The Americans In Ireland: Pros and Cons of Doing Business in Ireland
Companies choose to invest in foreign markets for a multiple of reasons. Very often, many want to expand their operations beyond their home country as well as to park their wealth in foreign countries. For those who are seeking to enter the European Union through Ireland, there are some pros and cons to consider.
U.S. is currently undergoing some immigration wave as what Americans had in the 19th century. Just that this time, it’s the reversed situation. More and more Americans are going back to their ancestor’s homeland to run business, but the reversal effect worries people. It’s because their American mind-set has steered the way they perceive the world.
Nevertheless, Americans are encountering some issues where they mistakenly think that they are from the U.S., where they know the way things are, the way things should be, and the way they want things to be. As such, Americans try to juxtapose the same on a foreign system, like Ireland. They think that they could understand foreign country [like Ireland] because they speak the same language and they share the almost the same living culture. Yet, it does not work out very well.
The perception, “I know what am I doing” is the one thing that places dangers to American when they are trying to do business in countries like Ireland. Such perception has posted difficulties for them to run business in foreign countries. The bottom line is, the right degree of understanding does not solely rely on how many times you have been to Killarney on vacation trips or St. Patrick’s Day parade. Businesses must come to grips with the assumption that “things are going to be the same as they are in America” where the truth shows otherwise.
In fact, a detailed plan for company setup in Ireland is a must-have procedure for companies to achieve their goals. Investors and businessman must equip themselves with the ability to correct mistakes, to respond to the changing circumstances as well as to evaluate the outcomes.
There are advantages and benefits to run businesses in Ireland. In fact, Ireland is a gateway for people to enter the mega market of European Union with a population of more than 300 million people. The barrier-free access to the EU’s 28 member countries and its four freedoms – free movement of goods, capital, services, and people are magnets that draw the attention of many companies to base in Ireland.
In this regard, Ireland is well-positioned as the ideal gateway for foreign investors to enter the huge market of European Union where it that has attracted more than 1,000 multinational companies to invest in this country. Furthermore, the Emerald Isle has one of the world’s lowest nominal corporate tax rates, which is 12.5 percent for active businesses. The young and well-educated workforce in Ireland, at a median population age of 35, is one of the strengths of the nation.
However, investors and businessmen are reminded that “a legitimate business reason” is a must if they plan to locate their business in Ireland. The country’s low corporate tax has indeed attracted attentions of many, but it [corporate tax] should not be the only reason for investors to tap into the Ireland market. Financial incentives are set to ensure the establishment or development of business operations. In this light, all applications must satisfy the IDA where the assistance is necessary and meet the business needs.
Also, the laws are different in Ireland than what people have in America. For example, an employment contract in America can be for an indefinite duration but not in Ireland. In Ireland, an employee with one year of continuous service with a business is entitled to a permanent contract.
Other than this, the intellectual property laws are also quite different. In Ireland, there is no legislation that protects know-how, trade secrets and confidentiality, and their IP ownership has to be specifically developed by contract. Yet, Ireland imposed stricter data protection laws, which is stricter than in the U.S.
Ireland’s low corporate tax rates are the cornerstone and the catalyst that spur the economic growth in Ireland. What’s more, it [low corporate tax] is there for long run and is not going to change for the time being. For R&D activity in Ireland, a 25 percent research and development tax credit are granted for any additional R&D activity in this country.
Lastly, a good exit strategy for tax purposes is highly recommended for foreign investors. Any profit derived from Ireland has a low tax rate, as long as it’s within the country. However, the corporate tax rate in the U.S. is as high as 35 percent, and is only deferred and must be paid once the profits are repatriated back to America.
In short, recognizing the possible pitfalls and benefits that lie ahead will ensure a successful business in Ireland.