There is no shareholders or share capital in this type of company. Instead of shareholders the company must appoint seven or more members, who guarantee to contribute 1 euro to the company in the event of its winding up (subject to Memorandum & Articles of Association). As the company is considered to be a public company, audite exemption cannot be granted (i.e. the company must file audited accounts with the Companies Registration Office). Members can also be Directors, therefore a total of seven people is required to incorporate this type of company.

Charitable Status can be applied to the Revenue Commissioners on projects which are set up for charitable, scholastic or religious purposes. It should also be noted that Guarantee Companies are required under statutory legislation to file Audited Accounts every year with the Companies Registration Office.

For more information on applying for Charitable Status please click Applications for Charitable Status.

There is also a company limited by guarantee with a share capital, however these are rarely used.

Introduction:
In recent years Ireland has become a very attractive place for international companies to locate a holding company.  Because of attractive tax, legal and regulatory framework, combined with an open and accommodating business environment, Ireland’s status as a world-class location for international business is well established.  Very often the preferred method of accomplishing these aims has been either through the relocation of the tax residence of a parent or holding company to Ireland or the incorporation of a new parent or holding company in Ireland.

Company Residency:
A company that is resident in Ireland is liable to Irish corporation tax on its worldwide profits and not just in respect of Irish source profits.  A company that is merely incorporated in Ireland is not automatically treated as resident here if it is controlled by shareholders who are resident in another EU State or in a country with which Ireland has a tax treaty.   

However, the key determinant for tax residency is the “central management and control” test.  In essence this means that a company is resident in Ireland if the strategic decisions concerning it’d activities and operations are exercised here.  Some of the factors that can generally be expected to be of relevance in determining the central management and control include:

• Where are the important questions of company policy and critical decisions determined?
• Where do the majority of directors reside?
• Where are the board meetings held?
• Where is the negotiation of major contracts undertaken?

Tax Advantages:
The main tax advantages for Irish resident holding companies include:
Capital gains tax participation exemption on disposal of qualifying shareholdings; Qualifying shareholdings are greater than or equal to 5% in companies resident in an EU member state/double tax agreement partner country. This shareholding must include the right to 5% of the profits of the company and the right to 5% of the assets on a winding up. The minimum holding requirement can also be satisfied where the holding company is a member of a group and the shareholdings of members of the group are taken into account. This holding requirement must be satisfied for a continuous 12 month period and the disposal must take place within a two year period after meeting the holding requirement. The activity of a subsidiary company must consist wholly or mainly of the carrying on of a trade at the time of the disposal. This requirement can also be satisfied where the business of the holding company and companies in which the holding company has a direct or indirect ownership interest of at least 5%, consist wholly or mainly of the carrying on of one or more trades.

 
1. Effective exemption for foreign dividends via 12.5% tax rate for qualifying foreign dividends and flexible foreign tax credit system.  The Finance Act 2008 introduced a 12.5% tax rate on foreign dividends out of trading profits of companies that are resident for tax purposes in EU Member States (‘EU’) or in countries with which Ireland has a tax treaty (‘DTA’).

2. Double tax relief available for tax suffered in foreign branches and pooling provisions for unused credits. Where (i) the Irish company receives foreign branch income, and (ii) the foreign tax suffered exceeds the Irish tax on the foreign branch income, then the excess may be set-off against Irish tax on other foreign branch income of the Irish company in the year concerned.

3. Dividend withholding tax can be avoided in certain circumstances including where the recipient is resident in an EU member state or a tax treaty partner country.  Amongst the circumstances included are: (A) Companies which are resident in a treaty country, but which are not under the control, whether directly or indirectly, of a person or persons who are resident in Ireland and (B) Companies which are not resident in Ireland and which are ultimately controlled by persons who are resident for tax purposes in a treaty country.  In addition persons who are not resident nor ordinarily resident in Ireland but are resident in an EU state or tax treaty country than be paid gross with withholding tax providing certain compliance procedures are met.

4. Transfer pricing.  Up to recently there were no transfer pricing rules in Ireland.  However new rules have been introduced to ensure that arm’s length prices apply to transactions between associated persons, thus ensuring the full profit is taxed in the country receiving the income. The rules do not apply to small and medium sized enterprises (less than 250 employees, with turnover below €50m or assets below €43m). Effective 1 January 2011 as respects transactions agreed on or after 1 July 2010.

