Australian founders choosing a European base, London or Dublin

The European base is a tax question before it is a location

An Australian company expanding into Europe usually chooses between London and Dublin on language, talent and market access, and then discovers that the tax and company-law differences were the ones that mattered. Both are natural first bases for an English-speaking business. Both put the founder in a familiar legal culture. The decision tends to be made on feel, and then handed to an accountant after the lease is signed, which is the wrong way round.

The useful comparison runs on two levels at once. There is the Australian side, which decides how the European subsidiary is taxed back home while the parent is still Australian, and there is the local side, the rate the subsidiary pays, the rules for forming it, and the market it can reach.

The two do not point the same way, and a founder who weighs only the local rate can pick the base that costs more once the Australian rules are applied to it.

This note sets out both levels for an Australian parent choosing a European subsidiary, and then, more briefly, how the same choice looks for a New Zealand founder, because the home-country rules are not the same. It is written for an owner-managed business making a genuine move into Europe, not for a holding structure built to sit on passive income, which the rules treat quite differently. A founder who is instead relocating personally, to the UAE rather than expanding the business into Europe, will find the companion notes on moving to Dubai from Australia and from New Zealand closer to the point.

For an Australian parent, the UK is a listed country and Ireland is not

The single difference that most founders miss is that Australia treats the United Kingdom and Ireland differently under its controlled foreign company rules, because the UK is a listed country and Ireland is not. Regulation 19 of the Income Tax Assessment Regulations 2015 lists seven countries whose tax systems Australia accepts as broadly comparable to its own: Canada, France, Germany, Japan, New Zealand, the United Kingdom and the United States. Every other country, Ireland included, is an unlisted country.

The reason this matters goes back to the design of the regime. When the list was settled, the Government said that profits of controlled foreign companies resident in the listed countries would remain largely exempt from accruals taxation, with only certain designated concessions caught. A UK subsidiary therefore sits inside that favoured group. An Irish subsidiary sits outside it.

In practice the gate for both is the active income test. A controlled foreign company has nothing attributed to its Australian owner, listed or unlisted, if it passes that test, which it does broadly where less than 5% of its turnover is tainted income, meaning passive income such as interest, rent and royalties, or certain related-party dealings. A subsidiary that genuinely trades, sells its own goods or services to real customers and earns its margin from that activity, passes comfortably, and the listed or unlisted label does not bite.

The label decides what happens when the test is failed. If an unlisted-country subsidiary fails, its adjusted tainted income is attributed to the Australian parent and taxed in Australia as it arises. If a listed-country subsidiary fails, only a narrow category of concessionally taxed income is caught, under subsection 385(2) of the Income Tax Assessment Act 1936. So the UK's listed status is not a free pass, but it is a wider margin for error. An Irish subsidiary that drifts into holding cash, licensing intellectual property or lending within the group is more exposed to Australian attribution than a UK one doing the same thing.

The practical reading is this. If the European business is a real trading operation, the CFC point is a reason for care rather than a reason to prefer one country, because both subsidiaries will pass the test. If the European entity will hold assets, licence IP or carry passive income, the UK's listed status is a genuine advantage, and Ireland needs the active income test watched closely.

Dividends home are tax-free from either country

Profits brought back to the Australian parent are not taxed again in Australia, whichever country the subsidiary sits in. Under section 768-5 of the Income Tax Assessment Act 1997, a dividend paid to an Australian company by a foreign company is non-assessable non-exempt income where the Australian company holds a participation interest of at least 10% in the payer. A wholly owned UK or Irish subsidiary is comfortably over that threshold, so the dividend it pays up to its Australian parent carries no further Australian company tax.

This is worth stating plainly, because it removes a question founders often worry about and lets the decision rest where it belongs. The choice between London and Dublin is not a choice about whether profit can be repatriated cleanly. It can, from both. The choice is about the rate the subsidiary pays before the dividend, the rules for running it, and the market it serves.

The position differs for an individual shareholder rather than a company, and for profit taken as something other than a dividend, so a founder who holds the European subsidiary personally rather than through an Australian company should take the point as applying to the corporate structure described here, not to every way of extracting value.

