How to Maintain Irish Company Tax Residence during the COVID-19 Travel Restrictions

By Andrew Lambe, 27th April 2020

As the COVID-19 situation develops, countries around the world are expecting to see a significant economic impact which will most likely result in a global recession. The Irish Government and many other countries have announced various measures to restrict contact and flatten the curve of infection. The current restrictions on flights and travel in Europe could impact Irish company tax residence if the directors are unable to maintain their own tax residency in Ireland.

Irish Tax Residence

Company directors are considered to have Irish tax residence when they spend 183 days or more in Ireland during that tax year. They may also be considered an Irish tax resident if 280 days or more are spent in Ireland during the current and previous tax year.

Many companies incorporated in Ireland are recognised as a tax resident company in Ireland, enjoying the benefit of 12.5% corporation tax (or less). However, Irish Tax residence of a company could be compromised if the company is managed or controlled by company officers who are resident in another jurisdiction; especially when that country holds a Double Taxation Agreement (DTA) with Ireland. If both Ireland and anther jurisdiction can assert a claim for tax residency, Ireland’s DTAs generally state that the company will be recognised as a resident in the jurisdiction which it is effectively managed from.

Company directors will need to take steps to avoid a taxable presence being created in another country and that the central management and control of the company remains in Ireland and not elsewhere. Certain companies could have an additional requirement to carry on business and conduct board meetings in Ireland. This is outlined under a “qualifying company” as per section 110 of the Irish Taxes Consolidation Act 1997.

Maintain a Company’s Irish Tax Residence

In general, the following procedures are recommended to maintain Irish Tax residence of a Company:

• The Board of Directors should be comprised of mainly Irish residents. (Please note that the physical residency of the director is important, not nationality)
• The Board of Directors takes all decisions regarding strategy and policy from meetings held in Ireland. (This shows that control of the business is based in Ireland)
• Avoid the use of written resolutions as they allow flexibility in decision making and allows directors to be absent from board meetings.

Directors should be physically present at board meetings in Ireland, however, some companies may be able to hold meetings remotely, using Hybrid Annual General Meetings, once the other points are met.

The Impact of COVID-19 Travel Restrictions

In some cases, the COVID-19 travel restrictions mean that the recommended procedures are not possible compromising the Irish company tax residence. Irish resident directors (of any nationality) may be unable to return to Ireland at this time, and therefore unable to hold the Board meeting in Ireland. Irish company law and court decisions regarding tax residency do not show flexibility for extenuating circumstances such as these. However, from a legal perspective, a recurring pattern of not fulfilling these guidelines would be taken more seriously than just once.

If holding a board meeting is necessary, please take the current tax residency of company directors into account. If it is necessary to hold a hybrid annual general meeting via teleconference or other means, be sure to use appropriate wording in the meeting minutes. In this situation, it may be advisable for directors who are not resident in Ireland to act as observers. In special cases, the company may consider using an alternate director who is an Irish resident or a sub-committee.

Company Bureau can provide an Irish resident director to your company if necessary, to obtain or maintain tax residency in Ireland. Please don’t hesitate to Contact Us today and a consultant will get back to you within 24 hours.

Disclaimer This article is for guidance purposes only. It does not constitute legal or professional advice. No liability is accepted by Company Bureau for any action taken or not taken in reliance on the information set out in this article. Professional or legal advice should be obtained before taking or refraining from any action as a result of this article. Any and all information is subject to change.