5. Controlled Foreign Company (CFC) Regulations.  Ireland does not have any CFC regulations and therefore it is possible for an Irish company to hold shares in companies that are resident in other jurisdictions and not require the profits of the entity in the other jurisdiction to be repatriated to Ireland. Many other international holding company locations include CFC rules which can limit the range of countries into which they can invest.

One of the major advantages of Ireland as a holding company location is the ability to combine the holding company with trading activities such as shared services, group administration, purchasing treasury and research and development.

For more information, and a free consultation on registering a Holding Company in Ireland, please contact Company Bureau Formations Ltd on +353 1 6461625 or e-mail formations@companybureau.ie

Richard Lowry is Managing Partner of 24/7 Accounts. Richard can be contacted on +353 87 2379553 or see www.247accounts.ie

Introduction
As business people we are all aware that it is cash that is the real life blood of any business. That old saying, ‘revenue is vanity, profit is sanity, but cash is king’ has never been more pertinent. Access to easy credit lines appears to be a thing of the past, for the immediate future anyway that is. While all too many companies have also seen a severe drop in revenues which has not been matched in a reduction of overheads.
As a result, SME’s in particular are having great difficulty in managing ever tightening cash flows, be it from customers lagging on payments or a lack of lending facility from a stressed banking sector.
The importance of managing cash flow therefore has never been more critical. However many of the issues of poor cash flow management stem from companies operating for too many years when there was a constant stream of easy cash available and they took their eye off those internal systems and procedures which act as a barometer for good cash flow management.

Cash Flow Management
Cash flow management is effectively about managing the cash coming into your business and the cash going out. It is about getting the balance right to ensure you receive cash owed to you before you have to pay for your overheads. The danger is very evident.
All too often cash inflows seem to be slower at coming in than the speed with which you are paying out cash. This shortage or cash flow gap is generally fine provided you are trading profitably and receiving in more cash from customers than you are paying out to suppliers over a period of time i.e. after receiving payment from customers and paying out your suppliers there is a balance of cash remaining to be re-invested in the company.
However this is not always the case and cash flow needs to be monitored and projected forward to highlight potential cash shortfalls. By careful monitoring of your cash position, corrective action can be taken in advance to ensure you are able to manage difficult times more easily.
Cash flow therefore can be described as a cycle. The cash you use in your business to acquire resources to sell products or services to your customers is then collected by way of customer payments. These payments are used to pay outstanding bills you have and also to re-invest in more resources to sell additional products or services.

Working Capital
Working capital is the amount of cash tied up in the business’ trading assets. Calculated as (Stock + Debtors-Creditors), a negative working capital might indicate a business’ inability to pay its short-term debt.
What is more relevant is the connection between the three items above. Cash tied up in Stock and Debtors is a cost to the business. Effectively managing your stock means tying up less cash in expensive materials. Over stocking ties up cash needlessly and should be avoided.
Debtors on the other hand can seldom be avoided. Most firms offer credit terms to customers to secure their custom. Debtors are therefore the cash tied up in unpaid invoices from customers. By
reducing Debtor days (speeding up payment from customers), you can cut down on this cost and bring in much needed cash to your business.
Creditors are the opposite of Debtors. This is cash you owe to your suppliers. By lagging on these payments you may extend your own credit terms and slow down your outgoings. But be warned, obtaining a reputation as a bad payer could do untold damage to your business.

Improving your Cash Flow
Remember that cash flow is the movement of cash in and out of your business. Cash Inflows can be monies received from customers to loans from your bank while Cash Outflows will be all the costs you have incurred to sell that product or service to your customer. These can be raw materials for products, rent, wages, insurance etc.

Managing Cash Inflows
Customer Payments: One of the biggest risks to SME’s is the failure of customers to pay their account on time, if at all. Defaulting or delaying payment can impact upon your ability to secure new raw materials, meet bank repayments or to pay the wages of staff.

