Ireland

Introduction

 

About Ireland

Ireland's economy is driven by high-tech sectors and services while being dependent on trade and investment for its success. It is the most competitive country and the only English-speaking country in the Eurozone. Ireland also has the youngest population amongst all the EU countries with one-third of its population under 25 years old, therefore providing Ireland with a significant labour force compared to other EU countries.

Ireland features pro-business policies including a stable tax regime and tax treaties with 72 countries. Ireland is ranked first in the EU and sixth in the world for the ease a business can pay its taxes. Other benefits include no exchange control, capital grants and interest subsidies. Ireland also has technology parks in several major cities to host advanced manufacturing projects and boost innovation.

With Ireland's proactive stance towards hosting innovation, Ireland supports a wide range of world-leading Chinese companies' operations in the country. China is also Ireland's second largest agri-food export destination.

What solutions are available in Ireland?

Solution Description
Treasury Centres A centralised treasury is one way to reduce the tax burden, centralise risk management, improve liquidity and enhance yield on cash.
Interest Optimisation Maximise your interest yield from for your balances held with the bank.
Notional Pooling Cash balances in different accounts are notionally offset to derive the net balance, which is then used to calculate interest.
Sweeping/ Zero Balance Account (ZBA) ZBA are checking accounts with zero balances where funds are physically swept to eliminate excess balances and maintain greater control over disbursements.
In-house Banks (IHB) In-house banks provide corporate treasurers with another method of centralising and consolidating their business.
Intercompany loans Similar to bank loans, intercompany loans refer to lending between entities within the same group.

Corporate Treasury in Ireland

Ireland is one of the founding members of the European Union. Its economy is focused on high-technology industries and the services sector. Here, we highlight some of the key benefits relevant to treasury and cash management in Ireland.

 

Financial Market Development

  • The World Economic Forum ranks Ireland 61st in the world for financial market development in The Global Competitiveness Report 2015-2016.

  • It ranks Ireland 126th in the world for the soundness of its banks, with access to financing highlighted as the main challenge of doing business in the country.

  • Ireland has good business infrastructure, a highly educated English-speaking workforce and a sound legal environment.

  • There are no foreign-exchange controls in Ireland.

 

Sophistication of Banking Systems

  • There are 58 banks in Ireland, of which 33 are branches of foreign banks, with the sector dominated by four large banks. Three of the country's banks required government assistance during the Global Financial Crisis.

  • Ireland's foreign exchange market has an average daily turnover of USD 2 billion (Bank for International Settlements triennial global survey 2016).

  • Ireland has a well-developed debt market with a wide-range of both government and corporate bonds available.

 

Regulatory Bodies

  • The banking industry is regulated by the Central Bank of Ireland. As a Eurozone country it is also covered by the Single Supervisory Mechanism.

 

Tax

  • The corporate income tax (CIT) rate is 12.5%. A higher rate of 25% is charged on income from business carried out wholly outside Ireland, and on income from land dealing, mining and petroleum extraction. An additional profit resource rent tax of 25% to 40% applies to certain petroleum activities.

  • Resident companies pay tax on their worldwide income. Non-resident companies are taxed on trading profits of an Irish brand or agency and certain Irish-sourced income. There is no withholding tax (WHT) on the repatriation of branch profits to the head office.

  • VAT is charged at 23%. Certain goods and services qualify for a reduced rate of 9% or 13.5%, and some are zero-rated or exempt.

  • Stamp duty is charged at 2% on the transfer of non-residential property, including business assets such as goodwill, debtors and contracts, and 1% in the transfer of shares.

  • Capital gains tax is charged at 33%, with rates of 25% or 40% charged in certain circumstances. Some exemptions are available.

  • Interest income is taxable at 25%. Interest expenses can be deducted if the borrowing is used for trade or certain non-trading assets.

  • Ireland has favorable tax treatment for cash-pooling activities. Under a typical cash-pooling arrangement, interest payments by the Irish cash-pool leader typically constitute ‘short’ interest for tax purposes. Tax deductions for interest payable to a group company resident outside of Ireland are available.

  • For entities known as 'Section 110' companies, namely Irish-resident special-purpose companies that hold and/or manage qualifying assets and meet a number of conditions, a corporation tax rate close to zero is available.

  • Foreign-tax credits are available for foreign taxes paid by an Irish company.

  • For resident companies, there is no WHT on dividends. WHT of 20% is charged on interest. Non-resident companies are charged WHT of 20% on both interest and dividends. Where a tax treaty is in place, rates range from 0% to 15%. WHT exemptions are available.

  • Ireland has tax treaties with more than 70 countries and territories.

  • Ireland is a signatory to the Organisation for Economic Co-operation and Development's Multilateral Competent Authority Agreement, through which information is exchanged between tax administrations, to provide a single, global picture on some key indicators of economic activity within multinational enterprises.

