New private limited company

shatter

In June I have had a private limited company formed in Sligo. The formation has been done by a formation agent. There are two directors, my wife and me, both non-residents. Not knowing where to turn to I have taken the advice of an irish friend and approached his accountant for the book-keeping and filing of the various reports. Afterwards, I found this board ... well.

Following the discussions earlier in this forum, two questions arose:
1) What would a normal accountant fee be to handle a small company with about 50 outgoing and 150 incoming invoices a year, CRO report, corporation tax, income tax for one director, VAT (very little), Intrastat, what-did-I-forget?
2) Is it possible to “pay” one directors salary normally, like 1000 Euros per month, and the others (maybe 2500 Euros per month) exclusively by dividend? The company would generate enough revenue to do so and still serve the other costs ...
3) IF one director only gets dividend, bo directors compensation, is he liable to social securtity?

Joachim

Our man in Havana

There are two directors, my wife and me, both non-residents.

Is the CRO aware of this? This is not legal to have 2 non resident directors unless a bond of €25,394.76 is lodged at the CRO.

www.cro.ie wrote:

Irish-resident director
Subject to one exception (see below), at least one of the directors for the time being of a company which is being incorporated is required to be resident in the State. Pursuant to section 44(8) Companies (Amendment)(No.2) Act 1999, a person is resident in the State at a particular time (the relevant time) if -

he or she is present in the State at -

1. any one time or several times in the period of 12 months preceding the relevant time (the immediate 12 month period) for a period in the aggregate amounting to 183 days or more, or

2. any one time or several times -

1. in the immediate 12 month period, and

2. the period of 12 months preceding the immediate 12 month period (the previous 12 month period),

for a period (being a period comprising in the aggregate the number of days on which the person is present in the State in the immediate 12 month period and the number of days on which the person is present in the state in the previous 12 month period) in the aggregate amounting to 280 days or more, or

that time is in a year of assessment (within the meaning of the Taxes Consolidation Act 1997), in respect of which the person has made an election under section 819(3) of that Act.

For the purposes of subsections (8) and (9) -

references in this section to a persons being present in the State are references to the persons being personally present in the State, and

a person shall be deemed to be present in the State for a day if the person is present in the State at the end of the day.

Exemption from the requirement to have an Irish-resident director
The requirement to have at least one resident director does not apply to any company which for the time being holds a bond, in the prescribed form, in force to the value of €25,394.76 and which provides that in the event of a failure by the company to pay the whole or part of -

1. a fine imposed on the company in respect of an offence under the Companies Acts, 1963-2001, committed by it, being an offence which is prosecutable by the Registrar of Companies and
2. a fine imposed on the company in respect of an offence under section 1078 of the Taxes Consolidation Act 1997 and
3. a penalty which it has been held liable to pay under section 1071 or 1073 of the Taxes Consolidation Act 1997,

there shall become payable under the bond a sum of money for the purpose of same being applied in discharge of the whole or part of the companys liability in respect of any such fine or penalty.

The bond must have a minimum period of validity of two years, commencing no earlier than the occurrence of the event giving rise to the requirement for the bond. The surety under the bond must be a member of a class specified in Schedule 2 to the Companies (Amendment)(No.2) Act 1999 Bonding Order 2000 - that is, a bank, building society, insurance company or credit institution.

If, following incorporation, a company applies for and is granted a certificate from the registrar of companies that the company has a real and continuous link with one or more economic activities that are in carried on in the State, that company will be exempted from the requirement to have at least one resident director from the date of the certificate, as long as the certificate remains in force. Application for this certificate is made on Form B67, and must be accompanied by a statement from the Revenue Commissioners made within two months of the date of the application by a statement that the Revenue Commissioners have reasonable grounds to believe that the company has such a link.

CRO practice note on section 43 bonds (required where company has no Irish-resident director) and new companies

* Presenters are requested to clearly identify applications for incorporation that are accompanied by bonds.
* The prescribed execution requirements (i.e. under the Common Seal of the Surety) must be adhered to.
* The original bond, together with a certified copy of same, should be submitted to the CRO, with the Form A1.

Effective date of bond
A period of two years is prescribed by the Companies (Amendment)(No. 2) Act 1999 (Bonding) Order 2000 as the minimum period to be specified as being the period of validity of the bond, which period is to commence not earlier than the occurrence of the event which gave rise to the requirement to effect a bond. Furthermore, for new companies, the bond must be effective as at the date of incorporation.