So how well do you know your customer base?
To safeguard against customers defaulting on payment it would be advisable to implement some or all of the following points;

• Check your customers’ credit worthiness.
• For new accounts, ask for references to check their track record on payments.
• Enforce your credit terms.
• Impose penalties for late payment.
• For new accounts insist on COD for the first two or three deliveries.
• Seek payments by Direct Debit.
• Take out credit insurance on your debtors.
• Be diligent; continuously review your aged debtors.
• Offer incentives for early payment of account.
• Phone your customers a week before payment is due to ensure there are no issues with payment.
• Construct a robust Credit Control Policy to minimise the risk of customers defaulting on their payments.

Internal Efficiencies: It stands to reason that the more efficient your own internal processes the more likely it is that your customers will pay on time. We have all heard the excuses for non-payment, some of the more common ones are;

• ‘I have not received the invoices.’
• ‘The invoices arrived too late for processing in the month and as a result will be paid in the next cheque run.’
• ‘There is an error on the invoice.’

By eliminating your own internal inefficiencies you are eliminating the range of excuses for customers to delay payment. Best practice in all your procedures will speed up cash inflows. When your customer places a Sales Order you must ensure that all the information is correct. The customer will have used the most up to date information available, so if the information on price, delivery time etc are incorrect at the start you have got off on the wrong foot. The sales order process should be quick and easy to use.
Assuming the customer has cleared your credit vetting procedures, the next step is to fulfil the order. It is critical that you honour your commitment on delivery and quality. Clearly once you have met your obligations on delivery and quality it is so much easier to insist on prompt payment. If delays are unavoidable, keep your customer notified.
Invoice your customer immediately on delivery of the goods or at the very least within 24 hours. Ensure that the invoice has been checked for accuracy so that it matches the agreed price, that the description and quantity of goods delivered, matches not just the sales order but more importantly the delivery note should the actual goods delivered differ from the sales order.
The quality of your invoice is critical. Critical information it should contain is; your company details, customer name address, description of goods or services sold, quantity delivered, price, payment terms, invoice date, sales order/delivery note number.
And remember – Once the invoice has been raised, post it out or e-mail it immediately to the correct address!

Managing Cash Outflows
It is vital that you understand what cash outflows your company incurs. If you are cash rich, payments can be met as they fall and in line with agreed credit terms. If your company however is restricted in whom it pays and when because of a worsening cash flow situation, how do you decide who to pay?
Paying a key supplier to ensure you continue to trade, on the surface seems a sound judgement call. But what of the suppliers who have gone without. Will they wait for the next payment run? Will they seek a judgement for non-payment? Will it frighten off future suppliers who hear of your difficulties in meeting payments?
It cannot be overstated how important it is for a company to develop the habit of generating cash forecasts. This will highlight expected receipts and outgoings and generate an anticipated cash position. The cash forecast should be for a three month period and updated weekly to ensure the most up to date information.
The starting point is to understand who you owe money to. Wages for your staff must be met weekly or monthly. Bank loans must be repaid. Materials must be paid for. VAT paid and so on.
Start by forecasting who needs to be paid and when. Use your creditor’s ledger to map out payment dates for suppliers. Ask yourself, how up to date is your creditor’s ledger. You could be living in a fool’s paradise if you omit significant payments to suppliers because the creditor’s ledger is not up to date. So be sure to take into account outstanding purchase orders that have not yet been matched to supplier invoices.
Prioritise payments ensuring that all critical payments are dealt with first. This may be obvious, but ensure there are funds to meet your wage bills for example.
Against these costs, map into your cash forecast expected receipts from customers. Using your opening bank balance you can now very simply generate an expected weekly bank position.
The forecast will visualise your current and future cash position and it may be possible to merely slow down supplier payments for a few days if the need arises as you know there are cash receipts due in presently.
However the risk here is that you may establish a reputation for late payment and that creditors will impose stricter and shorter credit terms if you persist with late payments.
If your existing cash flow difficulty is more longterm, what can you do?
Firstly as mentioned, have a detailed cash flow forecast available to highlight the current gap in funds and therefore the funds you require to close this gap.
Secondly, develop a business plan to show the viability of your business. Your bank will want this detailed plan to satisfy there own risk assessors that your business is worth investing in.
Thirdly, be open and transparent in your dealings with lenders, without giving away your competitive advantage.
You can then;

• Approach your Bank for support.
• Increase you overdraft limit.
• Secure a short term loan.
• Apply for invoice discounting.
• Speak to your principal suppliers and agree a payment plan.
• Speak to the Revenue Commissioners if meeting your tax liabilities for VAT or PAYE is a problem.
• Seek extended credit terms from suppliers.
• Speed up cash inflows by offering incentives for customers to pay early.
• Reduce and eliminate unnecessary costs.
• Inject additional personal cash.

