U.S.Outbound Investment
U.S. Outbound Investment: Why Choose Ireland?
US Outbound Investment = Foreign Direct Investment (FDI)
U.S. Ireland
Source: America Ireland Chamber of Commerce “US-Ireland Business 2017”
U.S. Outbound Investment: Why Choose Ireland?
Evolution of FDI in Ireland
U.S. Outbound Investment Why Choose Ireland?
Source: IDA Ireland Strategy, Horizon 2020
A range of services and incentives, including funding and grants, are available to those considering
foreign direct investment in Ireland. These are offered by IDA Ireland, Ireland’s inward investment
promotion agency, to both new and existing clients. www.idaireland.com
Survey Results
Source: Ipsos MRBI AIB Foreign Direct Investment Research February 2014
86% of companies stated that access to Europe was critical or important
REASONS FOR SETTING UP IN IRELAND
U.S. Outbound Investment: Why Choose Ireland?
See our Sector Report, "Why Choose Ireland?" at www.aibcorporate.ie
China $11,000
EU $35,000
Access to the European market
ECONOMIC
SIZE
PER CAPITA
WEALTH
LARGE MARKET FOR
US GOODS/SERVICES
CHINA $21.3 trillion
EU $19.2
US $18.6
INDIA $8.7
JAPAN
$ 4.9
Source: Cia WORLD FACT BOOK
U.S. Outbound Investment: Why Choose Ireland?
Export Propensity
Access to the 500m people in Europe
US affiliate sales of
goods and services in
Ireland totaled $343
billion in 2015
Greater than US
affiliate sales in
China ($165bn) and
Japan ($108bn).
The reason: Export-Propensity.
Ireland ranks the number one export platform in the world for U.S. affiliates
underscoring the importance of Ireland in the global value chains
>
Source: Bureau of Economic Analysis 2016 based on most recent data
U.S. Outbound Investment: Why Choose Ireland?.
Ease of Doing Business
Source: Ipsos MRBI AIB Foreign Direct Investment Research February 2014
1
U.S. Outbound Investment: Why Choose Ireland?
Education = Talent in Ireland
• Young, well educated and productive
workforce
• Youngest population in Europe.
• Currently 1m people in full time education.
• ICT skills strategy is driving significant
increases in graduates with an increase of
70-110% by 2018.
• Multi-lingual capabilities.
Ireland is the only English speaking workforce in
the EurozoneSource:: IDA
U.S. Outbound Investment: Why Choose Ireland?
Tax Regime
Corporate tax rate of 12.5% for active business.
25% Research & Development (R&D) Tax Credit
An Intellectual Property (IP) regime which
provides a tax write-off for broadly defined IP
acquisitions. Attractive relief for staff assigned from abroad,
key staff working in R&D.
“Our core offering is a competitive, business-
friendly regime with a rock solid commitment to
the 12.5% corporation tax rate”Update on Ireland’s International Tax Strategy 2016
Minister of Finance, Michael Noonan, TD
Why are Companies using Ireland?
Supply Chain Management
Headquarters & IP Management
High Value Manufacturing
Global Business Service Centers
Research, Development & Innovation
Expansion into EMEA Markets
Tax efficient supply chain management
Arm’s length pricing and transfer pricing
Operational substance in Ireland
Corporate restructuring and inversions into
Ireland
21
IRELAND AS A TREASURY LOCATION
Source: EY
12.5% on
treasury
trading profit
Transparent
tax regime
aligned to
BEPS
WHT
exemption on
interest &
dividends
No CFC or thin
capitalization
rules
OECD – based
transfer pricing
regime
No capital
duty on
shares / loan
issuances
Extensive tax
treaty
network &
EU
Directives Dedicated
securitization
regime
Unilateral
credit for
foreign
withholding
taxes
Published
guidance on
treasury
activities
Ireland also represents a very
attractive and sustainable solution
as a corporate treasury center/
group “bank”.
The taxation of interest / treasury
income at 12.5% is not targeted by
BEPS.
Ireland is not a “hybrid haven”.
The taxation of interest / treasury
income at 12.5% rate should meet
minimum taxation level of unilateral
interest base erosion measures.
IRELAND as a Treasury Location
U.S. Outbound Investment: Why Choose Ireland?
Case Study: The existing business model had many
issues…and opportunities
USP
Spain
France
Italy
Suppliers
Italy
Customers
France
Customers
Spain
Customers
IP Ownership
RM
Purchases
US
Customers
Full-fledged entrepreneurs:
procurement,
manufacturing, distribution,
marketing, sales, back-
office support, etc.
