Once you have completed your company formation in Ireland and received your certificate of incorporation, corporate rules and regulations may be the furthest thing from your mind. During the head-spinning early days, compliance can seem like an abstract concept, almost disconnected from the day-to-day challenges of running a new company. Moreover, the sheer complexity of regulatory requirements is daunting, yet every company must comply with all the latest legislation or risk significant penalties.
In this article, our experts guide you through the key statutory requirements and company law issues that you must consider once your company formation process is complete. Our aim is to provide you with the relevant information to avoid many of the common pitfalls of company registration. But first, let’s define what compliance really means.
The dictionary definition is “the act of obeying a law or rule, especially one that controls a particular industry or type of work”. In other words, a company must actively comply with all laws and regulations that apply to its industry, including internal policies and training. It is important to manage compliance requirements properly in order to avoid issues that put your company at risk. Furthermore, it is a cornerstone of corporate responsibility and is crucial in developing and maintaining the reputation of your company. As Warren Buffet once famously said, it takes about 20 years to build a reputation and only about 5 minutes to destroy it! Wise words, indeed. Below, we outline the principal statutory requirements which companies must observe.
The Companies Act 2014 requires every Irish company to file an Annual Return and financial statements (even if they are not yet trading) to the CRO by the Annual Return Deadline (ARD) each year. The company secretary can verify the company’s Annual Return Date (ARD) on the CORE Company Search facility.
The initial Annual Return summarises the current company directors, company secretary, shareholders, and share capital. The main regulations to note are as follows:
· The first Annual Return is due six months after the company’s formation – financial statements are not required at this time;
· After filing the first Annual Return, every Irish company must file their Annual Returns annually along with a copy of the financial statements;
· Annual Returns are filed online through CORE.ie or Company Secretarial software.
· Companies have 56 days to complete their Annual Returns and financial statements following their ARD.
Key Consideration: It’s important to note that there are significant penalties if you miss the deadline.
Corporation tax applies to the global profits of all limited companies resident in Ireland. A new business must register for Corporation Tax with the Irish Revenue within 30 days of the company’s formation and before it may trade or invoice clients. An accountant typically handles the process of registering for tax.
· Ireland has two main corporate tax rates: 12.5% and 25%. Your rate depends on where your company is centrally located and controlled. The majority of Irish companies are subject to the 12.5% tax rate; and
· Non-resident companies pay this tax if they trade through a branch or agency in Ireland or receive profits or gains concerning rental property in Ireland.
· Within nine months of a company’s financial period end (but no later than the 21st day of the following month), you must submit a corporation tax return with Irish Revenue.
Note: Two factors determine where your company is deemed to be centrally located and controlled: the location where it conducts its business and where its directors are domiciled.
Key Consideration: There are severe penalties for failing to register for Corporation Tax. It is advisable to hire a company formation expert, such as o’donnell+co Chartered Accountants, to ensure that you avoid potential tax issues at a future date.
Every company must comply with the following requirements relating to tax registration:
1. When registering, you must have a Companies Registration Office (CRO) number issued by the CRO.
2. Once registered, your company receives a Tax Registration Number (TRN) from Revenue – you must use this number on all documentation when trading and filing returns.
3. You should also register for ROS (Revenue Online Service) directly with the Revenue Commissioners to file and view all payments and tax returns online (eRegistration) – this is the most efficient way of registering for taxes. eRegistration also allows you to register for other taxes your company may have to pay, such as employment taxes, VAT and Relevant Contracts Tax (RCT).
4. A company must file its return and pay any taxes due through Revenue Online Service (ROS).
It is important to note that this is a complicated process subject to strict deadlines. If you do not comply with the relevant deadlines, you will incur penalties such as fines or legal action. Again, given the complexities and level of risk involved, it is advisable to have a Chartered Accountant file your returns.
A newly formed company must hold an AGM within 18 months of incorporation. After the first AGM, companies must hold an AGM each year within nine months of the company’s financial year end or provide a written resolution from shareholders in lieu thereof. There should not be more than 15 months between AGMs.
