Unlike many other EU members, Ireland continues to have a
relatively benign tax regime that enables M&A acquisitions
to be funded using a thinly capitalised Irish tax resident
Bidco.
There are no formal thin capitalisation provisions, worldwide debt
cap or transfer pricing applying to an Irish bid vehicle. Finance
Act 2011 introduced some restrictions but these apply where groups
seek to reorganise post-acquisition and inject debt. Accordingly,
where an Irish Bidco or target is being considered, it is key that
the ability to use tax deductible leverage is considered as part of
the bid structure. This is particularly relevant to private equity
funded bids.
Many US parented groups use Ireland as their EMEA hub. There are
strong US tax reasons to use cash generated from real and
substantive operations in Ireland to acquire non US shares and
assets. Structuring such acquisitions using debt finance enables
the effective Irish tax rate to be reduced significantly below
12.5%.
Where US parented groups seek to use shares to fund an acquisition
by an Irish corporate, Irish capital maintenance provisions become
highly relevant.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