With regard to new companies, the event which gives rise to the requirement to effect a bond is the incorporation of a company without a resident director. However, there is also a statutory requirement that the bond be furnished to the CRO pre-incorporation, with the Form A1.

It should be noted that paragraph 5 of the bond enables the parties to stipulate the commencement date of the bond. This is not required to correspond with the date on which the parties execute the bond, and so the parties have a degree of flexibility.

The CRO has implemented the following requirements in relation to the effective date of bonds received in connection with new companies:



The effective date of the bond may not exceed four working days prior to the date of the companys incorporation, exclusive of incorporation date.


As customers are aware, service standards apply to all incorporation schemes. These are:

* Fé Phrainn: incorporation within ten working days of receipt of documents by the CRO
* CRODisk: incorporation within five working days
* Ordinary: while there is no guaranteed service level, in practice it currently takes 15 working days.

In calculating the date from which the bond is to take effect, therefore, applicants ought to take account of the incorporation scheme which they are utilising and the relevant customer service standard.

The following effective dates will apply in practice:

* Fé Phrainn: the bond ought to take effect as and from the fifth working day after the date of receipt of Form A1 by the CRO.
* CRODisk: the bond ought to take effect as and from the date of receipt of Form A1.
* Ordinary Scheme: the bond ought to take effect as and from the tenth working day after the date of receipt of Form A1.

In the event that an application for incorporation accompanied by a bond is returned by the CRO to the presenter for amendment, a new bond with an adjusted effective date in line with the above will be required, unless the revised application is resubmitted to the CRO within five working days.

For further information see Information Leaflet No.17, The requirement to have an Irish-resident director.

Info Leaflet 17

antoinolachtnai

This is an unconventional situation, and to get the best tax deal, you will need an accountant who has a pretty good understanding of tax law in Ireland and Germany. It sounds to me like there might be a liability for tax in Germany as well as in Ireland in respect of the salaries. Taking the money out of the company as either a dividend or a salary isn't necessarily a very tax-efficient idea in your circumstances. Sorting out the tax and legal situation doesn't really have much to do with the number of invoices generated, it has to do with the type of trading involved and the issues of residency and domicile. Off the top of my head, I would say that to get this sorted out in a tax-efficient manner will take at least 30 hours and I suppose it would be realistic to pay EUR 200/hour. Maybe you could find someone who could do it cheaper, but you'll need to be sure of his experience. The point about company law is also well-made.

shatter

Bond-007 wrote:

Is the CRO aware of this? This is not legal to have 2 non resident directors unless a bond of €25,394.76 is lodged at the CRO.

Yes. We have issued a 2-yr-bond insurance instead of the bond itself.

Joachim

lomb

is there any reason u need an irish company?

shatter

antoinolachtnai wrote:

This is an unconventional situation, and to get the best tax deal, you will need an accountant who has a pretty good understanding of tax law in Ireland and Germany.

Actually,
the only issue seems to be the double taxation treaty. This means, that all moneys payed in Ireland are subject to Irish taxation, and I will receive a "tax-bonus" for my German tax declaration (which will be made by a german accountant). A first calculation showed, that I will pay about 4000 Euro more tax in Ireland than in Germany - under the assumption that I will not pull some of the gross income out for pension.

Joachim

shatter

lomb wrote:

is there any reason u need an irish company?

Yes.
For one thing, I love Ireland (especially the North-West), for another, you do a lot of things far smarter than we. For example the pension scheme for company directors ...
Another example: in Germany you would have to pay the bond ... in Ireland you can buy a bond-insurance.

Joachim

lomb

what is ur business here, will u be physically trading here?if u have property here and wish to buy it thru a company fair enough, but i reakon from experiance its madness. the administration just isnt worth the hassle to be honest, unless u are making a hundred grand +. especially if u dont live in the country.

taxes are very high in ireland, there is prsi to pay here and that raises the tax to 47%+, corporation tax rates are low though and thats good ONLY for reinvestment, capital allowances on depreciation are ridiculously low, as a dentist i know many dentists who are working with very very old equipment because they cant write new stuff off quickly.

lomb

shatter wrote:

Another example: in Germany you would have to pay the bond ...
Joachim

what bond, i set up a uk company and didnt pay a penny...

shatter

antoinolachtnai wrote:

Off the top of my head, I would say that to get this sorted out in a tax-efficient manner will take at least 30 hours and I suppose it would be realistic to pay EUR 200/hour.

