade union but there is no obligation on employers to recognise or negotiate with trade unions. Trade union membership amongst international employers in Ireland is low and works councils are not a significant feature of the Irish industrial landscape.

EEA, UK and Swiss nationals can work in Ireland without requiring a work permit. Non-EEA nationals require a work authorisation and/or visa, depending on nationality, to live and work in Ireland.

Equity incentives are commonly provided to employees in Ireland, without significant amendment to the multinationals’ general incentive terms.

What intellectual property protections are available in Ireland, and how can we safeguard our company’s intellectual property rights?

Ireland’s intellectual property framework is modern and dynamic, supported by a well-resourced regulatory and court infrastructure. Substantial efforts have been made over the years at a political level to establish Ireland as the preferred location for intellectual property, e-commerce and technology-based industries.

Most Irish measures in this area are based on an EU-wide legislative approach thus reducing complexities for businesses engaged in international trade. Indeed, Brexit has seen companies relocate to Ireland to ensure that they can benefit from EU intellectual property regimes.

Patents, trade marks, copyright, industrial designs, databases and plant breeders’ rights are among the intellectual property rights that can be protected under Irish and EU law. Confidential information and trade secrets can be protected by contract or by an action in common law for breach of confidence.

How does Ireland’s data protection and privacy regime compare to international standards?

The General Data Protection Regulation (GDPR) harmonises data protection and privacy laws across the EU and EEA. The GDPR applies generally to the processing of personal data by controllers and processors established in the EU (regardless of where the processing itself occurs), and also extends to non-EU controllers and processors who offer goods or services, or monitor the behaviour of EU citizens. The EU-wide application of the GDPR simplifies the regulatory burden in this area for international businesses. Breach of the GDPR can result in fines of up to 4% of an organisation’s annual turnover or €20m, whichever is the higher. In addition, individuals have a statutory right to bring compensation claims against organisations for material or non-material loss suffered as a result of a breach of the GDPR.

In Ireland, the main source of data protection and privacy law is the GDPR, as supplemented by the Irish Data Protection Acts 1988 to 2018 (DPA). Irish law-specific nuances, as permitted or required under the GDPR, are contained in the DPA. These include the setting of the digital age of consent and certain narrow derogations from data subject rights.

A further set of rules governing electronic marketing and cookies is contained in the European Communities (Electronic Communications Networks and Services) (Privacy and Electronic Communications) Regulations 2011. These Regulations implement the ePrivacy Directive 2002/58/EC (as amended) and detail the data protection standards for electronic communication services and networks. The regulations address, in particular, issues concerning the security, privacy and confidentiality of electronic communications. A proposed EU ePrivacy Regulation has been delayed, but remains on the EU legislative agenda.

What are the dispute resolution mechanisms available in Ireland?

As well as being internationally recognised as a leading venue for international arbitration, Ireland is the only EU member state with a court system that is both English speaking and common law-based. This system, which is supported by highly specialised lawyers with experience in advising multinational enterprises across all sectors, makes Ireland an attractive jurisdiction in which to litigate commercial disputes, particularly since Brexit.

An Irish court, under the doctrine of precedent, must follow the decisions of its superior courts. This, together with an internationally renowned judiciary, creates an element of legal certainty for international commercial litigants.

The Commercial Court is a division of the Irish High Court which, subject to some exceptions, deals with commercial cases with a value of at least €1m. Strict case-management protocols lead to a streamlining of litigation, with court rules designed to give the court maximum flexibility in managing cases.

While the norm in Ireland is for trials to take place in open court, where there is commercially sensitive or confidential information, all or part of the proceedings may be heard in private.

Ireland’s legal system also has a robust and long-established regime for the domestic enforcement of judgments, while Irish judgments can be enforced across EU member states under the Recast Brussels Regulation.

Are there any recent changes or pending legislation in Ireland that could impact our business operations?

In October 2021, the Irish government agreed to join the OECD Two Pillar Agreement (see below). This establishes a new international tax framework and a global minimum tax rate of 15% for consolidated corporate groups with global annual revenue over €750m. Ireland’s transposing measures are due to be in place by 31 December 2023 which will feature a ‘qualified domestic minimum top up tax’. The government has confirmed that there will be no change to the 12.5% corporation tax rate in place for the majority of businesses in Ireland which remain outside the scope of the OECD Agreement.

The Work Life Balance and Miscellaneous Provisions Act 2023 provides employees with a legal right to request remote working. The act also transposed the EU directive on work-life balance for parents and carers into Irish law, the aim of which is to increase the participation of women in the labour market and to encourage a more equal sharing of family related leave between men and women. It provides for a right to request flexible working arrangements for caring purposes and provides five days’ statutory unpaid leave for medical care purposes and five paid days’ leave for victims of domestic violence.

The Protected Disclosures (Amendment) Act 2022, which came into force in January 2023, significantly enhanced the protection available to whistleblowers and introduced criminal sanctions for non-compliance.

The Corporate Sustainability Reporting Directive ((EU) 2022/2464) (CSRD) must be transposed into domestic law by 6 July 2024. Irish transposition measures are currently being formulated. CSRD will require in-scope companies to make ESG-related disclosures against common EU reporting standards. The first set of companies must report in 2025 based on 2024 data. An EU wide audit requirement for reported sustainability information will apply, initially on a limited basis.

The ‘mobility directive’ (Directive (EU) 2019/2121) has been transposed into Irish law by the European Union (Cross-Border Conversions, Mergers and Divisions) Regulations 2023. These measures amend the previous procedures for EU cross-border mergers and introduce a harmonised EU framework for cross-border conversions and divisions.

Matheson profile

Matheson LLP is the law firm of choice for internationally focused companies and financial institutions doing business in and from Ireland. Established in 1825 in Dublin, Ireland, and with offices in Cork, London, New York, Palo Alto and San Francisco, 800 people work across Matheson’s six offices, including 121 partners and tax principals and over 540 legal, tax and digital services professionals. The firm’s expertise is spread across more than 30 practice groups.

Matheson’s clients include over half of the world’s 50 largest banks, seven of the world’s ten largest asset managers and seven of the top ten global technology brands, and it has advised the majority of the Fortune 100 companies. Matheson’s international business group is a team of dedicated lawyers within the corporate and commercial department whose primary focus is advising international clients on the Irish corporate law aspects of doing business in Ireland.

This content first appeared on The Legal 500 website here: https://www.inhouselawyer.co.uk/legal-briefing/doing-business-in-ireland/