Investment gem hidden within the Emerald Isle
PERHAPS better known for its Guinness than its financial expertise, Dublin is fast establishing itself as a major centre for offshore funds.
Ireland has all the prerequisites for attracting offshore funds: low taxation, a highly educated English-speaking workforce, and a full range of fund structures available.
But then again Luxembourg and Hongkong can boast of the same assets, so why Dublin? Ireland is a full member of both the European Community and the Organisation for Economic Co-operation and Development (OECD), providing access to European and Japanese markets, while offering administration and custody services at competitive costs, as well as a stock exchange listing.
Furthermore, in recent years the Irish Government has actively encouraged the financial services sector within the republic.
This has included the establishment of the International Financial Services Centre (IFSC), which offers the most tax efficient environment within the EC for the location of offshore funds and fund management operations.
Already many large corporations and institutions have set up offices in the IFSC including IBM, General Electric, Sumitomo Bank, Citicorp, Baring Brothers, Eagle Star and Credit Lyonnais. They are attracted by Ireland's comprehensive double taxation treaty network and 10 per cent rate of tax for specific types of activity including financial services out of Dublin and Shannon.
The IFSC offers a remarkable tax environment for the establishment of offshore funds.
It gives 10 per cent corporate tax on profits guaranteed by the EC until 2005; exemption from rates (local municipal taxes) for 10 years; double deduction of rent cost where property is leased; immediate one 100 per cent deduction for tax purposes of capital cost of commercial buildings; no withholding taxes on interest and dividends; no net asset tax on funds (0.06 per cent net asset tax in Luxembourg); no Irish value-added tax and management or administration charges; and no capital duty on funds established as limited companies.
Ireland's double taxation treaty network covers 22 countries including South Korea, the United States, Sweden, Australia and Britain, as well as treaties with Russia, Nigeria and Greece under negotiation, and ensures favourable treatment with respect to profits accumulated in, or repatriated from, Ireland.
The Irish Government's attitude is fuelled by a high unemployment rate and a desire to discourage young graduates from emigrating abroad.
Indeed, one of the IFSC's main selling points has been the availability of well trained personnel.
Consequently, the central bank and government both show a very positive attitude, which is resulting in upcoming legislation aimed at increasing the number of fund structures available. Most notably the fourth quarter of this year should see legislationallowing the setting up of limited partnerships and close-ended investment companies.