IP License
Key to flows:
Legal title
Physical flow
Services
Sales
Sales
Physical flow & Title
Physical flow & Title
Real Life Case Study: Centralized model
USP
Suppliers
FG Sale - Mkt
price less
commission
RM
Title
IP Ownership
Cost-sharing
for ROW IP
rights
IrishCo
Italy
France
Spain
RM Physical flow
US
Customers
ROW
Customers
Finished good shipped
FG Sale –
mkt price
FG Sale - mkt price
CM fee
Key to flows:
Legal title
Physical flow
Services
24Ireland: A Platform for Expansion into Europe
Intellectual Property Exploitation
Why choose Ireland for IP?
Legal framework for IP protection
Taxation at 12.5% on trading profits of an active brand management trade
Effective tax rate can be as low as 2.5%
Amortization for tax purposes
R&D credits: close to 40% on the dollar for qualifying R&D spend
25
Source: EY
12.5% on IP
trading profit
Tax
amortization
available for
acquired IP
WHT
exemption
on outbound
royalties
payments
Tax free
exit
available
on
migrationCredit
available for
WHT on
inbound
royalties
Interest
deduction on
borrowings
used to
acquire IP
Extensive tax
treaty network &
EU Directives25%
“refundable”
R&D tax
credit
New OECD
compliant
patent box
No stamp
duty on the
acquisition of
IP
Ireland has a very favorable IPregime with a number of largeMNE’s already choosing to locatetheir non-US IP in Ireland.
The royalty income receivedshould be taxable at the 12.5%provided the company has“substance” in Ireland is activelycarrying on an IP type trade.
A deduction for tax amortization onacquired IP and interest onborrowings also available whichcan reduce the company’s cashtax rate below the standard 12.5%rate and 0% rate is possible.
Currently seeing a huge amount ofinterest in Ireland as an IPlocation.
IRELAND as an IP Location
U.S. Outbound Investment: Why Choose Ireland?
Ireland is NOT a Tax Haven….
1. No or nominal taxes Ireland’s corporate tax rate is 12.5%
2 Lack of transparency Ireland’s tax regime is fully transparent based on
legislation
3. Unwilling to exchange Ireland exchanges information through Tax information Treaties, Information Exchange Agreements, EU
Savings Tax Directive and (proposed) FATCA);
4 No substance requirement The 12.5% tax rate applies to trading activities
only which require substance
The OECD has identified four key indicators of a
tax haven
None of which apply to Ireland
27
BASE EROSION & PROFIT SHIFTING (BEPS)
Source: OECD
What Is BEPS?
.
“Stated simply, BEPS arises because under existing rules, it is possible for companies to artificially separate taxable profits from economic activities and value creation”
Raffaele Russo, Head of BEPS project
Base Erosion Profit Shifting
U.S. Outbound Investment: Why Choose Ireland?
Tax planning strategies that exploit
gaps and mismatches in tax rules that
artificially shift profits to low or no-tax
locations where there is little or no
economic activity, resulting in little or no
overall corporate tax being paid
29Source: Address by Minister Michael Noonan TD to Irish Times International Tax Event 1/24/17
A Message From Ireland’s Finance Minister:
Ireland is committed to the BEPS project
Country by Country reporting has been implemented
Transparency: Committed to the highest international standards
Review of Ireland’s tax code in 2017 budget
U.S. Outbound Investment: Why Choose Ireland?
30
Source: AIB, EY
Ireland likely to be the ‘go-to’ jurisdiction since it already requires substance and has a competitive tax rate.
Ireland’s Knowledge Development Box was created in accordance
with the OECD guidelines.
Multi-national companies operating in different jurisdictions will have increased compliance costs.
BEPS impact on Ireland
U.S. Outbound Investment: Why Choose Ireland?