And of course what you should not do.
Do not bury your head in the sand and ignore the warning signals. As payment reminders come across your desk, deal with them personally. Communication is vital. It is in no ones interest for you to default on payment.

Raymond Gibbons ACMA is the owner of Business Management Solutions, who are Chartered Management Accountants with offices in Dublin and Navan. Phone 046 9073868 or please see www.businessmanagementsolutions.ie

Most Irish businesses are facing hard economic times and a more stringent tax regime.  Personal tax rates are increasing and Revenue are far less forgiving of non-compliance for both individuals and businesses.  Non-compliance can result in penalties and interest on any tax liability that a business might have.
 
The name of the game these days is to be far more vigilant about identifying and obtaining any of the tax reliefs that still exist and being equally vigilant in making sure that your business is not vulnerable to penalties and interest by being non-compliant.
 
Analysing your business perfomance should have always been a key part of managing your business, but now it is even more important than ever.  It is not only about tax efficiency and compliance, it is also about business efficiency and exploiting opportunities and avoiding business risks faced by your business.
 
Specifically:
 
1. Make sure the bookkeeping/accountancy software that you’re using is compatible with your accountant’s software.  This will save time and money when you send records to them to prepare final accounts or to analyse and give advice.

2. Make sure you understand the reports your software can provide for you.  Remember, your records are most valuable to you, so use them to check performance and plan.  Most businesses don’t use the reports that are available to them and, therefore, don’t know exactly what’s going on in their business.

3. Use your Accountant to help produce relevant reports in an efficient manner.  You don’t want to spend valuable time producing unuseful or irrelevant information.  Most businesses can identify 3-4 key performance indicators e.g. turnover, Gross Profit margin, payroll costs, net profit.  These can be identified and regular reports produced from your bookkeeping/accounting software about actual performance vs. a target.

4. Plan and try to anticipate what your performance will be.  In this environment, when credit is restricted and cash is difficult to collect, you need to plan ahead to make sure that you have enough cash coming in to meet your regular costs.

5. Income tax rates are going up while Corporation Tax rates are likely to remain the same.  Operate your business through a company and manage how you arrange for this to benefit you personally in the most tax efficient way.  This is usually about longer term planning, which a lot of us forgot to do in the Celtic Tiger years.  Plan for the longer term, because in the short term times are certainly going to be tough.

6. Pensions are very boring unless you’re a pensioner! One day we will all be pensioners (hopefully) and planning for that is a sensible and tax efficient thing to do, particularly if you operate your business through a company.  Discuss the tax efficiencies with your Accountant and the security and performance of  your pension  with your pension provider.  Again, this is about longer term planning which is vital. 

7. Ask the question Why am I in business?  The answer probably is  – To achieve a particular lifestyle now and in the future.  The next question then is – (How) Can that lifestyle be financially supported by my business.  Unless you actively manage and monitor your business, you won’t know.
 
Finally, remember that we’ve been in difficult economic times before and it was worse, but we got through.  We have better information now and better tools which we must make use of to get through these current difficult times.
 
This article is courtesy of Rick Smith, Eilis J. Quinlan & Co Accountants. Rick can be contacted on 086 1936561 or please see www.eilisjquinlan.ie

Mandatory e-filing of tax returns has arrived! From the 1st June 2011 it will be compulsory for certain categories of taxpayers to pay and file returns electronically with the Revenue Commissioners. The requirement to e-file affects:

• All companies.
• All trusts.
• All partnerships.
• Self-employed individuals filing a return of payments to third parties (Form 46G).
• Self-employed individuals subject to the high earners restriction (Form RR1, Form11).
• Self-employed individuals benefiting from or acquiring Foreign Life Policies, Offshore Funds or other Offshore Products.
• Self-employed individuals claiming a range of property based incentives (Residential Property and Industrial Buildings Allowances).
• All Stamp Duty returns & payments due on or after 1st June.