A branch can be simpler than a subsidiary

An Australian company does not always need a separate European company, because it can trade through a branch, and the active profits of a foreign branch are exempt from Australian tax. Section 23AH of the Income Tax Assessment Act 1936 treats the foreign income a resident company earns in carrying on business through a permanent establishment abroad as non-assessable non-exempt.

An Australian company that opens a UK or Irish branch, rather than incorporating a local subsidiary, can have that branch's active trading profits fall outside Australian tax under the same logic that favours an active subsidiary.

A branch is lighter to set up and avoids a second layer of company. What it does not do is create a separate legal person. The branch is the Australian company operating in another country, so the Australian company carries the local liabilities directly, files locally as a foreign company, and presents to customers and banks as a foreign business rather than a local one. For a cautious first step into a market, that can be the right trade. For a business that wants local credibility, local banking, local hiring at scale, or an eventual sale of the European operation on its own, a subsidiary is usually better.

The local tax rate also pulls towards a subsidiary in Ireland. Ireland's 12.5% trading rate is available to a company carrying on a trade in Ireland, so a founder who wants that rate on European profits generally wants an Irish-resident company, not an Australian company trading through an Irish branch. The branch route keeps the profit within the Australian company, exempt under section 23AH but not taxed at the Irish trading rate either. Which is better depends on whether the aim is a low local rate on retained European profit or a clean exemption on profit that flows back to Australia.

The rates, and what actually applies

The headline rates point towards Ireland, but the rate that applies depends on what the company does. The United Kingdom charges corporation tax at a main rate of 25% on profits above GBP 250,000 and a small profits rate of 19% on profits below GBP 50,000, with marginal relief producing an effective 26.5% rate on profits in between, and the main rate is unchanged for the financial year beginning 1 April 2026. Ireland charges 12.5% on trading income and 25% on non-trading income such as rent and investment returns.

Ireland's 12.5% is the lowest headline trading rate in the corridor, and it is the reason many founders start there. The rate applies to the profits of a genuine trade carried on in Ireland, so it rewards a real operation with substance in the country and does little for a company that books passive income. A UK company pays more on the same trading profit, but the gap narrows for a small company near the 19% rate, and the UK offers depth of market, capital and talent that a rate table does not show.

One rate caveat applies at the top end. A business that is part of a group with annual revenue of EUR 750m or more is within the global minimum tax, which can bring an Irish company's effective rate up towards 15%, as set out in the note on the Irish holding company in the corridor. For an owner-managed business well below that threshold, the 12.5% trading rate is the operative figure, and the comparison with the UK that is examined in the Irish and UK holding company analysis is the useful one.

Forming the company differs more than the tax

The practical rules for setting up and running the company differ between the two countries more than the tax does, and for many founders that is what actually decides it. The United Kingdom imposes no requirement that a company director live in the UK or anywhere in particular, so an Australian founder can own and direct a UK company from Sydney.

What the UK now requires is identity verification: since 18 November 2025 new directors and people with significant control must verify their identity, and someone outside the UK generally does this through an authorised corporate service provider rather than the government's own route, as explained in the note on UK company formation for non-residents.

Ireland is stricter in a way that catches Australian and New Zealand founders directly. An Irish company must have at least one director resident in a member state of the European Economic Area, or else hold a bond, in the prescribed form and currently of EUR 25,000, under section 137 of the Companies Act 2014. A founder with no EEA-resident director must either appoint one or buy the bond, and the point that surprises people is that a UK-resident director has not satisfied the EEA requirement since 1 January 2021, because the United Kingdom left the EEA. The detail of that requirement, and the ways around it, is set out in the note on setting up an Irish company as a non-resident.

So the formation comparison runs opposite to the rate comparison. Ireland has the lower trading rate but the harder residence requirement for the board. The UK has the higher rate but no residence requirement, subject only to identity verification. A founder who has an EEA-resident director available, or is content to use the bond, keeps Ireland's rate advantage. A founder with no EEA connection at all finds the UK the lighter company to form and run.

