Ireland currently has one of the world’s lowest tax rates at 12.5%. This has helped lure hundreds of foreign companies to set up shop there in recent years, much to the dismay of the U.S. and neighboring European countries. Beyond the low corporate tax rate, Ireland has another loophole known as the “double Irish” which many multi-national corporations are currently taking advantage of. Ireland announced that it would end the “double Irish” loophole for new entrants as of January 2015 and phasing it out completely by 2020. 
What is the “Double Irish” Loophole: Roughly 1100 international companies are headquartered in Ireland, including several big names in the tech world such as Google, Apple, Microsoft, and Facebook. Many of these companies take advantage of a loophole in which they set up a subsidiary registered in Ireland that is a resident of a different country with no income tax. The parent company based in Ireland generates revenues and pays them in royalties to the tax-free subsidiary, thus legally avoiding paying taxes on those revenues.
Google is a prime example of a company that takes advantage of the “double Irish” loophole. Google is headquartered in Dublin, Ireland, where it employs roughly 2500 people. From its Dublin headquarters, the company generates billions of dollars annually, primarily in pay per click online advertising revenue. This revenue is then paid out to a subsidiary that is incorporated in Ireland but is a resident of Bermuda, where the corporate tax rate is zero.
Ireland has been heavily criticized by the global community for allowing such a loophole and this practice is currently being investigated by the European Commission and others. The heavy scrutiny has apparently caused the Irish to re-think this arrangement and the negative publicity it is bringing to the country.
Corporate Tax Rate Unchanged: It is important to note that although the “double Irish” loophole is being phased out, Ireland is not doing away with its 12.5% corporate tax rate on multi-nationals. This is still one of the lowest corporate tax rates in the world, and there is no doubt it will continue to draw many European and American companies to its shores.
When does it make sense to re-locate to a foreign country: With the U.S. federal corporate tax rate topping out at 35% and with up to an additional 12.5% state tax (depending on the state the company is based in) as well as local taxes, the question often comes up whether or not it makes sense to move a company headquarters to a foreign country. Larger multi-national corporations that already do business throughout the world can realize enormous tax benefits from relocating, but most small to mid-sized U.S.-based companies are likely better off staying in America. The logistics of moving to another country are a major drawback for smaller companies. In addition, there are other effective tax reduction strategies that can be employed without having to re-locate your company offshore. As always, it is best to speak with a local accounting firm that can offer you in-depth guidance on your particular situation.