There is a list of specified returns & payments which must be e-filed via ROS (Revenue online Service) on the Revenue website www.revenue.ie/en/online/ros/mandatory-e-filing.html. It should be noted that even if a return is not included on the list, if it is possible to pay & file via ROS, then the return must be filed electronically.
You may have received a letter from Revenue advising you of your obligation to file electronically from the 1st June. You should not assume that you are not required to e-file if you haven’t received a letter from Revenue.

Revenue may grant some taxpayers from an exemption from mandatory e-filing. The exemption will only be granted where the taxpayer can show that they don’t have sufficient access to the Internet or in the case of an individual, that they can show by reason of age, mental or physical infirmity that it isn’t possible for them to e-file.

If you haven’t registered for ROS you should do so immediately. However, if your tax agent or representative is currently paying and filing all returns you do not have to register.

Revenue can apply penalties if you fail to pay & file your returns electronically; the penalty is €1,520 per offence. For example if you don’t pay & file your May/June VAT return electronically Revenue could apply a penalty of €1,520 for not paying the liability via ROS and another €1,520 for not filing the return via ROS which equates to a total penalty of €3,040.
While some taxpayers may feel the move to mandatory e-filing may place an additional administrative burden on them, the move can be seen as beneficial. ROS allows you file tax returns, pay liabilities, access your tax details and claim repayments using a quick and secure facility. You can also avail of extensions to existing deadlines for paying and filing returns when you both pay & file using ROS. The existing time limits have been extended to the 23rd of the Month for Corporation Tax, Relevant Contracts Tax (RCT), VAT and Employer PAYE/PRSI.

For more information please contact your tax agent or Lynda Lawlor BBS FCCA AITI, Tax Adviser at ‘The Wealth Shop’ on 01-8527784 or email info@thewealthshop.com

Disclaimer: The above content is provided by a 3rd party. Company Bureau is not responsible and shall not be liable for any expense incurred as a result of any misrepresentations contained in the above information. You should therefore verify any information obtained in the above and seek paid professional advice before you act upon it. This page contains a link to an internet site maintained by a third party. Company Bureau accepts no responsibility for the privacy practices or content of other such sites. You assume sole responsibility for use of third party links.

Collection of the Non Principal Private Residence Charge (NPPR) for 2011 commenced on the 31st March 2011 and is due shortly for companies and individuals.

The 2011 charge is based upon the ownership and status of the property on the 31st March 2011. Please note that you must pay the NPPR charge for 2011 on or before the 30th June 2011 to avoid late payment fees.

This levy on second homes or non-principal private residences in the state A late payment fee of €20 will be applied per month if the payment is made after 30 June 2011.

• The levy is €200 per property
• The levy applies to each additional property owned by the individual or company
• The levy applies to residential property only

The tax is self assessment and may be registered and paid on online using the following link

https://www.nppr.ie/

If you have any queries or require assistance in this matter please don’t hesitate to contact Angus Donohoe, BMOL Partners. PH: +353(1)662 2700
www.bmol.ie

The long awaited consolidated Companies Act moved a step closer last week with the publication of the first part of the Companies Consolidation and Reform Bill, otherwise known as “Pillar A” by the Minister for Jobs, Enterprise and Innovation, Richard Bruton.

When the consolidated Companies Bill is signed into law (expected to be late 2012 or early 2013) it will dramatically alter the landscape of company law in Ireland.

The draft legislation, which contains 952 sections and six schedules on over 1300 pages of text, is expected to provide the largest piece of legislation in the history of the State when it is complete. The draft consolidates the 15 existing Company Acts from 1963 as well as a significant number of statutory instruments and judgments. It has been in the pipeline since February 2000, when the Company Law Review Group (CLRG) was set up by Government to reform and modernise the landscape of Irish company law and bring it into the 21st century.

As well as consolidating existing law in the area, Pillar A of the Bill will make important changes which will make it easier and more cost-effective to register and operate a company. The legislation published today contains all provisions relevant to the private company limited by shares, which under the Bill will be known as “CLS” instead of “ltd”, and which accounts for over 90% of companies presently registered in Ireland.

This proposed new company type will now be put at the centre of Irish company law, and important reforms will be made to the way this company type operates:

• A CLS will be allowed to have only one director;
• A CLS will only be required to have one document in its company constitution, and the Act provides for a default document to apply in all cases except where the company changes this constitution;
• A CLS will have the same legal capacity as a natural person, reducing the necessity to prepare long company constitutions, and reducing legal disputes caused by the ultra vires doctrine;
• A CLS will no longer be required to have a “physical” Annual General Meeting (AGM) every year – it will be possible to do this by correspondence; and
• Other changes will include an exhaustive listing of the duties of directors (previously contained in case law) and of all criminal offences under company law.

