Set Up a Designated Activity Company in Ireland
Set Up a Designated Activity Company in IrelandUpdated on Wednesday 24th August 2022
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The Designated Activity Company (or DAC) is described in the Companies Act 2014 Part 16.
The designated activity company in Ireland differs from the traditional limited liability company in the sense that its main statutory documents have to stipulate, in detail, the legal entity’s objects of activity.
Local and foreign businessmen who want to open a company in Ireland as a DAC will be able to choose from two types of business forms: the DAC limited by shares and the DAC limited by guarantee.
Special requirements are in place for this business form and our team of Irish lawyers can provide in-depth assistance on the incorporation requirements for these structures.
You can reach out to us if you wish to open a company in Ireland that will engage in a particular activity. We can also provide accounting services according to the type of legal entity.
The main features of the DAC in Ireland
The designated activity company in Ireland is incorporated as a private company, limited by shares or by guarantee (with a share capital).
It is a company that is incorporated for very specific purposes, meaning that it will only engage in the business activities that are particularly set forth in its constitutive documents.
The DAC in Ireland provides similar regulations applicable to Irish limited companies.
For example, just like in the case of a private company limited by shares, in a DAC limited by shares, the company’s shareholders will be liable for the debts incurred by the legal entity only in amount of the shares they have contributed with the company’s capital.
Our team of lawyers in Ireland can provide further assistance on the rights and obligations of the company’s founders.
The following summarized features are the most important ones for the DAC (both the limited shares and the limited guarantee with share capital form):
- The company’s Memorandum of Association clearly states the objective of the company, the reasons for its incorporation;
- The founders have limited liability and share capital (or it can be limited by guarantee);
- It has at least 2 directors, natural persons, over 18 years of age;
- It can have between 1 and 149 members and does not need to hold an Annual General Meeting when it has 2 or more members;
- It can benefit from certain reporting exemptions, such as the audit exemption or the dormant company audit exemption;
- The name of the DAC in Ireland needs to include the words “Designated Activity Company” or “Cuideachta Ghníomhaíochta Ainmnithe”; as in other cases, the name has to be registered with the Companies Registration Office.
The designated activity company in Ireland will have its constitution in the format set forth in the Companies Act.
This means that its Memorandum is included in its constitution, where the objects for which the company is incorporated are also includes.
Compared to the DAC, the LTD company does not have its objects included in its Memorandum because it has an unlimited capacity to engage in any legal business (subject to the laws, regulations and licensing requirements in the chosen business field).
Both the DAC and the LTD can have between 1 and 149 members, however, the LTD in Ireland is only required to have one director (and, in this case, it will also have a separate secretary).
Compared to the DAC, the LTD is not required to hold an Annual General Meeting.
Some businesses in Ireland are specifically set up as a designated activity company, one of the common examples being that of a charity or a management company.
The DAC in Ireland can be used whenever the shareholders wish to incorporate a legal entity that will have a clearly defined objective.
The video below offers a short presentation on the Irish designated activity company:
Corporate taxation in Ireland
As a resident legal entity in Ireland, the designated activity company will be subject to taxation on its worldwide income.
Our tax lawyers in Ireland list the most important corporate taxes below:
- 12.5% for trading income and 25% for nontrading income;
- 25% withholding tax on dividends paid to a resident or non-resident company or individual, unless reduced through a double tax agreement;
- 20% withholding tax on interest and royalties, subject to reductions if a double taxation agreement is in place;
- 23% value added tax, with reduced rates of 13.5%, 9%, 5.5%, 4.8% and zero-rated goods and services.
Ireland has signed more than 70 double tax treaties and it used the OECD multilateral instrument.
Our tax lawyers in Ireland can give you more information on the tax treaty network and taxation in general.
When setting up a new company, whether with designated activities or as a regular limited liability company, investors may also be interested in trademark registration. Our team can assist you in this case.
Corporate compliance for Irish companies
The tax year in Ireland is a 12-month period and it cannot exceed this period of time.
Companies are required to self-assess their tax contributions and are subject to preliminary corporate tax payments during their chosen accounting period.
This preliminary contribution can amount to 100% of the corporate tax liability.
Companies that have a tax liability of more than EUR 200,000 for the previous accounting year pay this preliminary tax in two instalments.
In most cases, companies used the online filing and payment system provided by the Revenue Service.
Companies in Ireland are required to register for VAT when they exceed the annual threshold of EUR 75,000 (only applicable in case of suppliers of goods) and when 90% of the turnover is from the supply of goods.
For a DAC company VAT registration may not apply, depending on its specific objects of activity (for example, charity purposes).
For companies that are subject to VAT, the returns and due payments are made every two months in most cases.
Companies in Ireland are also subject to social security contributions which are deducted from the salaries of their employees.
Businessmen are invited to contact our law firm in Ireland for more details on the DAC legal entities.
Our lawyers can offer advice on the tax regulations available for both types of companies.