Divide et impera, as the Romans used to say.

I will have the Irish side treated by an Irish accountant, the German side by a German accountant (and tax specialist, which is the same over here). Anyhow, thank you very much for your advice, as I will ask my current Irish accountant to explain me why I possibly would need a tax man ...



Joachim

shatter

Hi Lomb!

Nice to meet a Zahnarzt ...

lomb wrote:

what is ur business here, will u be physically trading here?if u have property here and wish to buy it thru a company fair enough, but i reakon from experiance its madness. the administration just isnt worth the hassle to be honest, unless u are making a hundred grand +. especially if u dont live in the country.
taxes are very high in ireland, there is prsi to pay here and that raises the tax to 47%+, corporation tax rates are low though and thats good ONLY for reinvestment, capital allowances on depreciation are ridiculously low, as a dentist i know many dentists who are working with very very old equipment because they cant write new stuff off quickly.

I know, I know.
Over here you pay up to 54% max (plus pension) ... and get screwed for that anyway.
Let's put it simple: I have had enough and I'm looking for alternatives. Add to that my fixation to Sligo/Donegal ...

Also I know that a UK company would have been much cheaper, but ... sorry to say ... I have a slight distaste of de Inglish ... (probably an inherited racial prejustice)

Anyway,
I'm a German IT nerd who specialized in Oracle related things like planning, installing, programming, tuning, and the like ... basicially dealing with all the bullsh*t that arises if you use Oracle. My customers are exclusivly in Germany, they pay by the hour. And it accumulates to more than 100 Grand.

I plan to buy property in the Bundoran/Ballyshannon area and install a pension scheme that I can use to retire in Bundoran ... I just want to get old beside the sea.

Also thank you very much for your advice on the company tax; actually beyound a really small office, a car and a laptop there is not much to "invest" in ... and that I can do through my German company ... billing the Irish.

Now, are there any taxes or "squeezes" I forgot? I know about income tax, company tax, VAT.

Oh, by the way, if you want contacts to German dentists to try to get some so called "outdated equipment", I would be glad to help.

Joachim

lomb

shatter wrote:

Oh, by the way, if you want contacts to German dentists to try to get some so called "outdated equipment", I would be glad to help.

Joachim

nah being young i only buy the best
as far as i know there arent any real squeezes. the main one years ago was section 23 property allowances, where in effect the government let u write the construction cost of an apartment in a poor area against your rent. but now the few places that have section 23, property developers and investors merely add the value of the property onto the value of the capital allowances, so making it dearer than market value. its a bit of a joke actually.

i know what u are trying to do, ur trying to transfer invoices to theirish company, the problem with that is the german taxman might not be happy about it, cing as no development is taking place on irish soil. if it is thats ok!, u can always set up a company in the uk, they have VERY VERY generous pension provisions, down to buying a commercial property of ur choice thru your own private pension.

i find the uks overall tax rate of 42% as nearly the lowest in the free world also. it used to be 40 until last year and they introduced a 2% social insurance on all money....

shatter

lomb wrote:

i know what u are trying to do, ur trying to transfer invoices to theirish company, the problem with that is the german taxman might not be happy about it, cing as no development is taking place on irish soil. if it is thats ok!

Basicially yes, but the customers will be really customers of the Irish company and I will conduct some business in Ireland and the UK too (councelling, programming, PC service and the like).

My decision to set up in Ireland had not only to do with my fondness of the North-West, but also with my contacts up there. Within the next year I will watch things running and also check the UK option.

I guess the German taxman will not be happy, but provided that the company setup is stable, he can do little about it. I will have to file an income tax return here, which includes the Irish income and the Irish tax bonus.

Joachim

antoinolachtnai

Sad to say, structuring an international business, even a relatively small one, is usually a matter of money rather than sentiment. You are free to do whatever you want, of course, but you will probably end up paying more tax on your trading than you really need to (not that there's anything wrong with that, necessarily).

It sounds to me like you might have an opportunity to set up a nest-egg for yourself and your wife which could legitimately grow tax-free out of the reach of the German or Irish taxman. Unless you have a lot of time on your hands, I wouldn't go for the 'divide and conquer' approach - you need one person who can give overall strategic adice on your whole situation.