American Investment in Ireland

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Introduction

Last year was the 50th anniversary of The American Chamber of Commerce in Ireland so it is the occasion to think about the long-standing economic relationship between Ireland and the US and the importance of foreign direct investment in Ireland, much of which comes from the US. FDI is an investment that adds or requires a lasting interest in an enterprise operating outside of the economy of the investor. There are three components of foreign direct investment of US : equity capital flows, intercompany debt, and reinvested earnings.

In the five decades since the foundation of the American Chamber of Commerce in Ireland, the number of American companies has multiplied to more than 600 today, including the pharmaceutical, med-tech industry, ITC, financial services and digital media spread around the country. US companies employ more than 100,000 people and indirectly support tens of thousands of jobs in the Irish industry. US companies have US$188b in foreign direct investment (FDI) in Ireland– more than their combined investment in Brazil, Russia, India and China. This represents 8% of all US investment in the EU & 5% worldwide.

Moreover , Foreign direct investment, particularly from the US, remains very resilient and strong in Ireland and looks set to increase in the next two years. In 2011, the US accounted for 74% of Ireland’s inward investment.

Along with theses remarkable elements, we move on to our main subject today: What did American investments bring to the Irish society and what kind of challenges do they hold to Ireland?

Our presentation will fall into three parts:
* First, we are going to see why US FDI investors view Ireland as a good place to do business * Secondly, we are going to show the impacts of the American investment on Ireland * Lastly, we will see the challenges and perspectives of the American investment in Ireland.

PART I - Why invest in Ireland?

Over the last forty years, Ireland has been a key location for foreign owned companies looking to establish a foothold in Europe or expanding their operations overseas. Currently 1500 foreign owned companies, mainly in the technology, pharmaceutical, biosciences, manufacturing and financial services sectors, have invested in Ireland and play a key role in the performance of the Irish economy. Ireland remains a premium location for business establishment and continues to attract sizeable inward investments projects. Recently, large corporations such as Ebay. Facebook, IBM, Amazon have made significant investments in Ireland. The key reasons behind Ireland’s success at attracting inward investment are:

* EU membership : As a member of the European Union (EU), Ireland is part of the world’s second largest economy where goods, people and capital can move freely. Ireland is one of 15 EU member states using the euro as the official currency. * 12.5% corporation tax rate which applies to all companies : Ireland’s 12.5% corporate tax rate on trading income is one of the lowest rates in the world. The Irish Government is committed to retaining the 12.5% corporate tax rate on trading income until at least 2025. There are no restrictions on repatriation of earnings, capital, royalties or interest and there are no restrictions on the import of capital to Ireland. * A favorable holding company regime: An Irish company can now act as a European/ Regional holding or Intermediate holding company. The key points relate to the treatment of capital gains and foreign dividends. Irish holding companies are allowed an exemption from capital gains tax on the disposal of shares in their subsidiaries. The Irish tax system taxes the receipt of foreign dividends at a rate of 25%, but this liability may be reduced by the foreign underlying tax already paid on this income. There is a unilateral tax credit for underlying foreign tax provided there is a 5% shareholding relationship between the companies. * Double taxation...
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