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Ireland 2010 - A sound investment
For the international community, 2009 was certainly a challenging year, and Ireland was no exception. Financial markets continued to suffer in particular, with resulting implications for corporates and individuals alike. As the year came to a close however, the prospect of a return to economic growth began to emerge and we were left cautiously optimistic about what lay ahead for 2010.
During 2009, a number of important economic measures were adopted by the Irish Government. These included bank guarantee schemes to safeguard cash deposits, an interim budget to stabilise public finances and the formation of the national asset management agency (NAMA) to remove bad debts from the domestic banks. Various measures were also adopted from an Irish legal and tax perspective with the specific aim of ensuring that Ireland continues to remain a leading pro-business jurisdiction for the international investment community.
The introduction of a tax relief regime in 2009 in respect of capital expenditure on intellectual property was widely welcomed. Legislation to facilitate corporate migrations to Ireland was also well received as a direct response to the increasing number of foreign companies who had taken the decision to migrate. These developments, coupled with the passing of the Lisbon Treaty, served to definitively re-affirm Ireland’s place as a prime location for foreign direct investment.
For 2010, the new Finance Act has introduced a number of additional investment incentives against the backdrop of an increasingly competitive global market. Among the provisions are measures aimed at improving the tax treatment of dividends received by Irish resident companies to enhance Ireland’s holding company regime, as well as an extension of the tax relief regime for qualifying expenditure on intellectual property. In order to align Ireland with its main trading partners, the legislation has also provided for the formal adoption of transfer pricing rules in Ireland based on the OECD’s arm’s length principle. This proposal will strengthen the Irish tax base and provide assurance to foreign authorities of Ireland’s commitment to appropriate transfer pricing regulations.
Aside from the Finance Act, there are a number of other encouraging developments on the horizon. In terms of European based legislation, the Services Directive is being introduced with the aim of further breaking down barriers to the cross-border movement of service providers throughout Member States of the European Union. Closer to home, the proposed replacement of Irish Generally Accepted Accounting Principles by International Financial Reporting Standards (“IFRS”) could soon see the large scale adoption of global financial reporting standards in Ireland. Irish accountants are already familiar with IFRS and this, coupled with the proposed convergence of US accounting rules with IFRS, will further enhance Ireland as a location for establishing centralised accounting functions and other shared services centres in the future.
From an international business perspective, the Irish Government’s commitment to ensuring that Ireland remains a competitive and attractive location for foreign investment remained steadfast throughout 2009. Decisions were made with a view to ensuring that Ireland remains well-positioned as a location of choice for foreign investment. Many of the new announcements for 2010 are aimed at enhancing Ireland’s competitive edge, promoting business confidence and attracting new enterprises to Ireland. In addition, the Government continues to acknowledge the core importance of Ireland’s 12.5% rate of corporation tax, its position as a central part of the country’s economic brand and its significance to the country’s overall economic prosperity.
We are confident that Ireland’s appeal to foreign investors will continue and we look forward to continuing our work with you through 2010 and beyond.
Robert O'Shea, Corporate Partner and Head of the International Business Group.