Budget 2010 - investment management |
The financial services industry will have some reason to feel cheerful this Christmas on hearing two very important announcements in Finance Minister Brian Lenihan's Budget speech, in which the Minister specifically referred to the importance of the funds industry to Ireland. The government confirmed its commitment to strengthening Ireland’s competitive edge as a leading global hub for the international funds industry.
12.5% tax rate
The first reason to be cheerful is the clear and unambiguous statement that the 12.5% corporation tax rate is here to stay. The Minister acknowledged that our 12.5% rate is an “international brand” that is known the world over and continues to attract new business and jobs here. In a time of uncertainty, the very clear message that the 12.% corporation tax rate will not change is a very positive statement that will be very much welcomed by all in the financial services community.
Opportunities for the international funds industry
The other reason is that the Minister acknowledged the very great opportunities that exist for Ireland, not just in the wider financial services sector but, particularly, in the international funds industry. With changes happening within the EU that affect the European funds landscape, Ireland has a unique opportunity to further position itself as the home or domicile of choice for not just investment funds but also investment management companies. Our 12.5% tax rate, combined with our favourable investment funds tax and regulatory infrastructure, plus changes the Minister will bring forward in the Finance Bill, will make Ireland a clear winner as the global hub of choice.
Submissions have been made by the fund industry to the authorities highlighting innovative and pragmatic changes to legislation to facilitate EU Directives, such as UCITS IV (an EU directive that among other things permits a management company in one EU jurisdiction to “passport”/offer certain investment management activities to UCITS funds and other discretionary clients in other EU locations). Such changes might include protecting the tax residency and existing tax position of any foreign UCITS/clients that would be managed by Irish investment management companies, thereby providing certainty to such non Irish funds/clients and making Ireland an attractive location for such management companies.
Other initiatives that may be considered include more practical ways to
- permit non Irish funds to choose to become Irish tax resident and regulated and
- achieve fund reorganizations, reconstructions and amalgamations in an efficient and more cost effective manner.
In the international market, fund houses are looking to locate in quality jurisdictions as well as rationalising their fund offerings to achieve operational cost savings. Again, Ireland has a tremendous opportunity to be the location of choice and continue to build on its strength and eminence in this sector. We will have to wait until the Finance Bill to see the changes proposed, but it is a very positive initiative to have the Minister state his intent in this regard.