The section of the bill known as ”Pillar B” which will cover PLC’s, Companies Limited by Guarantee, re-registrations, foreign companies, investment companies, etc. is still being finalised and is expected to be published in late 2012.

Dr Tom Courtney, chairman of the CLRG, said: “The publication of the provisions of Pillar A of the Companies Bill represents a landmark moment in the development of Irish company law. The document which is published today is the product of years of very careful and painstaking work in remodelling Irish company legislation around the entity which uses it most – the private company limited by shares – and in making that legislation more accessible to those who need to be familiar with its provisions, whether in the business community or professional advisers. The publication of “Pillar A” will allow all of these stakeholders the opportunity to become familiar with the provisions of the proposed new law and to interrogate these provisions from a technical perspective in advance of the Bill being enacted”.

A copy of the Bill can be found on the Department of Jobs, Enterprise and Innovation’s website by clicking on the following link:
http://www.deti.ie/companiesbill

Company Bureau offers an annual company secretarial and compliance service to help you ensure your company is fully compliant with current and future company law legislation. For more information and our brochure, please don’t hesitate to Contact Us

For the latest updates and developments on the Companies Consolidation and Reform Bill, why not sign up to our monthly newsletter (Please see homepage for details)

As Company Formation experts, a question we are commonly asked is ‘how do I incorporate an Irish company’ or ‘How do I register my business?’

Before this question can be answered you need to decide what type of business you want to set up. This is the million dollar question that many of our clients have. There is no ‘catch all’ answer – It really depends on your precise requirements. If you are not sure, it is a good idea to seek the advice of an independant tax advisor or Accountant.

The benefits of a limited liability company are outlined here in our blog article that we published last year, courtesy of Mr. Gerald Owens FCA, AITI, of FDC. However a limited company is not for everyone e.g. for a dog grooming business with a turnover of EUR10,000 per year, registration of the business as a sole trader would be more suitable.

The process for business name registration is outlined by clicking here The process is straightforward, and once your certificate of business name registration is issued you can open a bank account in your company name and register for taxes / as self employed.

For the required steps on registering a limited company, please click here for more details. Once you have completed the application form, Company Bureau can have your company registered in only 3-4 working days.

May we take the opportunity to congratulate you on starting your own business, and we wish you every success with your new company!

The Multi-Unit Developments (MUD) Act 2011 was fully commenced into law on 1st April 2011. This piece of legislation contains 34 sections of new law for apartment management companies to comply with as well as providing a comprehensive legislative framework for multi-unit developments.

As well as providing a legal framework for multi-unit developments, the ‘MUD’ Act will enable apartment owners to take control of common areas and the management of the complex for the benefit of all residents.

The main features of the act are as follows:

As stated above, the act requires that common areas are transferred into the OMC by 30th September 2011. The existing management company can be utilised for this purpose, once the Memorandum & Articles of Association are changed and the company name is changed to include the term ‘owners management company’

Company Bureau can assist you with this requirement by changing the name of the company to include the term  ‘owners management company’ in the name, and also replace the Memorandum & Articles of Association with our ‘OMC’ version which has been drafted by a commercial law firm and is approved by the CRO.

For more information, please don’t hesitate to contact Paula Horan or Andrew Lambe on (01) 6461625 or e-mail cosec@companybureau.ie

Company Bureau would like to remind you that Tuesday 13th December 2011 is the last day for new company applications to be lodged with the Companies Registration Office (CRO) should you require a limited company to be incorporated before Christmas or the 31st December 2011.

Should you require a company to be incorporated before then, and also to avail of the 0% rate of corporation tax for the first 3 years of business, you will need to place an order with us at least 2 days before this date (Companies must be incorporated before 31st December 2011)

Also if you require a company to be incorporated before Budget Day, ideally we should receive the order/signed documents by Wednesday, 30th November to ensure that we have the company registered in time.

Please contact us on +353 1 6461625 for further information, or proceed to ‘order a company on-line’ by using the link above left.

Seasons Greetings from Company Bureau!