Attitude toward Foreign Direct Investment
The Irish government actively promotes foreign direct investment (FDI), a strategy that has fueled economic growth since the mid-1990s. The principal goal of Ireland’s investment promotion has been employment creation, especially in technology-intensive and high-skill industries. More recently, the government has focused on Ireland’s international competitiveness by encouraging foreign-owned companies to enhance research and development (R&D) activities and to deliver higher-value goods and services.
The Irish government's actions have achieved considerable success in attracting U.S. investment, in particular. As of year-end 2014, the stock of U.S. foreign direct investment in Ireland stood at USD 311 billion, more than the U.S. total for China, India, Russia, Brazil, and South Africa (the BRICS countries) combined. There are approximately 700 U.S. subsidiaries currently in Ireland employing roughly 140,000 people and supporting work for another 250,000, out of a total of 1.98 million people employed in a labor force of 2.17 million. U.S. firms operate primarily in the following sectors: chemicals, bio-pharmaceuticals and medical devices, computer hardware and software, electronics, and financial services.
U.S. investment has been particularly important to the growth and modernization of Irish industry over the past 25 years, providing new technology, export capabilities, management and manufacturing best practices, as well as employment opportunities. U.S. firms in Ireland have
activities that span from the manufacturing of high-tech electronics, computer products, medical devices, and pharmaceuticals to retailing, banking, finance, and other services. In more recent years, Ireland has also become an important research and development center for U.S. firms in Europe, and a magnet for U.S. internet/digital media investment, with industry leaders like Google, Amazon, eBay/Paypal, Facebook, Twitter, LinkedIn, and Electronic Arts making Ireland the hub of their respective European, and sometimes Middle Eastern, African, and/or Indian operations.
U.S. companies are attracted to Ireland as an exporting sales and support platform to the European Union (EU) and other global markets, mainly the Middle East and Africa. Other reasons for Ireland’s attractiveness as an FDI destination include: a 12.5 percent corporate tax rate for domestic and foreign firms and simple tax regime, the quality and flexibility of the English-speaking workforce, availability of a multi-lingual labor force, cooperative labor relations, political stability, pro-business government policies and regulators, a transparent judicial system, transportation links, proximity to the U.S. and Europe, and the drawing power of existing companies operating successfully in Ireland (a "clustering" effect).
Conversely, factors that negatively affect Ireland’s ability to attract investment include: high labor and operating (such as energy) costs, skilled-labor shortages, eurozone risk, any residual fallout from Ireland’s ongoing economic and financial restructuring, sometimes-deficient infrastructure (such as in transportation, energy and internet/broadband), uncertainty in EU policies on some regulatory matters, and absolute price levels that are among the highest in Europe. The Irish government has expressed concern that energy costs and the reliability of energy supply could undermine Ireland’s attractiveness as an FDI destination. The American Chamber of Commerce in Ireland has noted the need for greater attention to a “skills gap” in the supply of Irish graduates to the high technology sector, and has also asserted that high personal income tax rates can make attracting talent from abroad difficult.
In December 2013, Ireland became the first country in the eurozone to exit an EU/ECB/IMF (Troika) bailout program. Compliance with the Troika’s terms came at a substantial economic cost, in the form of GDP stagnation, austerity measures and chronically high unemployment. The economy has since recovered and was the fasting growing economy in the EU in 2015, with a growth rate of 7.8 percent. Meanwhile, government initiatives to attract investment are helping to stimulate employment. With unemployment numbers dropping, there is a resurgent interest in Ireland as an investment destination. A number of recent successful sales of government bonds on sovereign debt markets appear to exemplify renewed international confidence in Ireland’s recovery.
Other Investment Policy Reviews
The Economist Intelligence Unit and World Bank's Doing Business 2015 provide current information on Ireland's investment policies.