31
Source: EY
► Action 1: Address the tax
challenges of the digital economy
► Action 2: Neutralise the effects of
hybrid mismatch arrangements
► Action 3: Strengthen CFC rules
► Action 4: Limit base erosion via
interest deductions and other
financial payments
► Action 5: Counter harmful tax
practices more effectively, taking
into account transparency and
substance
► Action 6: Prevent treaty abuse
► Action 7: Prevent the artificial
avoidance of permanent
establishment status
Action plan
on Base
Erosion and
Profit Shifting
(BEPS)
► Action 8: Consider transfer pricing for
intangibles
► Action 9: Consider transfer pricing for
risks and capital
► Action 10: Consider transfer pricing for
other high-risk transactions
► Action 11: Establish
methodologies to collect and
analyse data on BEPS and
actions addressing it
► Action 12: Require taxpayers to
disclose their aggressive tax
planning arrangements
► Action 13: Re-examine transfer
pricing documentation
► Action 14: Making dispute
resolution mechanisms more
effective
► Action 15: Develop of a
multilateral instrument for
amending bilateral tax treaties
BEPS impact on Treasury
U.S. Outbound Investment: Why Choose Ireland?
32
Source: EY
► Action 1: Address the tax
challenges of the digital economy
► Action 2: Neutralise the effects of
hybrid mismatch arrangements
► Action 3: Strengthen CFC rules
► Action 4: Limit base erosion via
interest deductions and other
financial payments
► Action 5: Counter harmful tax
practices more effectively, taking
into account transparency and
substance
► Action 6: Prevent treaty abuse
► Action 7: Prevent the artificial
avoidance of permanent
establishment status
Action plan
on Base
Erosion and
Profit Shifting
(BEPS)
► Action 8: Consider transfer pricing for
intangibles
► Action 9: Consider transfer pricing for
risks and capital
► Action 10: Consider transfer pricing for
other high-risk transactions
► Action 11: Establish
methodologies to collect and
analyse data on BEPS and
actions addressing it
► Action 12: Require taxpayers to
disclose their aggressive tax
planning arrangements
► Action 13: Re-examine transfer
pricing documentation
► Action 14: Making dispute
resolution mechanisms more
effective
► Action 15: Develop of a
multilateral instrument for
amending bilateral tax treaties
Impact sales tax
payments- where
collected and paid
Increased reporting
requirements
& auditsTransfer pricing
calculations; impact
on intercompany
financings
Interest deductions
& Withholding tax
calcs;
Req. for substance
and shift of trading
activity
Double taxation
due to conflicting
jurisdictions?
BEPS impact on Treasury
U.S. Outbound Investment: Why Choose Ireland?
33
Ireland: Other considerations
Brexit
US Tax Reform
The Apple Case
U.S. Outbound Investment: Why Choose Ireland?
It’s Important to Have a Vision for Your BusinessInitial expansion planning decisions can have long-term impacts
Each “business” decision drives “tax” consequences and opportunities
Global Business
Model
How will I
mange foreign
currency issues
What do I do
with cash built-
up off-shore
What are my
income/indirect
tax obligationsWhat are my
financial &
regulatory
requirements
How/where will I
bill and collect
from clients
How will I sell &
conclude sales
outside the US
How will I
distribute
finished goods
How do I exploit
my Intellectual
property
How do I fund
ongoing R&D
What location(s)
should I be inWhat should my
legal structure
be
ProcSales
Acctg
ITMfg
Fin
Treas
Risk Legal
AP
Cash
AR
Anticipating and planning for each decision may help avoid unfavorable “default” decisions
which may negate benefits on an after-tax basis
If/where/how should
I manufacture
products
U.S. Outbound Investment: Why Choose Ireland?
Some thoughts…
Be aware of OECD work in progress/areas of focus
Choose a structure that best fits your company’s risk profile.
Hire the appropriate team of consultants and advisors
The Irish Advantage
It is the combination of factors
The Irish
Advantage
12.5% CT &
extensive
tax treaty
network
Stable
political
environment
& Respected
regulatory
regime
Highly
skilled,
knowledge
based
economy
Flexibility,
responsive-
ness &
innovation
Experience
delivering
Global
Business
Services
Experienced
& Innovative
Leaders
Excellent
Research
facilities &
capabilities
Irish
Government
partnering
Unique mix
of
components
Source: IDA Ireland
FUN FACTSFun Facts…
Ireland produces:
___% of the world’s contact lenses
__%of ventilators used in acute hospitals worldwide
___% of the world’s stents
___% of the world’s Botox
# of Jelly Beans daily
___% of the world’s Tic Tacs
1 in __ burgers served in European McDonalds is made with Irish beef
Driver vision systems technology is manufactured in Galway
which can park your car without you being in it.
Contacts
Denise Magyer
Senior Vice President
Allied Irish Bank
1345 Avenue of the Americas
10th Floor
New York
NY 10105
212-339-8170