Subsidiary vs. Branch in Ireland

Subsidiary vs. Branch in Ireland - The 2023 Guide

Updated on Tuesday 18th April 2023

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A foreign company interested in expanding its business in Ireland may opt for one of the two legal options, which are represented by the subsidiary and the branch office. Although they are similar structures, they have a set of differences – for example, in relation with the level of independence the branch office/subsidiary has with its parent company.

In the case of the Irish subsidiary, the structure represents a separate legal entity which is taxed in accordance with the company legislation available in Ireland. The branch office is also liable for taxation in Ireland, but for specific types of incomes; when referring to the level of independence towards the parent company, the branch office is seen as a sub-division of the company operating abroad.

Our team of Irish lawyers is experienced in providing legal assistance related to the incorporation of these two business forms in 2023. At the same time, our lawyers can offer advice on the main advantages provided by the two legal entities in accordance with the budget and the business plans the investors have. We also provide assistance to those interested in other matters, such as divorce in Ireland.

The infographic below presents the main characteristics of a subsidiary and a branch office in Ireland:

Opening a subsidiary in Ireland in 2023

Before investing in Ireland, a businessman should know that a subsidiary is an independent legal entity, different from the one set up in the country of origin. Investors are usually interested in this type of legal representation as the liability of the parent company is limited to the share capital invested in the subsidiary.

The minimum requirements imposed by the Irish law system related to the establishment of a subsidiary are presented below and our team of lawyers in Ireland can provide in-depth legal assistance on the conditions for registering a local subsidiary of a foreign company:

the subsidiary is generally registered as a limited company, more specifically, a private company limited by shares;
it is necessary to appoint two directors and one of the two has to be an Irish resident;
the minimum share capital of the company must be EUR 38,000 (EUR 38.092, more exactly);
provide the company’s articles of association and memorandum, as well as the resolution of the parent company which presents the decision of opening a subsidiary;
have a registered office, with an official business address in Ireland.

The subsidiary must register with the Tax Office for paying the corporate tax, Value Added Tax, Pay Related Social Insurance for the company’s employees and Relevant Contract Tax. Our attorneys in Ireland can offer you the legal support for opening a subsidiary here and register the company’s employees for taxation.

When opening a subsidiary in Ireland, the investors can choose from one of the business entities available under the Irish commercial legislation. However, most of the companies registered in Ireland take the form of a limited liability company, which, overall, provides the most advantageous conditions for the majority of the businessmen. It is important to know that during the incorporation procedure, the investors should also draw the company’s statutory documents – the articles of association and memorandum, as mentioned earlier.

The procedure must be certified in front of a public notary in Ireland, who will attest that the documents are completed following the applicable legislation. Like any other company in Ireland, the subsidiary will need to be registered with the Companies Registration Office, which is the main institution regulating the activity of commercial businesses in this country.

What are the main accounting requirements imposed on Irish subsidiaries?

A subsidiary in Ireland is required to comply with a set of accounting procedures, which can be detailed by our team of Irish lawyers. The company has to file its tax accounts and tax declarations with the Irish Tax and Customs Revenue Online Service, by using the institution’s online platform. The tax accounts have to be filed on an annual basis, while the value added tax (VAT) returns have to be submitted every two months.

The payment of capital gains tax for Irish subsidiaries

The gains obtained from the disposal of capital assets is generally taxed in Ireland at a rate of 33% or 40%, which is also applicable to companies established as subsidiaries. In the case of a holding company that concludes disposal of shares to one of its subsidiaries an exemption from taxation is granted, but this is applicable only in certain conditions.

For example, the tax exemption is granted provided that the subsidiary is established in Ireland, in a country which is a member state of the EU or if the company benefits from the provisions of a double taxation treaty. At the same time, the exemption is available for a subsidiary that is a part of a group or registered as a trading company.

It is also important to know that the capital gains tax is not applicable in the situation in which the parent company owned at least 5% of the subsidiary’s shares for a period of minimum 12 months on a continuous basis. Our team of lawyers in Ireland can provide further information concerning other tax exemptions that can be applied to Irish subsidiaries.

Opening a branch office in Ireland in 2023

A branch office depends on the parent company and cannot make its own business decisions. Still, the Irish government offers incentives for foreign companies interested in opening a branch office in Ireland, by giving, for example, various tax exemptions. Our Irish lawyers can present to you more details about the benefits of opening a branch office in Ireland.

In order to set up a branch office, an investor should submit a wide range of documents and it is important to know that in this case, the Irish authorities will request a larger number of official documents than in the case of a subsidiary:

a notarized stamped copy of the foreign company’s memorandum and articles of association;
a copy of the certificate of incorporation of the parent company;
the list of directors of the parent company and a copy of the annual accounts;
the name of the Irish resident person who is authorized to act on behalf of the company;
a registered address of the Irish branch office and any changes that can occur related to the property owned by the company, its share capital or the company’s trading name.

Furthermore, a branch in Ireland is also required to report any changes regarding the company’s statutory documents and any changes related to the person who is authorized to represent the branch. In the situation in which the company is closed down, the company’s representatives are also required to notify the local authorities by submitting a note of insolvency or liquidation, depending on the situation of the company.

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What are the main tax requirements for Irish branches?

In terms of taxation, companies established as branch offices in Ireland will be liable for paying the corporate tax only with respect to their activity conducted on the Irish territory. Also, the branch will need to register for taxation purposes, including those related to the taxation of the employees working in the respective establishment. As a general rule, the branch office in Ireland has to be registered following the provisions of the 1993 Branch Disclosure Regulations.

