The Irish Agency company is commonly used to facilitate international business and is able to avail itself of a comparatively low rate of Corporation Tax (12.5%). An Irish Company is also able to trade freely throughout the European Union, is able to utilize a European VAT number and is not subject to Withholding Tax from other EU Countries.
The concept of an Irish Agency Company is that it acts on behalf of a Principal who may be located in an offshore jurisdiction. The Principal engages the Irish Company to carry out specific trading activities that it would ordinarily not be able to carry out itself, such as the provision of goods or services within the European Union or possibly due to the inhibitive high costs of setting up their own physical operation with the European Union.
The Principal will engage the Irish Company through a formal Agency Agreement that clearly defines the role of the Irish Company within the trading structure. Also defined within the Agreement are the fees, or percentages of profit, that the Irish Company will collect for the execution of its role along with any additional provisions that may be agreed.
The fee charged by the Irish Company should be a suitable commercial amount that reflects the responsibility undertaken by the Irish Company on behalf of the Principal. This fee will be retained by the Irish Company to cover its own operational and administrative costs. Thereafter, any remaining funds in the Irish Company’s bank account will be subject to Irish corporation tax. An acceptable fee, chargeable by the Irish Company would be between 5-10% of gross turnover.
If trading occurs within the European Union, the Irish Company will be obliged to register for VAT; the rate presently stands at 23%. The inherent benefit of VAT registration when trading within the EU means that the Irish Company, reflecting its VAT number on its issued invoices and indicating the buyers VAT/IVA number on the same, results in no VAT being levied on the value of the goods as the buyer will account for the VAT in their own country of registration.