     

Benefits for Regional Treasury Centres

  • Ireland is a popular location for cash pooling and treasury activities due to its low corporate tax rate.

  • It offers favorable tax treatment for cash-pooling activities.

  • Corporate treasury activities may be structured as stand-alone or agency operations.

  • Ireland is a popular location for shared service centres due to its highly skilled workforce and strong government support.

  • Ireland is positioning itself as an alternative European financial centre for when the UK leaves the European Union.

  • Most forms of cash concentration and notional pooling are available in Ireland on a domestic and cross-border basis.

  • Ireland is a member of the pan-European TARGET2 real-time gross settlement system.

  • Ireland has an extensive tax treaty network, and offers foreign tax credit relief on countries not covered by this network.

  • Ireland is a Eurozone country with trading hours that overlap with Asia, Europe and North America.

 

Banking

 

Banking System

  • There are 464 credit institutions, which include 438 foreign banks and representative offices of foreign banks and 20 commercial banks.

  • Ireland's largest banks are the Bank of Ireland and the Allied Irish Bank (AIB), which are both partly government-owned (13.95% and 99.83%, respectively) followed by the Ulster Bank, which operates as part of Royal Bank of Scotland due to various bank acquisitions.

  • Ireland was one of the hardest-hit European countries in the 2008 global financial crisis and its banking sector suffered badly. The country's three major banks at the time were part of a strategic restructure of Ireland's banking sector: AIB and Permanent TSB were nationalised and the Bank of Ireland was rescued. It received a European Union-International Monetary Fund rescue package in 2010 and since has fully recovered.

  • There is speculation that some major international banks are considering relocating part of their operations to Ireland after the UK has left the European Union.

     

Bank Accounts

  • Residents may hold foreign- and domestic-currency accounts both domestically and overseas. Domestic-currency accounts are fully convertible into foreign currency.

  • Non-residents may hold foreign- and domestic-currency accounts both domestically and overseas. Domestic-currency accounts are fully convertible into foreign currency.

  • Interest is not available on all current accounts.

     

Legal and Regulatory

  • The Central Bank of Ireland (Central Bank) is an autonomous institution and a member of the European System of Central Banks (ESCB).

  • The European Central Bank (ECB) supervises banks within the Eurozone that are regarded as 'significant' through the Single Supervisory Mechanism (SSM), and other 'less significant' banks are supervised by the national central bank, such as the Central Bank.

  • A company is resident if it is incorporated in Ireland or is effectively managed or controlled in Ireland.

  • Ireland has anti-money laundering and counterterrorism financing legislation in place, and follows European Union (EU) anti-money laundering directives.

  • There are no foreign-exchange controls in place.

  • Ireland has set up a financial intelligence unit, An Garda Siochana/Bureau of Fraud Investigation (GBFI), which is a member of the Egmont Group.

 

Payment

 

Payment Systems

TARGET2-IE

Ireland's national pan-European TARGET2 Real-time Gross Settlement (RTGS) system

  • Operates on behalf of the Eurosystem.
  • Three Eurosystem central banks, Banca d'Italia, Banque de France and Deutsche Bundesbank, provide the Single Shared Platform (SSP) of TARGET2.
  • 14 direct participants and nine indirect participants
  • Processes high value (no maximum value threshold) and urgent EUR-denominated domestic and cross-border credit transfers.
  • Activates final settlement of participants' net balances from the IPCC and STEP2.
  • Settles transactions same day and with immediate finality.
  • Final settlement done across participant banks’ correspondent accounts at the SSP.

STEP2

European Automated Clearing House (ACH)

  • Operated by the Euro Banking Association (EBA).
  • 59 member-bank participants and four direct participants
  • Processes low value, non-urgent and bulk EUR-denominated domestic and cross-border Single Euro Payments Area (SEPA) credit transfers and direct debits (there is no value threshold).
  • The payment cycle takes two days and is a single date value system for settlement next day (when payment is submitted before cut-off time).

 

IPCC

(Irish Paper Clearing Company Ltd)

Paper-based and cheque-clearing system

  • Operated by the Banking & Payments Federation Ireland and supervised by the Central Bank.
  • EUR-denominated cross-border payments are done through the EBA's EURO1 (Ireland has two participant banks), STEP1 or STEP2 payments systems.
  • A pan-European real-time infrastructure for EUR-denominated transactions is under development by EBA Clearing (which operates EURO1, STEP1 and STEP2) and Italy's SIA Group (which is an operator for STEP2).
  • Cross-border transactions can be processed through SWIFT and overseas correspondent banks.
  • Clears paper-based and cheque payments through daily bilateral exchange between participant banks.
  • Final settlement done through TARGET2-IE.
  • Seven direct participants (BNP Paribas, Dublin branch, is the clearing agent for the participant banks).
  • Settlement done within three days, whereby beneficiary bank receives funds on day two and debited bank has funds withdrawn on day three.
  • Same-day value cheques are available for significantly high values through 'special presentation'. Only key banks' branches in Dublin have this service available.

