Irish resident, starting up a company abroad, what tax am I liable for?

[DannyBoy]

Ok, it's a long title, but I can't summarize it any further

I'm resident in Ireland, in full time employment, paying PAYE.
I'm about to start up a company in Croatia with 3 other partners for property development. We would be using our savings and remortgaging our properties here in Ireland to raise the initial capital for the company.

I intend to stay in full time employment here in Ireland, but would obviously depend on the profits of the foreign company to pay off the extra loan on my mortgage and wouldn't be considering this if it wasn't going to make a profit.

The company would be solely a Croatian entity, it's place of business in Croatia and employing Croatian workers. (you get the point, the company wouldn't be doing any business in Ireland)

In Croatia the profit tax is 20%, and the income tax paid on that is an additional 15% but if the company is paying out profits into a foreign account then I'm only liable for 20% profit tax. So as far as Croatia is concerned, I have two options - pay the profits in a Croatian bank account and pay 35% tax or pay the profits into a foreign bank account and pay 20% tax.

It's the tax in Ireland that I'm unclear about, what sort of tax would I have to pay on those profits here?

And would it make a difference that I'm repaying a loan that was for my initial investment, so at the end of the year I might have invested 300k and only made 150k? (not to mention that I'm paying interested on the 300k I invested)

Not the simplest of questions but I hope there's someone out here who could give me some advice.
​

 

[mirmick]

Ok, it's a long title, but I can't summarize it any further ​

I'm resident in Ireland, in full time employment, paying PAYE.
I'm about to start up a company in Croatia with 3 other partners for property development. We would be using our savings and remortgaging our properties here in Ireland to raise the initial capital for the company.​

I intend to stay in full time employment here in Ireland, but would obviously depend on the profits of the foreign company to pay off the extra loan on my mortgage and wouldn't be considering this if it wasn't going to make a profit.​

The company would be solely a Croatian entity, it's place of business in Croatia and employing Croatian workers. (you get the point, the company wouldn't be doing any business in Ireland)​

In Croatia the profit tax is 20%, and the income tax paid on that is an additional 15% but if the company is paying out profits into a foreign account then I'm only liable for 20% profit tax. So as far as Croatia is concerned, I have two options - pay the profits in a Croatian bank account and pay 35% tax or pay the profits into a foreign bank account and pay 20% tax.​

It's the tax in Ireland that I'm unclear about, what sort of tax would I have to pay on those profits here?​

And would it make a difference that I'm repaying a loan that was for my initial investment, so at the end of the year I might have invested 300k and only made 150k? (not to mention that I'm paying interested on the 300k I invested)​

Not the simplest of questions but I hope there's someone out here who could give me some advice.​

As I know you cant avoid Irish tax at all. As you are resident in Ireland, you have to pay tax on the foreign profits/earnings as well. If you remitt the profits in Ireland as dividends then you will pay DWT. Or if you receive the salary from that comapny then you need to pay Income Tax. But there is Double Taxation relief available.
You can find some info on this site.
[broken link removed]

 

[podowd]

Mirmick is correct, if you are resident and domciled in Ireland then you are taxable in Ireland on your worldwide earnings, whether it is dividend, salary, interest or whatever, even if you don't remit the funds to Ireland. You will need to check out the double taxation relief to see if you get a credit in Ireland for any tax you (personally) have already paid in Croatia.

 

[micamaca]

Just curious, a country like Croatia. How would Irish Revenue find out about money made abroad...have they spies in the system?

 

[podowd]

The tax system in Ireland is self-assessment - it's up to you to declare your income. In theory they wouldn't find out unless you had a routine revenue audit where they look into your affairs and find out about it, however they are a lot more efficient these days in chasing non-compliant people and having assets/funds overseas no longer means that it's out of their reach. A lot of irish people with foreign homes will soon be the target of the revenue to see if they are in receipt of rental income that they are not declaring in Ireland.

 

[micamaca]

As I know you cant avoid Irish tax at all

unless you're a politician with a good sob story/a gullible public or a good accountant!

And my understanding is not only do you pay paye but you also pay prsi tax on all earnings. Isn't this true. It's a bit much considering one doesn't get very much for prsi anyway...heard a nurse on Newstalk 106 this morning who has worked in Irish hopitals and abroad, saying under no circumstances would she willingly have an operation done on her in an Irish hospital...

Anyway mini-rant aside, it's paye and prsi tax too isn't it.

 

[Newby]

DannyBoy,

If you guys are going to be remortgaging your properties to start up a property development venture in Croatia then i really think it would be worth splashing out a few quid on professional advice. For the sake of a few grand you might save yourself an awful lot of headaches (and who knows maybe even some tax) down the line.

Also if you make large lodgements of Croatian source income into an Irish bank account i think the bank are obliged under money laundering regulations to notify a Government department (i think its the Revenue Commissioners) but not sure. Maybe someone with more experience of this could comment.

 

[johndoe64]

Also if you make large lodgements of Croatian source income into an Irish bank account i think the bank are obliged under money laundering regulations to notify a Government department (i think its the Revenue Commissioners) but not sure. Maybe someone with more experience of this could comment.

As far as I know this is only if its not a normal type transaction on your account, the bank will raise an STR(suspicious transaction report) and then forward it on.

 

[almo]

Ok, it's a long title, but I can't summarize it any further ​

I'm resident in Ireland, in full time employment, paying PAYE.
I'm about to start up a company in Croatia with 3 other partners for property development. We would be using our savings and remortgaging our properties here in Ireland to raise the initial capital for the company.​

I intend to stay in full time employment here in Ireland, but would obviously depend on the profits of the foreign company to pay off the extra loan on my mortgage and wouldn't be considering this if it wasn't going to make a profit.​

The company would be solely a Croatian entity, it's place of business in Croatia and employing Croatian workers. (you get the point, the company wouldn't be doing any business in Ireland)​

In Croatia the profit tax is 20%, and the income tax paid on that is an additional 15% but if the company is paying out profits into a foreign account then I'm only liable for 20% profit tax. So as far as Croatia is concerned, I have two options - pay the profits in a Croatian bank account and pay 35% tax or pay the profits into a foreign bank account and pay 20% tax.​

It's the tax in Ireland that I'm unclear about, what sort of tax would I have to pay on those profits here?​

And would it make a difference that I'm repaying a loan that was for my initial investment, so at the end of the year I might have invested 300k and only made 150k? (not to mention that I'm paying interested on the 300k I invested)​

Not the simplest of questions but I hope there's someone out here who could give me some advice.​

Dannyboy, I don't know how familiar you are with Croatia, or the business implications here, or the nightmare for foreign developers that seem to suck away cash and profits, but htink hard on it, the new build market is not as attractive as it was 2 years ago.

And as for taxes, three words to think of "tax free zone", it'll save you a lot and be easier to operate (including not paying taxes at all on profit and having employee tax relief too).