Ireland: Offshore Business Sectors
Investment Fund Management
As an EU member with a recognised stock exchange, a good network of double tax treaties, and favourable tax rules, Ireland has been successful at attracting mutual fund and investment fund business, even if it is not quite in the same league as Luxembourg: as of December 30, 2012, the Irish Stock Exchange had 932 funds, 1,647 sub-funds and 7,565 fund classes listed. The exchange has actively encouraged the fund market to make up a short fall in more traditional business.
To list on the Irish Stock Exchange, an EU fund must pay a listing fee of EUR2,000 plus a similar amount in annual fees. Non-EU funds must pay EUR2,180 to list. Additionally, around EUR10,000 is charged by advisors to help list a fund, with a further EUR1,000 charged annually in administration fees.
Ireland has implemented the EU UCITS directive. Other than for UCITS funds, funds of funds are permitted within limits, and umbrella funds are allowed for all types of vehicle. There are no restrictions on the domicile of funds to be listed, but retail funds must be domiciled in 'recognised' jurisdictions, which for the ISE means EU countries, the Channel Islands, the Isle of Man, Hong Kong and Bermuda; or at the discretion of the ISE they can be admitted if they are subject to an equivalent level of regulation.
About 40% of the funds listed on the stock exchange are also domiciled in Ireland, many of them in the International Financial Services Centre (IFSC). For a company based in the IFSC, a certificate could be obtained from the Minister for Finance giving access to a 10% taxation rate; application was made initially to the Industrial Development Agency. As from 2002, however, no further entrants were permitted to the IFSC due to the harmonised taxation regime agreed with the EU.
See Offshore Legal and Tax Regimes for further information on the IFSC and the ISE.
Resident Irish taxpayers are subject to an 'exit tax' of 33% on gains on encashment or maturity of investment funds. The rate was 30% before 2012.
It was announced in November 2004 that the Dublin Funds Industry Association was in talks with the Irish Financial Services Regulatory Authority with regard to the creation of a regulatory regime which would allow retail hedge funds to be sold in Ireland.
The groundwork for the move had already been laid, according to Global Fund News, as the Irish authorities had the previous year created regulations permitting retail investors to access funds of hedge funds.
Dublin Funds Industry Association executive, Declan Casey observed at the time that: "Alternative investments have been in vogue in the last few years and Dublin has gained a strong reputation in this area but we are well aware of the many obstacles that lie ahead. The issue of disclosure for retail hedge funds remains difficult. But retail hedge funds are definitely on the agenda."
On December 18, 2009, the Companies (Miscellaneous Provisions) Act 2009, passed by the upper house of the Irish parliament, which will enable investment funds to re-domicile to Ireland more simply and efficiently.
The new legislation provides a clear framework designed to address and minimize the challenges currently experienced when re-domiciling a fund. The legislation has been drafted to specifically allow a fund structured as a corporate entity in another domicile to re-register in Ireland with its original corporate identity retained, ensuring continuity of activity and continuation of arrangements.
In addition, the legislation simplifies the considerations involved when re-domiciling. These include the ability to re-domicile a fund at a single meeting of shareholders in the jurisdiction from which the fund is seeking to move; and a single filing of registration documentation with the Companies Registration Office in Ireland to include a statutory declaration from a director of the company. The simplified process should therefore reduce the burden and cost of re-domiciling by eliminating unnecessary shareholder meetings, notary declarations, certificates and reports.
Responding to the immediate need for a simple and efficient legislative process and to shorten the timeframe for the enactment of primary legislation, the legislative provisions were included in the Companies (Miscellaneous Provisions) Bill 2009, as amendments to the Bill.
Welcoming the new legislation, the Tánaiste and Minister for Enterprise, Trade and Employment, Mary Coughlan, said: “The investment funds industry in Ireland has gained international recognition and prospered by fostering an environment of openness, transparency and regulation. As investment funds seek to re-establish themselves in regulated European jurisdictions, it is highly appropriate that we enable them to do so by ensuring our legislative framework is as efficient as possible."
Irish Minister for Trade and Commerce, Billy Kelleher on January 4, announced the enactment of the Companies (Miscellaneous Provisions) Act 2009. According to the Trade Minister, most of the provisions in the Act entered into force with immediate effect.
The 2010 Irish Finance Bill included a package of measures to improve the attractiveness of Ireland as a base for internationally-traded services, particularly financial services. These include: exemption from completion of non-resident declarations for foreign investors in Irish domiciled funds that are not marketed within Ireland; more clarity with regard to the tax treatment that would apply to foreign funds that are managed from Ireland under the recently adopted UCITS IV (Undertakings for Collective Investments in Transferable Securities) Directive provides for the establishment and operation of a UCITS ‘Management Company Passport; extension of stamp duty to accommodate mergers of investment undertakings.
The financial services industry located primarily within the IFSC (International Financial Services Centre) will benefit from changes to modernize the tax rules governing the investment of funds," commented Chartered Accountants Ireland (CAI) in February 2010.
The CAI also lauded the introduction of further Islamic Financing Arrangements:
“Islamic financing arrangements which are compliant with the principles of Shari'a law don’t feature the making or receiving of interest payments. This means that there are different structures put in place to provide investment, financing and insurance services. Where possible, the Irish Revenue have applied tax to Islamic Financing arrangements as if they operated along the lines of equivalent Western models. The new rules in the Finance Bill will formalize these tax treatments. They should enhance Ireland’s ability to attract Islamic Financial Services providers to the IFSC, while at the same time facilitating the provision of services to our Muslim population.”
In March 2010, asset management firm GAM and former Bank of England Monetary Policy Committee member Sushil Wadhani announced that they had joined forces to launch a new hedge fund for retail investors, to be domiciled in Ireland. The GAM Star Keynes Quantitative Strategies Fund was launch on April 6, 2010, and the fund has a UCITS III structure.
Funds listed in Ireland are supervised by the Central Bank of Ireland under a number of statutes. See Law of Offshore for further details.