 

SEPA

(Single Euro Payments Area)

EU integrated-payment infrastructure

  • Pan-EU standardised electronic payment system, set up for settlement of EUR-denominated credit transfers and direct debits.
  • Not applicable to urgent, high-priority transactions. There is no value threshold.
  • Jurisdictional scope of SEPA is the 28 EU member states plus Iceland, Norway, Liechtenstein, Switzerland, Monaco and San Marino.

 

 

 

Payment Instruments

 

Credit transfers

  • Can be automated or paper-based, although the large majority of credit transfers are automated. Credit transfers are used increasingly as paper-based payments are in decline.

  • High-value and urgent transfers are settled through TARGET2-IE in real time.

  • Low-value and non-urgent SEPA transfers are settled same day through STEP2.

  • The SEPA Credit Transfers (SCT) scheme is used for retail transactions and is available for urgent and high-priority payments (no maximum threshold) within the SEPA.

  • Used for payroll, supplier and third-party transactions.

     

Direct debits (auto-debits)

  • Used for low-value, regular transactions such as utility bills.

  • The SEPA Direct Debit (SDD) scheme is used for urgent and high-priority retail payments (no maximum threshold) within the SEPA. It is mandatory for all banks in the Eurozone to offer SDD facilities, and banks outside of the Eurozone are required to accept SDD transactions.

  • SEPA SDD transactions cleared same day through STEP2.

 

Cheques

  • Cheques are a common form of cashless payment, almost double the average usage in the EU. However, cheque usage is being fast-outpaced by electronic transactions.

  • Used for high-value, one-off and supplier retail and commercial payments.

  • Government, state and local authorities do not accept cheques.

  • Cheques are cleared through IPCC and final settlement is done through TARGET2-IE. There is a stamp duty of EUR 0.50 levied on all cheque transactions.

     

Card payments

  • Payment cards are becoming increasingly popular, especially debit cards.

  • The main payment card brands are Visa and MasterCard, with American Express and Diners Club credit cards also in circulation. All payment cards are SEPA- and Europay, MasterCard and Visa (EMV)-compliant.

  • Clearing and settlement is handled by individual banks which operate their own arrangements.

  • There were 2,640 ATM and 38,680 POS terminals at the end of 2015 (Association for Financial Professionals). All are EMV-compliant.

     

Other payment schemes

  • Reloadable prepaid payment cards are available such as Skrill, 3Money, Swirl and Payzone.

  • PostFX MasterCard® Currency Card is offered by Ireland's main postal service provider, An Post. The currency card can be used at ATMs and retail outlets globally where MasterCard payment cards are accepted.

 

Demographics

 

Recent developments

 

Central Bank Launches FinTech Division

The Central Bank of Ireland  (CBI) has created a new FinTech division to focus on engaging with the industry and encouraging innovation. The move comes after research commissioned by the CBI found the absence of an accessible point of contact for firms at the central bank was holding back innovation. The new unit will have its own email address enabling FinTech firms to interact with it outside of more formal regulatory processes.

Read more about the development here

 

Ireland Joins European Blockchain Partnership

Ireland is one of 22 countries to sign up to the new European Blockchain Partnership. The partnership aims to avoid a fragmented approached towards the use of blockchain among EU members by sharing information and encouraging cooperation on technical and regulatory aspects of the technology. It also plans to explore the potential of blockchain to improve cross-border European services, such as VAT reporting, taxation, customs and business registries.

Read more about the development here

 

Consumers Warm Up to Contactless Payments

Contactless payments made by cards or mobile wallets accounted for one in four card transactions in Ireland during the second half of 2017, with a total value of EUR1.6billion, according to the Banking & Payments Federation Ireland. Total card payments rose by 20.4% year-on-year during the period, while one in three credit transfers took place through digital channels, such as the internet or mobile banking. Despite the increase, it is expected to be at least 2020 before card transactions overtake cash ones.

Read more about the development here

 

 

This Market Profile is brought to you by DBS. Get in touch with us for further insights on doing treasury in Ireland and take advantage of our innovative solutions to empower your business. Click here to find out more.

 

 

Sources: IMF World Economic Outlook database, October 2016; CIA World Factbook; Trading Economics; PwC

Please note that the information contained in this document, assembled based on information available and accurate as at July 2017, is of a general nature only and is subject to change whether for economic, political, social or other reasons.

 

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Last updated on 07 Jun 2018