Laws/Regulations on Foreign Direct Investment
One of Ireland's most attractive features as an FDI destination is its low corporate tax rate. Since 2003, the headline corporate tax rate for both foreign and domestic firms has been 12.5 percent. The tax regime is also relatively simple, as the reported effective tax rate is 12.4 percent. Ireland's headline corporate tax rate is among the lowest in the EU, and the Irish government continues to oppose proposals to harmonize taxes at a single EU rate. In October 2014, the government announced that firms would no longer be able to incorporate in Ireland without also being tax resident. Prior to this change, firms could incorporate in Ireland and be tax resident elsewhere and could use an arrangement commonly known as the “Double Irish” to reduce tax liabilities. The Irish government has indicated it will adhere to future decisions reached through the OECD’s Base Erosion and Profit Sharing (BEPS) discussions. The government implemented a Knowledge Development Box, effective in 2016, which is reportedly consistent with OECD guidelines.
All firms incorporated in Ireland are treated on an equal basis. With only a few exceptions, there are no constraints preventing foreign individuals or entities from ownership or participation in private firms/corporations. The most significant of these exceptions is that, as with other EU countries, Irish airlines must be at least 50 percent owned by EU residents in order to have full access to the single European aviation market. Citizens of countries other than Ireland and other EU member states can acquire land for private residential or industrial purposes. Under Section 45 of the Land Act, 1965, all non-EU nationals must obtain the written consent of the Land Commission before acquiring an interest in land zoned for agricultural use. There are many stud farms and racing facilities in Ireland that are owned by foreign nationals in such areas. No restrictions exist on the acquisition of urban land.
Ireland's judicial system is transparent and upholds the sanctity of contracts, as well as laws affecting foreign investment. These laws include:
The Companies Act 2014, which contains the basic requirements for incorporation in Ireland;
The 2004 Finance Act, which introduced tax incentives to encourage firms to set up headquarters in Ireland and to conduct R&D;
The Mergers, Takeovers and Monopolies Control Act of 1978, which sets out rules governing mergers and takeovers by foreign and domestic companies;
The Competition (Amendment) Act of 1996, which amends and extends the Competition Act of 1991 and the Mergers and Takeovers (Control) Acts of 1978 and 1987, and sets out the rules governing competitive behavior; and,
The Industrial Development Act of 1993, which outlines the functions of IDA Ireland.
The Companies Act, with more than 1,400 sections and 17 Schedules, is the largest-ever Irish statute, consolidating and reforming Irish company law for the first time in over 50 years.
In addition, there are numerous laws and regulations pertaining to employment, social security, environmental protection and taxation, with many of these keyed to EU Directives, and Ireland has a Foreign Account Tax Compliance Agreement (FATCA) agreement in force with the U.S.
All firms must register with the Companies Registration Office (www.cro.ie). As well as registering companies, the CRO also can register a business/trading name, a non-Ireland based foreign company (external company), or a limited partnership. A company registered under the Companies Act 2014 becomes a body corporate as and from the date mentioned in its certificate of incorporation. While the website permits online data submission, it must be supplemented by a paper copy with relevant signatures unless the company has already registered at www.revenue.ie (the tax collecting authority).
The following six government departments and organizations currently promote investment into Ireland by foreign companies:
The Industrial Development Authority of Ireland (IDA Ireland) has overall responsibility for promoting and facilitating FDI in all areas of the country, except the Shannon Free Zone (see below). IDA Ireland is also responsible for attracting foreign companies to Dublin's International Financial Services Center (IFSC). IDA Ireland maintains seven U.S. offices in New York; Boston, MA; Chicago, IL; Mountain View, CA; Irvine, CA; Atlanta, GA; and Austin, TX as well as multiple offices in Europe and Asia.
Enterprise Ireland promotes joint ventures and strategic alliances between indigenous and foreign companies. The agency also assists foreign firms that wish to establish food and drink manufacturing operations in Ireland. EI has four offices in the United States: New York; Austin, TX; Boston, MA; and Mountain View, CA.
Shannon Group (formerly the Shannon Free Airport Development Company) promotes FDI in the Shannon Free Zone (see description below) and owns properties in the Shannon region as potential green-field investment sites. Under the 2006 Industrial Development Amendments Act, responsibility for investment by Irish firms in the Shannon region was transferred from the Shannon Group to Enterprise Ireland. IDA Ireland remains responsible for FDI in the Shannon region outside the Shannon Free Zone.
Udaras na Gaeltachta (Udaras) has responsibility for economic development in those areas of Ireland where Irish (Gaeilge) is the predominant language and works with IDA Ireland to promote overseas investment in these regions.
