Corp tax as an employee

helimachoptor

Let's say I'm an employee of company A.
I develop an idea that company A wants to buy off me (let's ignore the normal IP stuff on contracts)

The company wants to buy that idea for a million bucks. Can the employee set up company X and have company A pay a million bucks?

Some questions
Is this possible/legal
What is the most tax efficient way for me to get access to the cash?

All hypothetical of course

Lenar3556

helimachoptor wrote: »

Let's say I'm an employee of company A.
I develop an idea that company A wants to buy off me (let's ignore the normal IP stuff on contracts)

The company wants to buy that idea for a million bucks. Can the employee set up company X and have company A pay a million bucks?

Some questions
Is this possible/legal
What is the most tax efficient way for me to get access to the cash?

All hypothetical of course

The problem is that it is likely to be a capital gain, so the new company will be liable to pay CGT

Pawwed Rig

When you set up the company you would then need to transfer the intellectual property into it. The value of the transfer will be your main issue here. Then once you have the money in the company you will need to figure out a way to get it back out.

pinksoir

Move to Andorra or Malta and set the company up there.

Pawwed Rig

pinksoir wrote: »

Move to Andorra or Malta and set the company up there.

Possible but you wouldn't be able to come back for a long time given our CGT laws (Denis O'Brien rules)

pinksoir

Pawwed Rig wrote: »

Possible but you wouldn't be able to come back for a long time given our CGT laws (Denis O'Brien rules)

Yep. Or you could pay yourself a salary and keep no money in the company. Tax in Andorra is only 10% of worldwide income and similar in Malta, or at least there's ways around it. Also options in Portugal (20% tax for first 10 years) or Spain (David Beckham law no tax on worldwide earning outside Spain for 5 years but must be employed in Spain by Spanish co). But all require leaving Ireland and becoming tax resident in another country.

But realistically, if you want to stay in Ireland for the foreseeable you need to pay income tax or CGT here, no way around it.

Other option is to pay into a pension (which you could have set up with an investment/index fund).

helimachoptor

pinksoir wrote: »

Yep. Or you could pay yourself a salary and keep no money in the company. Tax in Andorra is only 10% of worldwide income and similar in Malta, or at least there's ways around it. Also options in Portugal (20% tax for first 10 years) or Spain (David Beckham law no tax on worldwide earning outside Spain for 5 years but must be employed in Spain by Spanish co). But all require leaving Ireland and becoming tax resident in another country.

But realistically, if you want to stay in Ireland for the foreseeable you need to pay income tax or CGT here, no way around it.

Other option is to pay into a pension (which you could have set up with an investment/index fund).

Thanks, from my reading since I posted this, a pension seems like the most sensible option.

Tbh I just to be able to clear the mortgage so once it's clear what the offer is I can start looking at specifics

pinksoir

helimachoptor wrote: »

Thanks, from my reading since I posted this, a pension seems like the most sensible option.

Tbh I just to be able to clear the mortgage so once it's clear what the offer is I can start looking at specifics

Pension is the best option if you want to make the money work for you over the longer term.

Clearing your mortgage is also a great idea to remove financial burden in the short term. You could even look to retiring early etc. But obviously any money you take out from the company will be taxed. One way to spread this out is to have your wife/partner and yourself be directors of the company and pay each other a salary, thus taking advantage of each of your tax free allowances and lower rates of tax.

Best of luck with it! And get an accountant once you know what the story is.