DESPITE the well documented economic challenges endured in Ireland over the past number of years, the appetite of international companies to invest in Ireland continues to grow. The majority of investment in Ireland is in three broad sectors: financial services, life sciences and technology. Ireland has enjoyed modest growth for the past three years and had record levels of exports in 2011 and 2012. Ireland is reliant on an export-led recovery as a means to boost employment and create growth in the economy. To that extent, the Irish government must remain committed, as it has been to date, to developing and introducing measures and initiatives designed to enhance Ireland's attractiveness as a place to do business for multinational companies.
Financial services
Ireland continues to be a jurisdiction of choice globally for the establishment of investment funds. Ireland already services approximately 43% of global and 63% of European hedge fund assets and is the largest hedge fund administration centre in the world. It is expected that with the implementation of the Alternative Investment Funds Managers Directive (AIFMD), Ireland will attract an increased share of global investment funds with a further expected flow of investment funds re-domiciling to Ireland from traditional off-shore financial centres. US hedge funds and private equity funds have for the past number of years also been realising acquisition opportunities in the distressed Irish domestic market. They are also using Irish investment vehicles, such as qualifying investor funds (QIFs) and Section 110 securitisation vehicles (S110 Companies), as platforms for further investment throughout Europe. The creation of a new fund vehicle with similar characteristics to the Luxembourg SICAV, will also broaden the flexibility of the Irish funds industry and will provide an entity which can be "checked" from a US tax perspective.
The aircraft leasing industry in Ireland continues to grow from strength to strength. Ireland-based aircraft leasing companies manage $150 billion in assets, accounting for 19% of the global fleet (19,000 aircraft). Enhancements to the Section 110 securitisation regime now allow for aircraft leasing transactions to be funded using Section 110 structures. While the structured finance industry in Europe has been slower to recover than the US, the public collateralised loan obligation (CLO) market is showing signs of life in 2013 and a number of CLOs are currently being priced in Europe. Due to the favourable tax and regulatory infrastructure, Irish Section 110 companies continue to be the leading choice of vehicle for European CLO transactions.
Technology and life sciences
Ireland has a track record of successfully attracting life sciences companies. For example, of the world's top 10 pharmaceutical companies, nine have established in Ireland and many of the leading medical device companies also have a presence. Similarly, most of the world's most successful technology companies have also established substantial operations in Ireland.
Ireland's success in attracting life sciences and technology companies can be linked to four main factors which were identified in a pulse survey commissioned by Matheson in 20121. As one would expect, one of the four principal "pull-factors" is our stable taxation regime and the 12.5% rate of corporation tax. However, the survey results also illustrated that access to the EU internal market through the eurozone's only English speaking common law jurisdiction, the talented, highly skilled workforce and the stability of the legal, political and regulatory environment were equally important in attracting foreign direct investment (FDI) to Ireland. In this regard, it is important that the Irish government remains committed, as it has been to date, to the continued introduction of reforms and initiatives that ensure that Ireland retains its attractiveness.
Recent and proposed legislation
The last 12 months have seen the introduction of a number of such reforms and initiatives: From a taxation perspective, the Irish government's policy of preserving the 12.5% rate of corporation tax was once again reaffirmed inthe Finance Act 2013. While there were few headline proposals in the Finance Act this year, there have been substantial improvements to the amortisation (tax depreciation) regime for acquired intangibles and the research and development tax credit system over the past few years. Enhancements in both of these areas has improved Ireland's attractiveness to companies exploiting intangibles and companies wishing to carry out research and development activities in Ireland.
The government has also recently published a new Irish Companies Bill (the "Bill") which, once enacted, will consolidate, reform and simplify existing Irish company law. Proposals envisaged by the Bill include the reduction of the corporate maintenance burden for private companies limited by shares, the introduction (for the first time) of a domestic merger and division regime for Irish private companies and the establishment of a single, streamlined validation procedure to approve the entry into certain restricted activities, such as transactions with directors, financial assistance, capital reductions and solvent windings-up. The publication of the Bill is a landmark development in the strategic reform and modernization of Irish company law and, once enacted, will bring significant benefits for companies of all types doing business in Ireland.
Another welcome development was the recent announcement of proposals for the introduction of a new visa for highly skilled persons working in the technology sector. Once this proposal has been implemented, it will facilitate the entry of an increased number of skilled developers and software engineers into the country to further support technology businessess with a presence in Ireland.
Conclusion
While the global economy, and particularly the European economy, remains challenging, Ireland continues to attract significant investment from abroad. The Irish government is committed to delivering the best possible infrastructure from a legal, tax and regulatory perspective to ensure that Ireland continues to attract further investment and retains its position as a world-leading destination for international companies to do business.
Footnotes
1. Investing in Ireland: A Survey of Foreign Direct Investors, authored by the Economist Intelligence Unit and commissioned by Matheson
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