Department of Foreign Affairs and Trade has responsibility for economic messaging and supporting the country’s trade promotion agenda as well as Diaspora engagement to attract investment.
Department of Jobs, Enterprise, and Innovation supports the creation of good jobs by promoting the development of a competitive business environment in which enterprises will operate with high standards and grow in sustainable markets.
Limits on Foreign Control and Right to Private Ownership and Establishment
There are no barriers to participation by foreign entities in the sale of state-owned Irish companies, as seen, for example, in the purchase by U.S. investors of shares of the formerly state-owned national airline Aer Lingus during its privatization. Residents of Ireland, however, may be given priority in share allocations to retail investors, as was the case with the state-owned telecommunications company Eircom when it was privatized in 1998. The government privatized Aer Lingus in 2005 through a stock market flotation but retained about a one-quarter stake in the airline. In 2015, the International Airlines Group (IAG) made purchased the government’s remaining stake in the airline.
Irish law does not prevent foreign corporations (registered under the Companies Act 2014 or previous legislation and known locally as a public limited company, or plc for short) from conducting business in Ireland. Any company incorporated abroad that establishes a branch must, however, file certain papers with the Registrar of Companies. A foreign corporation with a branch in Ireland will have the same standing in Irish law for purposes of contracts, etc., as a company incorporated in Ireland. Private businesses are not at a competitive disadvantage to public enterprises with respect to access to markets, credit, and other business operations.
Citizens of countries other than Ireland and other EU member states can acquire land for private residential or industrial purposes. Under Section 45 of the Land Act, 1965, all non-EU nationals must obtain the written consent of the Land Commission before acquiring an interest in land zoned for agricultural use. There are many equine stud farms and racing facilities in such areas that are owned by foreign nationals. No restrictions exist on the acquisition of urban land.
While Ireland does not have a formal privatization program, the government agreed in 2010, as part of its Troika bailout program, to privatize some of its state-owned and semi-state owned enterprises. The government nominated but has not yet sold some non-strategic elements of Ervia (formerly Bord Gais Eireann (BGE) - the gas supply company) while it also indicated that it may sell the electricity generating arm of Electric Ireland, the electricity supply company. (See “State-Owned Enterprises” below.)
Screening of FDI
There is no formal screening process for foreign investment in Ireland, though investors looking to receive government grants or assistance through one of the four state agencies responsible for promoting foreign investment in Ireland are often required to meet certain employment and investment criteria. These screening mechanisms are transparent and do not impede investment, limit competition, or protect domestic interests. Potential investors are also required to examine the environmental impact of the proposed project and to meet with Irish Environmental Protection Agency (EPA) officials.
The Competition Act of 2002, subsequently amended and extended by the Competition Act 2006, strengthens the enforcement power of the independent statutory agency, the Competition Authority. The Act also introduced criminal liability for anti-competitive practices, increased corporate liability for violations, and outlined available defenses. Most tax, labor, environment, health and safety, and other laws are compatible with EU regulations, and they do not adversely affect investment. Proposed laws and regulations are published in draft form for public comment, including by foreign firms and their representative associations. Bureaucratic procedures are transparent and reasonably efficient, in line with a general pro-business climate espoused by the government.
The Irish Takeover Panel Act of 1997 governs company takeovers. Under the Act, the “Takeover Panel” issues guidelines, or "Takeover Rules," which aim to regulate commercial behavior in the context of mergers and acquisitions. According to minority “squeeze-out” provisions in the legislation, a bidder who holds 80 percent of the shares of the target firm (or 90 percent for firms with securities on a regulated market) can compel the remaining minority shareholders to sell their shares.
There are no reports that the Irish Takeover Panel Act has been used to prevent foreign takeovers, and, in fact, there have been several high-profile foreign takeovers of Irish companies in the banking and telecommunications sectors in recent years. In 2006, for example, an Australian investment group, Babcock & Brown, acquired the former national telephone company, Eircom, and subsequently sold it to Singapore Technologies Telemedia in 2009. The EU Directive on Takeovers provides a framework of common principles for cross-border takeover bids, creates a level playing field for shareholders, and establishes disclosure obligations throughout the EU. The Directive was fully implemented through Irish legislation in May 2006, though many of its principles had already been enacted in the Irish Takeover Panel Act 1997.