Whether you’re saving for retirement, your children’s education, or simply wanting to get ahead in life, investing is a great way to grow your money. But it’s important to understand the risks and benefits of investing.
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The Irish economy has been opening up to foreign investment in recent years, thanks to a business-friendly government and a favorable tax regime. However, investors will need access to a substantial amount of spare capital in order to take advantage of the opportunity.
Ireland’s resilient business enabling regulatory environment and deep pool of talent are expected to continue attracting alternative fund managers, including those from the UK and US. This will further strengthen the country’s growing funds sector.
In addition, the country’s P2P lending market is gaining traction. This allows individuals to invest money into debt notes issued by Irish businesses that need funding. This type of diversification can help investors better ride out periods of volatility. However, it is important to research each opportunity carefully.
Capital Gains Tax
Ireland has a 33% capital gains tax (CGT). Gains are taxable based on the difference between the market value of an asset when disposed of and the purchase price, plus any expenses incurred in developing it.
CGT is not applied to gains arising from the disposal of your personal residence or to shares that qualify for the private residence exemption. Capital losses may be used to offset capital gains in the same year, or carried forward to future years.
There is no guidance available yet on how staking rewards or airdrop tokens are taxed. However, it’s likely that they will be treated as income based on their fair market value at the time of receipt. This would be similar to how mining profits are taxed in Ireland.
Those investing in Ireland may be liable to withholding tax on dividends received from non-resident companies. This is similar to a withholding tax on other kinds of earnings such as interest charges or royalties. Nevertheless, there are a number of exemptions. Scrip dividends, for example, are distributed in the form of extra share capital rather than cash. This can help reduce the impact of withholding tax.
The Irish economy is a magnet for international investors, thanks to a legal framework tailored toward business growth, favourable tax bands for individuals and companies, a treasure trove of natural resources and a renowned export market. But, as the global economic environment changes, these incentives will need to be reshaped. In our survey, respondents identified rising interest rates, the ongoing war in Ukraine and political instability as factors that could derail their investment plans for Ireland in 2023.
Tax-efficient investment vehicles
In recent years there has been a spate of tax changes at local, EU and OECD/global levels aimed at reducing the opportunity for tax avoidance. These include anti-hybrid rules, interest limitation rules and exit tax rules.
The anti-hybrid rules in ATAD require that hybrid financial instruments be taxable where the income is generated or where the debt is used and this is likely to impact a number of Irish securitization vehicles which use profit participation financing techniques.
Ireland is a popular domicile for Undertakings for Collective Investment in Transferable Securities (UCITS) and Alternative Investment Funds. There are a number of legal fund structures available including unit trusts, investment companies/PLCs, common contractual funds (“CCF”) and investment limited partnerships. The introduction of the new Irish corporate investment vehicle, the ICAV is eagerly awaited by global fund promoters.
Ireland’s enduring economic prosperity and global investment profile is a result of the country’s resilient economy, diversified economy and supportive regulatory and tax regime. It has a highly competitive cost base and is a top location for R&D investment, talent attraction and sustainability-related investments.
Foreign investors can easily invest in Irish equities via local exchange traded funds (ETFs). However, picking the right one is important, since different brokers offer different fees and market access for international markets.