Residence of the company sits behind both. A company incorporated in the UK is UK tax resident, and a company incorporated in Ireland is Irish tax resident, but each can also be treated as resident where it is centrally managed and controlled, so a European subsidiary genuinely run from Australia risks being treated as Australian resident in substance. The doctrine, and how to hold a company's residence where it is meant to be, is set out in the note on central management and control.

Market access and the treaties

The firmest reason to prefer one country over the other is often market access, and here the two have genuinely diverged. Ireland is inside the European Union single market, so an Irish company trades across the EU in goods, services, data and people on the same footing as any other member-state company. The United Kingdom left the European Union, so a UK company reaches the EU as a third country, under the trade terms the UK and the EU have agreed, rather than from inside the market.

For a business whose European ambition is the European Union itself, that points to Dublin. For a business whose market is the United Kingdom, or the English-speaking world more broadly, London is the base and the EU question is secondary. The UK has signed its own trade agreements with both Australia and New Zealand, each in force since 31 May 2023, so an Australian or New Zealand business trading goods with the UK has preferential terms there that it does not automatically have with the EU through Ireland.

On tax treaties the two are even. Both the United Kingdom and Ireland have double tax agreements with Australia, and both have agreements with New Zealand, so a founder from either country has a treaty tie-breaker for company residence and a framework allocating taxing rights whichever base they choose. The treaty network is not the deciding factor between London and Dublin, because it exists for both. It is the single-market question, and the company-law question, that actually separate them.

The New Zealand founder's version

A New Zealand founder faces the same choice with one of the hard edges removed, because New Zealand's controlled foreign company rules do not sort countries into listed and unlisted. New Zealand uses an active business test that exempts a controlled foreign company from attribution wherever it is resident, provided its passive income is less than 5% of its total, so the test turns on what the subsidiary does rather than on where it sits.

A genuinely trading UK or Irish subsidiary of a New Zealand parent is outside New Zealand attribution either way, and there is no equivalent of the Australian advantage for the UK.

The rest of the comparison applies to a New Zealand founder exactly as it does to an Australian one. Ireland's 12.5% trading rate against the UK's 25% and 19%, the EEA-resident director requirement that a New Zealand director does not meet any more than a UK one does, the identity verification for a UK company, and the single-market question all read the same. For a New Zealander the decision is cleaner, because it rests on rate, company law, treaties and market, without the home-country residence of the subsidiary pulling towards one country.

New Zealand also has tax treaties with both the United Kingdom and Ireland, so the treaty position is covered on either route, and dividends paid back to a New Zealand parent are dealt with under New Zealand's own rules for foreign dividends rather than the Australian section described above.

London or Dublin side by side

The table sets the two bases against each other on the points that actually decide the choice, for an Australian parent, with the New Zealand position noted where it differs.

Read down the first two rows and the tension is clear. Ireland has the lower rate but the weaker Australian CFC position and the harder board requirement. The UK has the higher rate but the listed status and the lighter formation. The right answer is the one that fits the business, not the one with the lower number in a single row.

The order that works

The choice is best made by settling the business questions first and the tax questions second, because the tax follows the activity rather than the other way round. The order is short.

1. Decide which market the European business is really for, the European Union or the United Kingdom, because that alone often settles London against Dublin.
2. Decide whether the European entity will trade genuinely or hold passive income, since a trading company passes the active income test in either country while a passive one makes the UK's listed status valuable.
3. Check whether an EEA-resident director is available, because without one Ireland needs the section 137 bond and the UK does not.
4. Weigh the rate against the market and the cost of running each, rather than on the headline rate alone.
5. Then form the company, with the identity verification for a UK company or the director and bond position for an Irish one settled before incorporation, not after.

The founders whose European expansion runs cleanly are the ones who chose the base for the business and then built the structure to fit it, rather than choosing the lowest rate and discovering the board requirement, the CFC position or the market barrier afterwards.

Frequently asked questions

Is the UK or Ireland better for an Australian company expanding to Europe?

It depends on the business, and the two pull in opposite directions. Ireland has the lower trading rate, 12.5% against the UK's 25% and 19%, and sits inside the EU single market, which suits a business whose market is the European Union.

