Irish companies which are “close” companies are liable to pay a 20% surcharge each year on any investment income (or deposit income) which is not distributed.
A “close” company is a business which is controlled by 5 or fewer participators (i.e. a person who has an interest in the income or capital of a company). Does this sound like your company?
Have you built up reserves in a Deposit Account or through Share purchase?
A lot of people might not even be aware of the Surcharge; your accountant may just organise the payment of it.
Can you avoid this charge?
Yes you can; a very efficient way of sheltering any reserves in your company from this surcharge is to place the money in funds through an insured arrangement. In simple terms; these are funds managed by Insurance Companies similar to your pension fund. Your company would be the policy owner.
Not only does the use of these vehicles avoid the surcharge but companies also benefit from a reduced EXIT TAX – only 25% versus 41% that you pay on personal monies.
Your funds grow in a tax free environment for up to 8 years before the exit tax is payable.
By availing of this opportunity, you will avoid the surcharge and benefit from a reduced exit tax rate of 25%.
Talk to us today about helping to increase the wealth in your company!
Some points to note:
We recommend that you don’t use your working capital; we feel a minimum term of 3 years is advisable.
Investing your money in a diversified portfolio may yield much better returns than historically low deposit rates. The usual caveats apply. The value of funds may fall as well as rise.
By investing in an Insurance wrapped policy, your investment returns are specifically exempt from the Close company surcharge of 20%.
O’Leary Financial Planning can help you find the right solution for your funds. As Authorised Advisers, we work solely for you.