- Most Irish resident companies are what are called 'close' companies.
- A Close Company is a company that is controlled by five or fewer participators or is controlled by any number of participators who are directors.
- The definition of a Close Company includes a company where, on distribution of its full income, more than 50% goes to five or fewer participators or participators who are directors.
- A participator is a person having an interest in the income or capital of the company.
Close Company provisions
The Close Company provisions set out in the Taxes Consolidation Act 1997 have four main implications for a company and its participators/directors.
- Certain benefits-in-kind and expense payments to participators or associates will be treated as distributions.
- Interest in excess of a specified rate paid to directors or their associates will be treated as distributions.
- Loans to participators or their associates must be made under deduction of tax and, if the loan is forgiven, the grossed-up amount is treated as income in the hands of the recipient.
- A surcharge of 20% is payable on the total undistributed investment and rental income of a close company. Close "service" companies are also liable to a surcharge of 15% on one-half of their undistributed trading income.