The Companies Act 2014 requires directors of Irish-incorporated companies to prepare financial statements for the company for each financial year. Financial statements must meet the following criteria:
· Independent accountants must audit the financial statements (except for companies that qualify for audit exemption);
· All limited companies and certain unlimited companies must submit their financial statements to the Registrar of Companies for public inspection;
· The directors of all companies must present the financial statements and reports to company members at the AGM; and
· When there is a written resolution in place of the AGM, or the AGM has been waived, the company directors must send the financial statements to all members.
Financial statements include the following documentation:
· a profit and loss account (the company must supply an income and expenditure account if it is not trading for profit);
· a balance sheet;
· a directors’ report, and
· a statutory auditors’ report.
Registering for VAT can take several weeks, so it is wise to start the process as early as possible. The business must register for VAT if it meets specific criteria and submit VAT returns every two months after that. Revenue may ask you to prove that you require a VAT number before processing your application.
Note: Companies unable to demonstrate intent to trade in Ireland may be denied VAT registration by the Irish Revenue.
You must register for payroll tax with Revenue if hiring employees or taking a director’s salary.
Company directors must register for Income Tax and file Income Tax Returns. The director’s first Income Tax Return is due for the year the company is incorporated. For instance, if the business was incorporated in July 2022, the director’s first Income Tax Return will be for 2022. It would therefore be due for filing with Revenue on or before the 31st of October 2023.
Relevant Contracts Tax: this tax applies only to the construction, forestry and meat processing industries. RCT is a withholding tax on certain payments by principal contractors to subcontractors. There are three RCT rates – 0%, 20% and 35%.
The company name must be displayed in full at the registered office address, place of business and on all corporate stationery;
The company must open a business bank account using its registered company name. However, the company must first be registered. You need the company documents to set up a bank account. These include the original certificate of incorporation, your company constitution, and a copy of the A1 form.
If the company trades under a different name, it should register the business name.
Within 5 months of formation, a newly incorporated limited company in Ireland must submit the details of its beneficial owners to the Register of Beneficial Ownership (RBO). Beneficial owners are defined as “any natural person(s) who ultimately owns or controls a legal entity, either through direct or indirect ownership of a sufficient percentage of the shares or voting rights or ownership interest in the entity, including through bearer shareholdings, or through control via other means” (source: https://rbo.gov.ie/faq-what-is-a-beneficial-owner). In other words, a person who owns or controls more than 25% of the company’s shares, voting rights, or ownership interest. If the beneficial owner does not hold a PPS Number, then Form BEN2 must be completed.
Key Consideration: Failure to comply is a criminal offence and will result in significant fines.
Note: It is advisable to complete this step through the RBO website (rbo.gov.ie) as soon as possible. You must file your RBO before you can set up a bank account.
· The company must notify the company’s registration office (CRO) of any changes to the particulars of the company capital, directors and officers within the specified timeframe.
No article on compliance would be complete without briefly mentioning the role of the company secretary. Over time, this position has evolved into a multi-tasking role that ranges from the administration of the company’s day-to-day business, filing changes to the Companies Registration Office (CRO) and most importantly, ensuring that the company complies with Irish company law.
In conclusion, it is clear that compliance plays a fundamental role in the operation of a company. More than that, it affects every part of the organisation, from its core values and ethos to its public reputation. For these reasons, compliance matters and should form a central pillar in support of all management systems following company formation.
If you are considering incorporating a limited company in Ireland, our company formation experts will guide you through every stage, enabling you to make informed decisions, backed by sound, objective advice. With over 26 years of experience in this area, our expertise is second to none. For more information on how to set up a company in Ireland and to deal with all related, ongoing compliance requirements, please call us on 061 317500 or email us at info@odonnellaccountants.ie. Our company formation services include:
Registered Office Address Service
Company Formations
Tax Registration
VAT Registration
Company secretarial services
