What are NACE Codes

WHAT ARE NACE CODES, AND WHAT IS THEIR IMPORTANCE?

When incorporating a company in Ireland, the principal business activity must be determined and stated in the company’s registration documents submitted to the Companies Registration Office. Under the Companies Act 2014, an Irish company must file a declaration regarding the economic activity that the company will carry out. Then, the businesses are classified based on this activity. This is where the use of NACE codes comes into play.

What is Meant by NACE Codes, and What are they Used For?

The NACE code refers to the acronym for the Nomenclature of Economic Activities. It is a system of classifying products and economic activities, classifying entities throughout Europe based on their business activity. Just as the Standard Industrial Classification (SIC) Codes are used in the United Kingdom to rank companies, the NACE codes are generally used in Ireland and Europe. The four digits NACE code and the nature of economic activity should correspond to the company’s proposed business objectives stated in its Memorandum of Association.

Understanding How NACE Codes are Read

The NACE Code has four levels:

For instance, the NACE code for an entity providing Life Insurance services could be understood as follows:

⦁ Section K — FINANCIAL AND INSURANCE ACTIVITIES.
⦁ Division – 65 Insurance, reinsurance and pension funding, except compulsory social security.
⦁ Group – 65.1 Insurance.
⦁ Class – 65.11 Life insurance.

Examples of the NACE Code Sections:

The NACE codes have been classified broadly into sections representing different natures of businesses. Examples of the business activities into which the companies are classified include the following:

⦁ Agriculture, forestry and fishing,
⦁ Manufacturing,
⦁ Electricity, gas, steam and air conditioning supply,
⦁ Construction,
⦁ Information and communication,
⦁ Financial and insurance activities,
⦁ Human health and social work activities,
⦁ Transportation and storage,
⦁ Education, and
⦁ Arts, entertainment and recreation.

Significance of NACE Codes

The NACE codes provide a framework for collecting and presenting statistical information regarding economic activities. All activities are characterized by the input of resources, a production process and the resultant product (goods or services). Therefore, it is crucial to categorise your business into the relevant codes since this provides insights into critical economic statistics such as production, employment, labour market, national accounts and much more.
It is getting the right NACE code determined and stated in the company’s registration documents. Incorrect NACE codes can cause delays in opening a bank account or issuance of company tax numbers by the Revenue. In addition, when a company changes its principal business activity, it must acquire a new NACE code corresponding to that activity.

Any Questions or Queries?

Contact our Support Agent today for advice and answers to any questions you have when ascertaining the NACE code for your business.