Yes!
An overseas investor can generally invest in an Irish company and become a shareholder.
However, before accepting the investment, the company should review:
- How the shares will be issued or transferred.
- What company records need to be updated.
- Whether beneficial ownership information is affected.
- How payments to the overseas shareholder may be treated for tax purposes.
This is a common question for Irish business owners who have a family member, business partner, investor, or other individual based outside Ireland who wants to invest in an Irish company.
How can an overseas person become a shareholder of an Irish company?
Before an overseas investor puts money into an Irish company, it is important to establish exactly what the investment represents and how the investor will receive their ownership interest.
There are two common ways in which someone can become a shareholder:
- The company issues or allots new shares to the investor
- An existing shareholder transfers some or all of their shares to the investor.
These are different transactions and can have different company and tax implications.
Is the overseas investor buying existing shares or receiving new shares?
This is one of the first questions to clarify.
New shares are being issued.
If the Irish company issues new shares to the overseas investor, the company’s share capital and ownership structure will change.
CRO guidance states that an allotment of shares is submitted using Form B5, which should generally be submitted within 30 days of the allotment.
The company’s constitution and applicable company-law requirements should also be considered before the new shares are issued.
Existing shares are being transferred.
Alternatively, an existing shareholder may transfer some of their shares to the overseas investor.
The CRO states that a company is not required to notify the CRO of a share transfer at the time of the transfer. The transfer is reflected in the company’s next annual return.
An overseas investment should not simply be treated as a generic “shareholder update.” The correct process depends on whether the transaction is an allotment or a transfer.
What changes have to be made?
When the ownership structure of an Irish company changes, the company’s statutory records and relevant CRO filings need to be considered.
The annual return provides information about the company’s shareholders and share capital, while particular transactions can create additional filing requirements.
The company should therefore maintain accurate records of:
- The investor’s name and details
- Number and class of shares
- Percentage ownership
- Date of the transaction
- Consideration paid for the shares
- Relevant shareholder documentation
- Any changes to beneficial ownership
- Share purchase or investment agreement
- Share transfer documentation, where applicable
- Board resolutions
- Shareholder resolutions, where applicable
- Updated register of members
- Share certificates
- CRO filings
- Beneficial ownership information
- Shareholder agreement
- Dividend documentation
- DWT exemption documentation, where applicable
The objective is to ensure that the investment is properly documented rather than simply transferring money into the company’s bank account and recording the investor informally.
Does the overseas investor have to live in Ireland?
The fact that an investor lives outside Ireland does not, by itself, answer all of the tax questions relating to their investment.
The investor’s tax residence can become relevant when considering income received from the Irish company, particularly dividends and other payments.
Revenue’s guidance explains that the Irish tax treatment of an individual depends on factors including their residence, ordinary residence and domicile, as well as the type and source of income involved.
The investor’s home country may also have its own tax rules.
For that reason, an overseas investor should consider whether they need tax advice in both Ireland and their country of tax residence.
What should an Irish company check before accepting overseas investment?
Before completing the transaction, the company should consider the following checklist.
1. Who is investing?
Is the investor:
- An individual?
- Another company?
- A partnership or other entity?
2. Where is the investor tax resident?
The investor’s tax residence can be relevant to the treatment of dividends and other payments.
3. Is the investor receiving new shares?
If so, the company should check the requirements for the share allotment and relevant CRO filing.
4. Is an existing shareholder transferring shares?
If so, the company should follow the appropriate share-transfer process and consider any restrictions in the company’s constitution. CRO guidance notes that the constitution and relevant provisions of the Companies Act can affect share transfers.
5. What percentage of the company will the investor own?
The ownership percentage can affect control and beneficial ownership considerations.
6. Does the RBO information need to be updated?
If the ultimate ownership or control of the company changes, beneficial ownership should be reviewed.
7. Will the investor receive dividends?
If yes, the company should review the Dividend Withholding Tax position and whether a non-resident exemption is available.
8. Will the investor receive other payments?
Any salary, interest, loan repayment, consultancy payment or other transaction should be considered separately.
Will it affect company’s corporation tax?
Having an overseas shareholder does not, by itself, automatically change the Irish company’s corporation tax position.
The Companies Act 2014 provides mechanisms for restoring a dissolved company to the register.
The current Corporation Tax rates include 12.5% for trading income and 25% for certain non-trading income and income from excepted trades, subject to the applicable rules.
However, the specific investment structure and transactions involving the overseas shareholder can create other tax considerations, which is why the proposed investment should be reviewed before it is completed.
What happens when dividends are paid?
A dividend is a distribution of company profits to shareholders.
Revenue states that Irish resident companies must generally withhold Dividend Withholding Tax (DWT) at 25% on dividend payments and other distributions, subject to applicable exceptions.
However, 25% should not automatically be assumed to be the final tax treatment for every overseas shareholder.
Revenue provides exemptions for certain qualifying non-resident shareholders, subject to conditions and the required documentation.
For example, qualifying non-resident individuals and companies may be eligible for an exemption where the relevant requirements are met. Revenue states that the exemption is not automatic and requires the appropriate declaration, such as Form V2A for an individual or Form V2B for a company.
This means the company should establish the shareholder’s circumstances before paying dividends.
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