Ireland: Offshore Legal and Tax Regimes
The 10% 'Manufacturing Rate' of Tax
As originally enacted, the 10% 'manufacturing rate' of corporation tax applied to:
- Companies manufacturing goods in Ireland;
- Companies selling goods which are manufactured within Ireland by a 90% subsidiary, a fellow 90% subsidiary or a 90% parent company; and
- Companies which subject goods belonging to another to a manufacturing process in Ireland.
The 10% rate could be claimed by a branch of a foreign company as well as by companies established in Ireland. There was no statutory definition of 'manufacturing' and over the years the Courts extended the beneficial rate to a number of activities not normally regarded as manufacturing, as well as excluding some types of activity. The permitted activities included:
- Professional services performed in Ireland relating to engineering works executed outside the EU;
- Computer services, including data processing services and software development, and associated technical or consultancy services;
- Fish farming;
- Certain shipping activities;
- Repair or maintenance of aircraft, aircraft engines and components carried on within Ireland;
- Film production, provided that 75% of the work is carried out in Ireland;
- Approved meat processing;
- Re-manufacture and repair of computer equipment by its original manufacturer;
- Some types of fish sales;
- Newspaper production and associated advertising sales.
Exclusions include retail sales, the building industry, mining, and leasing (but not for certificated IFSC or Shannon companies).
For true 'manufacturing' companies the 10% rate lasted until the original date of 2010; for other companies it lasted only until the end of 2000. A company which did not qualify as a true 'manufacturing' company paid the declining rate of mainstream corporation tax (see Domestic Corporate Taxation) from 2001 until the final 12.5% rate agreed between the Irish Government and the EU came into effect in 2003.