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2 I Why Ireland? A guide to doing business in Ireland I ByrneWallaceWhy Ireland?Over severaldecades Irelandhas become amagnet for foreigndirect investment(FDI). Ireland isthe global base ofchoice for some ofthe world’s largestcorporations. FDIgenerates morejobs per capita inIreland than in anyother country.So what are theprincipal reasonswhy Ireland isso successfulin attractinginvestment?MARKET ACCESSIreland is a member of the EuropeanUnion (EU), with over 500 millionconsumers. Within Europe, Ireland is theonly English speaking country which usesthe euro, apart from Malta. TheEuropean mainland is readily accessiblethrough Ireland’s main ports and airports.Therefore more and more internationalcompanies use Ireland as their base toexpand into the rest of Europe, whileavailing of the benefits a leading foreigndirect investment location has to offer.12.5 % TAX RATEIreland offers one of the lowestcorporation tax rates in Europe. Irish taxresident companies benefit from acorporation tax rate of 12.5% on tradingprofits and certain distributions receivedfrom foreign trading subsidiaries. Thescope of activities which may beconsidered to be trading is quite broadand can include the development andexploitation of intellectual property. Acompany is tax resident in Ireland if it isincorporated in Ireland or if Ireland is theplace of central management and controlof the company. Irish tax law also containsextensive reliefs for expenditure in relationto intellectual property and research anddevelopment.FOREIGN TRADEThe 2014 Index of Economic Freedomrates Ireland as the European Union’smost economically free country.Information & communicationstechnology, chemical components andpharmaceutical products, medical andhealthcare devices are all key exports.Ireland is also beginning to emerge as aleading economy in the renewable energysector.The World Competitiveness Yearbook2014 ranked Ireland 15th out of 60countries worldwide for goods exportedas a percentage of GDP.US investment has been particularlyimportant to the growth andmodernisation of Ireland providing amultiplier effect with new technology,export capabilities, and employmentopportunities. As of 2013, the stock of USforeign direct investment in Ireland stoodat $190 billion. There are approximately700 US subsidiaries currently in Irelandemploying around 160,000 people andsupporting work for a further 275,000out of a working population of 2 millionspanning activities from manufactureof high-tech electronics, computerproducts, medical supplies, andpharmaceuticals to retailing, banking,finance, and other services. Ireland isalso an important European researchand development center for US firms inEurope.THE HOLDINGCOMPANY REGIMEThe principal benefits of locating aholding company in Ireland are theexemption from the charge to Irishcapital gains tax in respect of thedisposal of qualifying shareholdings insubsidiaries and the beneficial regimefor the taxation of foreign dividends.While there is no specific participationexemption, to the extent that dividendsare received from companies residentin the EU or in a tax treaty country suchas the US and are payable out of thetrading profits of such subsidiaries,those dividends are taxed in the handsof an Irish holding company at thelower 12.5% rate. Although Irelandimposes a dividend withholding tax andwithholding on interest payments (bothat 20%), domestic law provides for wideexemptions from these obligations,particularly for dividend payments.