Thanks to its strategic location at the "gateway to Europe," Ireland is well-positioned as a global business hub. The country also boasts a robust technology infrastructure, a highly-skilled workforce and a competitive 12.5 percent corporate tax rate—features that make Ireland an appealing destination for international investment. A magnet for foreign direct investment in recent years, Ireland is strongly situated to maintain this growth thanks to its many positive attributes and celebrated pro-business reputation.
These fundamentals are why Ireland has been named the "best country in the world for attracting high-level direct investment" by IBM's Global Location Trend report for an impressive six years running. The country attracts cutting-edge, high-level investment across a range of industries. Some of the most prominent include pharmaceuticals, business services, financial services, technology and medical equipment.
A variety of global corporate heavyweights maintain a presence in the country, including PayPal, Pfizer, IBM and Microsoft. Given Ireland's strong gravitational pull for businesses and investors seeking an amenable environment, it's likely that we'll see even more large enterprises open operations or expand their footprint in the country in the near term.
The benefits of doing business in Ireland
The reasons why global businesses are drawn to Ireland are both numerous and diverse. Along with its strategic "gateway" positioning, Ireland is known for being stable, secure and resolutely pro-business. The country has long offered some of the most attractive corporate tax rates, and operates under a regulatory and legal framework that closely mirrors that of the United Kingdom.
The Irish have also seen exceptional economic growth in recent years, ranking first in the Eurozone and sixth worldwide in terms of performance. Total GDP growth in Ireland in 2017 was 7.3 percent, topping the already impressive five percent projection issued by the European Commission. In 2018, growth is expected to moderate somewhat (projections are four percent), yet this level of GDP growth remains at the top of Eurozone performance. Ireland continues to have robust employment growth and high household consumption figures.
Ireland is also well-regarded in terms of facilitating new business expansion. The country ranks ninth in "ease of starting a new business" in the World Bank Index. A vibrant exporting sector has helped spur Irish economic growth and employment gains in recent years.
Irish exports grew by 6.1 percent year over year from 2015 to 2016. Overseas businesses remain significant exporters from Ireland; clients brought in by Ireland’s Industrial Development Agency were responsible for 66 percent of national exports. Along with Ireland's open economy, competitive corporate tax rates (12.5 percent) have been a key impetus for growth for more than 30 years. Irish tax laws are transparent and in full compliance with OECD (Organization for Economic Co-operation and Development) and EU guidelines and laws.
Ireland's status as a member of the EU single market and Eurozone is also a significant advantage, as it provides businesses with access to one of the world's most attractive markets. Ireland is currently the only English-speaking member of the Eurozone, positioning it as a hub for firms seeking a European base.
Additionally, few countries can match the Irish state in terms of skilled workforce. It boasts a young, vibrant, multicultural population that has helped the nation become a global leader in research and development. Ireland ranks among the world's top locations for Research, Development and Innovation (RDI) activity thanks to its stability and pro-growth posture. Global leaders in key industries have chosen Ireland as a base to undertake RDI projects in areas such as biotech, financial services, medical devices and ICT.
The country's 25 percent R&D tax credit serves as an additional incentive, as does Ireland's Knowledge Development Box regime, which allows companies to claim tax relief on profits deriving from certain intellectual property, including patents and copyrighted software. Ireland is also promoting an "Innovation 2020" government strategy that aims to make the country a global innovation leader through a combination of policies and incentives.
Considerations before doing business in Ireland
While Ireland is celebrated as one of the world's most business-friendly jurisdictions, there are some key considerations of which businesses and investors should be cognizant.
First, the country has elevated costs of doing business, with labor expenses being the most significant outlay for most firms. Property costs, as well, are high, making this the second-largest expense for most enterprises. This applies to both residential and commercial spaces. Overall, the cost and limited availability of suitable properties is one of the key hurdles to competitiveness for Irish businesses.
The permitting process is also more expensive than in many other jurisdictions. Building permit costs rank higher than the OECD high-income average, and the cost of construction permit acquisition is roughly 4.6 percent of a property's value—substantially higher than the OECD average of 1.6 percent.
Entrepreneurs should be aware that Ireland's income tax rate is comparatively high, making it one of the most significant hurdles to conducting business, along with labor and insurance costs.
While Ireland has been a vocal supporter of the E.U. and public sentiment is pro-European integration, the island stands to be affected by the U.K.'s decision to leave the union. The U.K. is Ireland's largest trading partner and the nation shares a border with Northern Ireland. Because of this, Irish firms are encouraged to pursue a broader export strategy.
Not all Brexit-related news is bad for Ireland, however. The country's Deputy Prime Minister, Frances Fitzgerald, has noted that Ireland's economic outlook remains positive, as the nation is now positioned as the only English-speaking member of the EU bloc. Given that Ireland was the only EU country to experience exceptional economic gains post-Brexit, it is well-suited for a new role as Europe's go-to business destination, at least partially filling the role that the U.K. has vacated within the EU.
Contract enforcement continues to be relatively expensive in Ireland. The World Bank reports that the total cost of enforcement is roughly 26.9 percent of the value of a claim. That compares to the 22.5 percent average in the OECD. Time is also an issue, with it taking, on average, 650 days to complete this process. That's 73 days longer than the OECD average.
Credit acquisition also remains a challenge for some small and medium-sized enterprises (SMEs), despite the introduction of new programs to expand access to bank credit. This can cause smaller enterprises to have difficulty reaching scale. The country also has the fourth-highest SME interest rates on overdrafts and credit lines in the OECD. In January 2017, the rate on loans up to €1 million was nearly double the average Eurozone rate for new businesses.
Finally, Ireland has imposed the EU’s new GDPR data privacy laws featuring a standard that is among the world's toughest—and considerably more restrictive than found in the United States.
The takeaway
Operating in a new country (even one as business-friendly as Ireland) is often a daunting task. Without a firm grasp on the evolving nature of local laws, regulations and business practices, expanding businesses can face the possibility of delayed entry, rising costs, tax penalties—or even civil or criminal litigation.
In order to avoid such a scenario, it's imperative to find a trusted partner with global reach and the experience to help ensure a smooth transition.
CT can help you get set up, provide a single point of contact and provide you with customized solutions for all your needs. We know that one-size does not fit all. From incorporation to dissolution, major mergers and acquisitions, registered agent services and all the day-to-day compliance needs in between, we’ll make sure you have the right support tailored for your global needs.
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CT has helped businesses and law firms expertly manage compliance issues for 125 years. To learn more about how we can help you better manage your global compliance needs, contact a CT representative at 844-318-1457 (toll-free US).