When operating in Ireland through a branch office, the company’s representatives are also required to file specific tax and accounting documents with the tax authorities. In this sense, the company must provide its annual accounts, annual reports of the directors, a report concluded by local auditors on the company’s accounts and another one regarding the director’s reports.

In 2023, the corporate income tax for the locally registered company and the branch tax rate are the same, set at 12.5% for trading companies and at 25% for nontrading entities. For the purpose of taxation, a resident company is considered as such if it is managed and controlled in the country (in come cases, it is considered a resident company if it is incorporated in Ireland – if the incorporation took place after 1 January 2015). A resident company will be subject to taxation on its worldwide profits, whole the resident company will be subject to taxation on its Irish-source income (as well as capital gains tax on certain types of assets, such as land or building located in the country).

Understanding the differences between the branch and the subsidiary is also important in terms of annual reporting, accounting and bookkeeping. When working with our team of Irish accountants, you can make sure that the branch or the subsidiary of a foreign company operating in Ireland remains fully compliant. Reach out to us today for details about our services and a personalized offer.

Register a branch office with the Irish CRO

The registration of a branch in Ireland, just like in the case of any other business form available for incorporation in this country, is started at the Companies Registration Office (CRO), following the regulations of the Companies Act 2014. It is necessary to register with the CRO one month prior to starting any business activities in this country.

The registration with the Irish institution is completed in accordance with the country of origin of the parent company. Thus, companies registered in one of the member states of the European Economic Area (EEA) will have to complete the Form F12, while companies outside EEA will have to submit the Form F13. A detailed presentation on the meaning of EEA/non-EEA companies is given by the recently signed order – the Companies (Accounting) Act 2017 (Commencement) Order 2018.

Investors should know that certain categories of businesses are not allowed to register in Ireland under a branch office. This is the case of UK based companies operating as limited liability partnerships, which are not entitled to perform business activities in Ireland through this business form.

The video below presents the main differences between Irish subsidiaries and branches:

Can one register a subsidiary Societas Europaea in Ireland?

Yes, a subsidiary can also take the form of a Societas Europaea (SE) in Ireland. The SE represents a type of entity that can be registered at the level of the EU, following the legislation stipulated by the European Commission. The main rules of law regulating this entity are given by the EU Regulation (Council Regulation 2157/2001).

The registration of a subsidiary SE is done through the CRO, where the investors have to complete the Form SE5. The applicants have to provide a set of details concerning the future company, such as its trading name, the location of the registered office, information on the company’s secretary, the company’s official e-mail address, information on the company’s directors and others.

Our team of Irish lawyers can advise on the formalities for registering a subsidiary SE in this country and can assist with information on the share capital of this structure, the requirements regarding the types of activities it can develop in Ireland and on any other inquiries regarding the legislation that regulates the SE.

What are the most important aspects on foreign investments in Ireland?

As the branch office and the subsidiary are types of entities that can be used by foreign companies expanding on a new market (they can also be used by local businesses), we have prepared a presentation on the most important aspects that give a clear image on the foreign investment activities developed in Ireland. Our Irish law firm can assist investors with more details, including on the legislation regulating this sector. Some of the basic aspects on foreign investments in this country are presented below:

the main foreign investor in Ireland is the United States of America – with a share of 23,8% from all the investments (at the level of 2017);
the second most important investor is represented by the offshore centers investing here (19%);
other top investors are as follows: the Netherlands (13,3%), Luxembourg (12,2%), Switzerland (9,9%) and the United Kingdom (7,7%);
the top economic sector preferred by foreign investors is the wholesale and retail trade (accounting for 46,6% of the total foreign investments in 2017);
another important investment sector is the information and communication (38,2%).
the financial sector stands out as another relevant industry, with a share of 10,1%.

A characteristic of the Irish economy is that the foreign companies operating here have better results compared to local company, when referring to the industrial sector. For example, the value of foreign companies operating in this industry accounted for EUR 150 billion, compared to only EUR 32 billion reached by the local businesses.

Investors who are considering entering the local market through a branch office or a subsidiary should also be aware of the fact that Ireland is the home of 24 of the 25 largest pharmaceutical companies that have set up their activities at a international level. Our team of Irish lawyers can advise on the regulations and the business permits that have to be obtained when operating in the pharmaceutical industry through a branch office or a subsidiary.

What are the reasons for investing in Ireland?

Regardless if foreign companies prefer to opt for a branch office or a subsidiary when investing in Ireland, there are a set of competitive advantages that make this jurisdiction suitable for investment purposes. Besides the attractive taxation system and the ease of registering a local business, investors will also be interested in the legislation protecting their rights. When referring to investor protection, the country provides the following advantages:

the country’s index of transaction transparency has an index of 9.0;
in comparison with other countries, Ireland provides better conditions, as for example, in Germany, the index is of 5.0, while in the United States, it stands out at 7.0;
the Irish index measuring the shareholder’s power is of 7.0;
in the United States, it stands at 4.0 (as the value of the index increases, it means that the shareholder benefits from simpler procedures to take legal actions);
the index measuring the protection of the investors has a value of 7.3 in Ireland;
it is the highest value compared to OECD average (of 6.5), the United States (6.5) or Germany (6.0).

If you are interested in expanding your business in Ireland in 2023, please contact our lawyers in Ireland, who can help you choose the best business form for your needs: either a branch or a subsidiary. Our law firm in Ireland can also offer you legal representation in the company registration process as well as services related to Family Law, such as assistance for divorce in Ireland.