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US – Ireland Double Tax Treaty

US – Ireland Double Tax Treaty

American investors interested in the business environment available in Ireland should know that if they decide to start a company here, they can benefit of the provisions stipulated by the double taxation treaty signed by the two states. The US – Ireland agreement for the avoidance of double taxation was signed in Dublin on the 28th of July 1997. 

The treaty became effective from the 1st of January 1998 and it describes the way in which residents of the contracting states can be taxed in terms of income and capital gains. The agreement contains tax provisions favorable to American businessmen, as the countries have agreed upon tax deductions and incentives, applicable in certain conditions; our team of Irish solicitors can offer an in-depth presentation on this matter. 

Taxes covered by the US – Ireland double taxation agreement 

The US – Ireland double tax treaty stipulates the taxes applicable to both American and Irish natural persons and legal entities performing various actions in the contracting states. It is important to know that, according to the Article 2, paragraph 2, the states enforce the taxation of similar taxes, as prescribed by the legislation of each country. 

United States of America will apply to Irish entities the following taxes: 

• federal income tax;

• federal excise tax (applicable for insurance premiums payable to foreign insurance companies). 

The treaty stipulates the following taxes, applicable on the Irish territory

• income tax;

corporation tax;

• capital gains tax. 

Our attorneys in Ireland can provide more details on the way in which the above mentioned taxes are applied to American and Irish entities.

Provisions of the double taxation treaty signed by US and Ireland 

American entrepreneurs who want to establish a company in Ireland should know that if they obtain income from an immovable property (which refers to real property, including forestry and agricultural activities) will be taxed in Ireland for such profits; the tax is applicable for any deriving activity which relates to the immovable property. 

As a general rule, the business profits of an American company with activities in Ireland will be taxed only in the United States of America; the business income can be taxed in Ireland only if the foreign company operates on the Irish market through a permanent establishment (PE), but only to the extent of the profits obtained through the PE.

The PE refers to a physical place in which the company carries out its operations through an office, a building site, a factory or a mine. According to the Article 5 of the agreement, the building site is considered a PE only if its operations last more than 12 months. 

If you need further information on the US – Ireland double taxation agreement, please contact our team of Irish solicitors, who can offer you legal assistance on the provisions of the treaty.