The UK has no director-residence requirement, a lighter formation process and listed-country status under the Australian controlled foreign company rules, which suits a business whose market is the UK or the English-speaking world and a founder with no EEA-resident director. Neither is better in the abstract; the right base is the one that matches the market and the structure.

What does it mean that the UK is a listed country and Ireland is not?

It is an Australian tax classification. Regulation 19 of the Income Tax Assessment Regulations 2015 lists seven countries, including the United Kingdom, whose tax systems Australia treats as broadly comparable, and all other countries, including Ireland, are unlisted. Under the controlled foreign company rules a subsidiary in either country that passes the active income test has nothing attributed to its Australian parent. If the test is failed, an unlisted-country subsidiary has its tainted income attributed, while a listed-country subsidiary exposes only a narrow category of concessionally taxed income, so the UK's status is a wider margin rather than a complete shelter.

Will my Australian company be taxed on its European subsidiary's profits?

Only if the subsidiary fails the active income test, and then only to a limited extent in the UK. A genuinely trading UK or Irish subsidiary whose passive and related-party income is a small fraction of its turnover passes the active income test in section 432 of the Income Tax Assessment Act 1936, and nothing is attributed to the Australian parent as it arises. When profit is later paid up as a dividend, it is non-assessable non-exempt income for an Australian company holding at least 10%, under section 768-5 of the Income Tax Assessment Act 1997, so it is not taxed again in Australia.

Can I run an Irish company from Australia without an Irish director?

Not without dealing with the residence requirement. An Irish company must have at least one director resident in the European Economic Area, or hold a bond in the prescribed form, currently EUR 25,000, under section 137 of the Companies Act 2014. An Australian-resident director does not satisfy the requirement, and neither does a UK-resident director, because the United Kingdom left the EEA on 1 January 2021. In practice an Australian founder either appoints an EEA-resident director or buys the section 137 bond, and the choice between them is one of the first things to settle when choosing Ireland.

Does the UK require a resident director for a company?

No. The United Kingdom does not require any director to be resident in the UK or anywhere else, so an Australian or New Zealand founder can own and direct a UK company from home. Since 18 November 2025, however, new directors and people with significant control must verify their identity, and a person outside the UK generally does this through an authorised corporate service provider rather than the government's own identity route. There is no residence requirement and no bond, which makes a UK company lighter to form for a founder with no European connections.

Should I set up a branch or a subsidiary in Europe?

A branch is simpler and its active profits are exempt from Australian tax under section 23AH of the Income Tax Assessment Act 1936, but it is not a separate company, so the Australian company carries the local liabilities and presents as a foreign business. A subsidiary is a separate local company, which gives local credibility, local banking and a cleaner eventual sale, and in Ireland it is the way to access the 12.5% trading rate. A branch suits a cautious first step; a subsidiary suits a business committing to the market or wanting the local rate.

Do the UK and Ireland have tax treaties with Australia and New Zealand?

Yes, all four combinations exist. Both the United Kingdom and Ireland have double tax agreements with Australia, and both have agreements with New Zealand, so a founder from either country has a treaty tie-breaker for company residence and a framework for allocating taxing rights whichever base they choose. The treaty network therefore does not decide between London and Dublin, because it covers both. The deciding factors are the single-market question, the rate and the company-law requirements.

Is the choice different for a New Zealand founder?

Yes, and simpler on one point. New Zealand's controlled foreign company rules use an active business test that applies the same way wherever the subsidiary is resident, exempting it from attribution if its passive income is below 5% of the total, so New Zealand does not have the Australian listed and unlisted distinction. A trading UK or Irish subsidiary of a New Zealand parent is outside New Zealand attribution either way. The rate, the EEA-resident director requirement, the UK identity verification and the single-market question all apply to a New Zealand founder exactly as they do to an Australian one.

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Critical advisory. London or Dublin is two decisions, taken in order.

First the business: the European Union points to Dublin, the United Kingdom and the English-speaking market point to London. Then the structure: Ireland's lower rate against its EEA-resident director rule, and the Australian controlled foreign company position behind both.

Settling that order, and forming and running the company that follows from it, is work we do in-house across the UAE, the United Kingdom and Ireland.

This is general information, not advice on your own facts.