China is a burgeoning economy, and Ireland is a net beneficiary for both investment by Chinese companies into the European marketplace, and also as a platform for multi-national companies to access the Chinese marketplace.
Investment into Ireland
Ireland is an attractive location for Chinese companies seeking to access the European marketplace, primarily for 3 reasons:
- Gateway to Europe
Ireland has a business-friendly, common law, corporate tax system, which is in line with OECD norms. Its low corporate tax rate of 12.5% on trading profits provides the basis for companies to structure trading and holding company operations in Ireland.
Ireland also has a very beneficial Intellectual Property (“IP”) regime, which facilitates the application of the 12.5% corporate tax rate to profits from the exploitation of IP in Ireland. Furthermore, to help develop and sustain the Irish knowledge based economy, and to encourage companies which develop, own and exploit their IP from an Irish base, capital allowances are available for capital expenditure incurred on the creation and acquisition of “specified intangible assets”, including the acquisition of IP.
Ireland is actively attracting Research and Development (“R&D”) activity, due to an attractive R&D regime, which provides for a 25% R&D tax credit for expenditure above a base year (2003) (in addition to the normal corporation tax deduction for expenses incurred during the course of a trade, thus giving an effective 37.5% rate for R&D expenditure). For start-ups post 2003, the base year expenditure would usually be zero. Additionally, where it is unlikely that the start-up company would have taxable profits, the R&D credit can be carried forward indefinitely.
Building the stock of knowledge and know-how in the economy is critical to Ireland’s future economic development. Ireland has already laid the foundations of the "Ideas Economy" by investing heavily in education and skills training and is well equipped with a highly educated workforce. The R&D and IP credits are an important part of the Irish Government’s tax policy to further promote Ireland as an open entrepreneurial economy with the means of converting research, development and innovation into commercialised products and services. This will provide a major driver of Ireland’s future prosperity and firmly establish Ireland’s position as a "Smart Economy".
Ireland boosts a young, hi-tech, skilled and English-speaking workforce. Ireland also remains a vibrant and attractive place for younger workers within the EU, ensuring the pool of talent for investing companies is deep. Ireland is positioning itself as a “Smart economy” and given the problem-solving skills and creative and innovative thinking of its workforce, this will be achieved.
Gateway to Europe
One of Ireland's key strengths and biggest opportunities is Europe. Global corporations based in Ireland can effectively reach Europe's 600 million consumers with excellent goods and services developed and built in Ireland by Irish workers.
Ireland as a Platform for Investment in to China
Ireland is a favourable platform for investment into China due to a combination of the Ireland / China Double Tax Treaty (“DTA”) and the Irish holding company regime. This combination allows for an exemption from Chinese capital gains withholding tax on all disposals of non-real estate Chinese shares, regardless of shareholding size. It also allows for an exemption from Irish tax on gains and disposals of non-real estate Chinese shares, and a reduction of Chinese withholding tax on dividends (where the recipient holds at least 25% of the voting power of the Chinese company). All this results in a potential tax free exit from an investment made in China. The Ireland / China DTA matches or exceeds the benefits of the tax treaties with other popular gateways into China = via Mauritius, Barbados, Singapore, Hong Kong and Switzerland.