If you are planning to set up a company in Ireland, you may have heard of the Irish Resident Director requirement. This is a legal obligation that applies to all Irish companies, regardless of their size, nature, or industry. But what exactly is an Irish Resident Director and why do you need one?
In this blog post, we will explore the essentials of this requirement and how it can affect your company formation process. We will also look at the impact of Brexit on UK-based directors of Irish companies
What is an Irish Resident Director?
An Irish Resident Director is a person who is appointed as a director of an Irish company and who resides in Ireland. The purpose of this requirement is to ensure that there is a person who can be held accountable for the company’s compliance with Irish company law and tax obligations.
The Irish Resident Director requirement is set out in Section 137 of the Companies Act 2014, which states that every company must have at least one director who is resident in the EEA. Non-compliance can lead to fines of up to €5,000 and legal action by the Companies Registration Office (CRO).
Understanding the Role of an Irish Resident Director
An Irish Resident Director has the same duties and responsibilities as any other director of an Irish company. These include:
- Acting in the company’s best interests
- Avoiding conflicts of interest
- Maintaining proper financial records
- Filing annual returns with the CRO
- Ensuring tax compliance
- Managing the company’s daily operations
Moreover, an Irish Resident Director can bolster a company’s tax residency in Ireland, given the country’s favourable tax rates and extensive double taxation treaties.
Impact of Brexit on UK-based Directors of Irish Companies
Brexit has brought about significant changes for UK-based directors of Irish companies. Since 1 January 2021, UK residents no longer qualify as EEA residents. Therefore,any Irish company that has only UK-based directors must take action to comply with the Irish Resident Director requirement or face penalties.
EEA Resident Director Requirement: A Closer Look
The EEA resident director requirement applies to all types of Irish companies, including private limited companies (LTD), designated activity companies (DAC), public limited companies (PLC), guarantee companies (CLG), unlimited companies (ULC), external companies (branch or place of business), and investment companies (ICAV).
The EEA resident director requirement does not specify any minimum period or frequency of residence in the EEA. However, it does require that the director’s residence be “ordinary”, meaning that it is not temporary or occasional. The CRO may request evidence of residence from directors, such as utility bills, bank statements, tax returns, or travel records.
Navigating the Changes in Director Residency Requirements
The changes in director residency requirements brought about by Brexit may pose significant challenges for companies that have only UK-based directors.Such companies have three options after post-Brexit:
- Appointing an EEA resident director
- Obtaining an insurance bond
- Applying for a real and continuous link certificate
Appointing an EEA Resident Director
The simplest and most straightforward option for companies that do not have an EEA resident director is to appoint one. This can be done by either:
- Replacing one or more of the existing UK-based directors with an EEA-based director
- Adding an additional director who is based in the EEA
The main advantage of appointing an EEA resident director is that it ensures compliance with Section 137 of the Companies Act 2014 and avoids any penalties or prosecution. It also helps to establish the company’s tax residency in Ireland, which can have positive implications for its tax position.
The Insurance Bond Alternative
Another option for companies that do not have an EEA resident director is to obtain an insurance bond. This is a type of policy that provides a guarantee that if the company fails to pay any fines or penalties imposed by Irish authorities for breaching company law or tax law, the insurer will pay up to €25,000 on behalf of the company.
The main advantage of obtaining an insurance bond is that it exempts the company from having to appoint an EEA resident director for as long as the bond is valid for as long as the bond is in force. This means that the company can keep its existing UK-based directors without having to appoint a new one.
Real and Continuous Link with Ireland
The third option for companies that do not have an EEA resident director is to apply for a real and continuous link certificate. This is a document issued by the Revenue Commissioners, the Irish tax authority, that confirms that the company has a real and continuous link with one or more of the following activities in Ireland:
- Trade or business
- Research and development
- EU directives or treaties
- Headquarters
The main advantage of applying for a real and continuous link certificate is that it exempts the company from having to appoint an EEA resident director for as long as the certificate is valid. It also demonstrates that the company has a strong connection with Ireland and may qualify for certain tax reliefs or incentives.
Frequently Asked Questions
What is the difference between an EEA resident director and an Irish resident director?
An EEA resident director is a person who is ordinarily resident in any member state of the EEA, which includes 27 EU countries plus Iceland, Liechtenstein, and Norway. An Irish resident director is a person who is ordinarily resident in Ireland only. Both types of directors can satisfy Section 137 of the Companies Act 2014, but an Irish resident director may have some additional advantages, such as:
- Being more familiar with Irish company law and tax rules
- Being more accessible and responsive to communication
- Having a stronger connection with Ireland for tax residency purposes
How can I verify if a person is an EEA resident director?
The CRO may request proof of residence from any director of an Irish company at any time. The proof may include documents such as utility bills, bank statements, tax returns, or travel records that show that the person has been living in an EEA country for at least 183 days in a year or has their main home there. The CRO may also check other sources of information, such as public registers or databases.
How much does it cost to appoint an EEA resident director?
The cost of appointing an EEA resident director depends on several factors, such as the availability, qualifications, and experience of the candidate.The cost may also vary depending on the service provider that you choose to assist you with the appointment. At Peak Accounting Solutions, we offer competitive and transparent pricing for our EEA resident director service. Please contact us for a free quote.
How long does it take to appoint an EEA resident director?
The appointment process can take anywhere from a 3 to 9 days, depending on the availability and responsiveness of the parties involved. At Peak Accounting Solutions, we can help you expedite the process by providing you with a pool of qualified and experienced EEA resident directors who are ready to serve your company.
What are the risks of not having an EEA resident director?
If you do not have an EEA resident director, you are in breach of Section 137 of the Companies Act 2014 and may face serious consequences, such as:
- Fines of up to €5,000 for each offence
- Prosecution by the CRO
- Disqualification of your directors from acting as directors in Ireland or elsewhere
- Loss of your company’s good standing and reputation
- Difficulty in obtaining finance, contracts, or licenses
- Closure or liquidation of your company
To avoid these risks, you should take action as soon as possible to comply with the Irish Resident Director requirement or avail of one of the alternatives discussed above.
Peak Accounting Solutions: Your Partner in Navigating Irish Company Formation
Setting up a company in Ireland requires expert guidance, especially when it comes to fulfilling the Irish Resident Director requirement. Peak Accounting Solutions specializes in this very service, ensuring your business adheres to all regulatory standards. Don’t leave such a crucial aspect of your company formation to chance. Reach out to Peak Accounting Solutions today – your trusted partner for expert Irish Resident Director services. Let us navigate the complexities, so you can focus on your business growth.
