By Keeva O’Neill, 14th June 2022
If you have set up an Irish company before or are currently in the process of setting up your first company, you may have come across the term ‘NACE code’. This short blog explains exactly what NACE codes are, where they came from, and why they are important.
NACE Codes Explained
The term NACE is the acronym for “Nomenclature Statistics on the European Activities of the European Community”. In layman’s terms, it is a classification system used in Ireland and throughout Europe that groups organisations according to their business activities. The NACE codes are similar to the Standard Industry Classification (SIC) used in the United Kingdom and the North American Industry Classification System (NAICS). All business activities are characterised by the input of resources, a distinctive production process, and an output of products (goods or services). For example, a company manufacturing pharmaceutical products falls into the “21.10” category, whether it is based in Ireland or elsewhere in the EU.
The NACE code is located on the first page of the A1 document, this is all that is needed to define the activity. When a company is being formed, CRO Form A1 must be filled out with the new company details and submitted to the Companies Registration Office.
NACE codes are based on the ‘principal activity’ of a company, where most of the business is obtained. When reading the NACE code, the first two numbers indicate the division. The third number indicates the group, and the fourth number indicates the class.
For example, an Internet Service Provider is defined by the NACE code 61.20, where:
- 61 is the Telecommunication division
- 2 is the Wireless telecommunication group
- 0 is the Wireless telecommunication category
Some of the most commonly used NACE codes in Ireland are:
- 01 Computer programming activities
- 22 Business and other management consultancy activities
- 20 Activities of holding companies
Evolution of NACE Codes
NACE codes are compulsory for every company in the EU and have been around since the original version, NACE 70, was introduced in 1970. There have been various updates over the years. NACE Rev. 2 was implemented over several years and commenced in January 2008.
In 2009, NACE Rev.2 became an official Central Statistics Office Ireland Standard Classification. NACE Rev.2 is the current NACE code database that company formation agents must work off when incorporating companies in the EU.
The Importance of the NACE Code
The Companies Act 2014 requires a NACE code declaration along with a statement regarding the company activity. Limited companies, although required to choose and declare a NACE code, can trade in other industries and are not bound to trade within that NACE code area. NACE codes are mainly used for statistical purposes, designed for classifying businesses, business activities and products plus it does not limit the company’s trading capacity. The team at Company Bureau have come across some scenarios where inaccurate NACE codes have caused issues for our clients. For example, some financial institutions require the NACE code to be accurate before opening an account. Additionally, we have also experienced Revenue requesting a change in NACE code before granting the company a tax number. It is possible to change the NACE code by resolution and a filing with the CRO, should your company’s activities change, and a change of NACE code is required.
If you have a question about NACE codes for your new company formation or if you need to change your company’s NACE code, please complete our contact us form or call our office at +353(0)1 6461625. Our team would be happy to assist you.
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.