Israel – Ireland Tax Treaty

Business Activity in Ireland

Ireland is considered one of the most attractive investment locations in Europe. The country was ranked first in the world for economic performance, second for overall competitiveness, and third for government efficiency showing how it is such a competitive country to do business in. There is a large range of business sectors in Ireland including engineering, pharmaceuticals, technology, financial services and computer software.

Ireland currently has a total GDP of $564.02 billion with a forecast of $696.95 billion in 2029 ranking them second in the world for highest GDP per capita. Its top exports include pharmaceuticals, vaccines, blood, antisera, packaged medicaments, nitrogen compounds, integrated circuits and more. Its top export destinations include the United States, Germany and the United Kingdom.

Bilateral Agreements between Ireland and Israel

1. Double Taxation Agreement
2. Free Trade Agreement

Convention on the Prevention of Double Taxation

The agreement between the governments of Israel and Ireland regarding the avoidance of double taxation was signed on November 19, 1995 and entered into force on December 31, 1995.

To read the agreement in English click here.

Applicability of the MLI

Both Ireland and Israel have signed the “Multilateral Convention to Implement Tax Treaty-Related Measures to Prevent Base Erosion and Profit Shifting” (MLI). Israel and Ireland both signed the agreement on June 7, 2017. Israel ratified it on January 1, 2019, while Ireland ratified the MLI on May 1, 2019.

Residency for Tax Purposes in Ireland

Residence of an Individual

An individual is considered a tax resident in Ireland if they are present for at least 183 days of the year in the country. If the following year is included as well, one must stay in Ireland for 280 days with at least 30 days in each year. After three consecutive years of being a tax resident, an individual becomes “ordinarily resident” while a “domicile” resident is the country that is being considered for potential residency.

To read about how an individual is considered a resident of Israel, click here.

Residency of a Company

A company incorporated in Ireland after January 1, 2015, is considered a tax resident. In addition, if a company is incorporated in a foreign country but its central management is located in Ireland, the company is a tax resident.

To learn about how a company is considered a resident of Israel, click here.

The Tax System in Ireland

The Irish tax authority is called the Office of the Revenue Commissioners.

Income taxation: 20%/40%

Taxation of companies and branches: 12.5%/25%

VAT: 23%

Capital gains tax: 33%

Withholding Tax

Inheritance Tax in Ireland

Ireland applies an inheritance and gift tax at a rate of 33% called capital acquisitions tax (CAT).

You are not obliged to pay Capital Acquisitions Tax (CAT) for a gift or inheritance if:

1. It is from your husband or wife or civil partner, or
2. The total value is below the group threshold amount, even when added to previous gifts and inheritances in the same group.

Furthermore, Capital Acquisitions Tax is not applied for €3,000 or less gift from one person within a calendar year.

Relocation to Ireland

There are some tax savings for individuals’ relocation to Ireland. For starters, income made before relocating to Ireland can be brought in tax free. Taxation in Ireland is only put towards income from Irish sources and not on anything outside the country. There is also no wealth tax in Ireland.

Relocation can be very beneficial for businesses. Corporate tax rates are only 12.5% on worldwide profits as that can be taken advantage of. As a member of the European Union (EU), Ireland has double taxation agreements with many other countries including Israel which can be beneficial for businesses. The country is highly educated and one of the most desirable investment locations in Europe.

As of 2023, there are 2700 Jews in Ireland. There is one progressive synagogue in Dublin and two orthodox synagogues located elsewhere. Ireland has a great Jewish community with the heart of it in Dublin. The community is represented by the Jewish Representative Council which advocates for the Jewish people of Ireland.

Real Estate Taxation in Ireland

Both residents and non-resident who own a residential property in Ireland, have to pay the Local Property Tax (LPT) for your property. They are responsible for paying local property tax in Ireland in 2024 if owning a residential property as of November 1, 2023. The amount paid is dependent on the value of the property which is self-assessed. The rates range from 0.1% – 0.3% depending on self-valuation of the property. Non-residents are eligible to buy land in Ireland and be liable for local property tax.

Stamp duty occurs when there is a transfer of ownership in an immovable property by formal deed. A physical stamp used to have to be shown on the legal document to show the tax was paid but now with advanced technology, that is no longer needed. The deed is considered an instrument in stamp duty legislation. One must ensure that stamp duty is paid on time and the stamp duty return is filed in relation to the instrument.

Vacant home tax (VHT) applies towards properties in use for less than 30 days. Similar to local property tax, it is a self-assessed tax rate by the owner of the property in which they must adhere to the obligations.

Transfer of Funds from Israel to Ireland

According to section 170(a) of the Israeli Income Tax Ordinance, any transfer of payment to a non-Israeli resident is subject to a 25% withholding tax. The tax authority may allow, under certain circumstances, a reduction or dismissal of the withholding tax. Our firm handles withholding tax matters with the Israeli Tax Authority.

Since both countries have a tax treaty, one can submit a declaration form (statement regarding a payment to a foreign resident that is exempt from withholding tax), and under certain circumstances, it is possible to transfer the payment without the withholding tax and the approval of the Tax Authority.

In providing advice regarding the transfer of money abroad, in addition to the issue of withholding tax, our firm handles the requirements of foreign banks, such as an accountant’s approval regarding the payment of taxes, and examines additional actions required in light of the uniform standard of CRS between the countries –automatic exchange of information between countries which is carried out first through the banks and then between the tax authorities of each two countries.

Banks raise many difficulties and charge high fees for converting shekels into other currencies, so it is important to consult before transferring the funds – Contact us.

For more information on money transfers abroad click here.

Types of Business Entities in Ireland

There are 3 main types of business entities in Ireland with different sub-categories in each.

1. A limited company
2. An unlimited company
3. Investment funds

Limited companies: In a limited company, the liabilities of the shareholder are limited to what they have invested or guaranteed to the company. The company is limited by shares so the liabilities are limited to the unpaid value of the shares. Types of limited companies include public limited companies which have permission to be listed on the stock exchange and private companies limited by shares which is a distinct entity that owns its own property, assets and liabilities. Private limited companies by shares have the capacity of a natural person and only needs one director whereas every other company needs at least two.

Unlimited companies: Similar to limited companies, the only difference in unlimited companies is that the shareholders’ liability is unlimited. The three types of unlimited companies are private unlimited companies with share capital (ULC), public unlimited companies with share capital (PUC), and public unlimited companies without share capital (PULC). Unlimited companies can be private or public.

Investment funds: Investment funds pool investors’ money together to provide professional investment management. They sell shares which then goes into investment opportunities and then distributed out to the shareholders. Investment funds can include investment companies and Irish collective asset-management companies (ICAV).

Incentive Laws in Ireland

Ireland’s main tax incentive is the low 12.5% corporate tax rate towards active business income. Additional corporate benefits include 30 percent credit on research and development expenditures, total effective tax deduction of 42.5%, and cash grants for capital expenditure.

Individual tax incentives vary depending on the circumstances. For example, a single person with no dependent child will receive EUR 1875 while a married blind person will receive EUR 3300. The special assignment relief program (SARP) entitles qualified workers to exclude 30% of their employment income from being charged to Irish tax.

Moreover, the Shannon free zone (FZ) in Ireland is an incentive that lowers taxes for investors for specific conditions. The 12.5% corporate tax remains the same but for investors, they may obtain a lower tax rate of 10%. The free zone is mainly put into use for repair of aircrafts, trading activities, and activities related to intellectual property. Others can also be exempt from paying VAT and custom duty while also obtaining grants for employment, research and development, and training.

Ireland Double Tax Treaties