Note: Please refer to the future of 10% Corporation Tax rate in Section 7.7.

6.1

IFSC - DUBLIN

In 1987 legislation was introduced to establish the IFSC in Dublin, and to introduce a special 10% rate of corporation tax for business carried on in the Centre. Over 300 major companies from around the world have established there. Companies establishing in the IFSC require a certificate from the Minister for Finance before they will be eligible for a 10% tax rate on their income arising from certified trading activities.

Generally a certificate will only issue in respect of a trading operation, provided (a) it is carried on in the IFSC and (b) the Minister is satisfied that it will contribute to the IFSC as an international financial services centre and that it falls within one or more of the following classes of trading operations:-

(a)the carrying on, on behalf of persons not ordinarily resident in Ireland, of services in relation to transactions in foreign currencies, which are of a type normally provided by a bank in the ordinary course of its trade;

(b)the carrying on, on behalf of persons not ordinarily resident in Ireland, of international financial activities, including in particular:

(i)global money management;

(ii)international dealing in foreign currencies and in futures, options, bonds, equities and similar financial assets which are denominated in foreign currencies;

(iii)insurance and related activities;

(iv)dealing in commodity futures or commodity options;

(c)the provision, for persons not ordinarily resident in Ireland of services of, or facilities for, processing, control, accountancy, communication, clearing, settlement, or information storage in relation to financial activities;

(d)the development or supply of computer software for use in the provision of services or facilities of the type referred to at (c) above or for the reprocessing, analysing or similar treatment of information in relation to financial services; or

(e)trading operations which are similar to, or ancillary to, any of the operations described in the foregoing paragraphs, in regard to which the Minister is of the opinion that they will contribute to the use of the IFSC as an international financial services centre.

Although the financial services provided by companies in the IFSC are intended to be provided only to non-Irish residents, it may be possible to obtain permission to provide such services to other companies trading in the IFSC or in the Shannon Free Zone.

It is normally a term of a certificate that losses generated by a 10% company trading in the IFSC may only be offset against profits which would otherwise be taxed at the 10% rate.

In addition to the reduced rate of corporation tax, the following incentives are available:-

  • remission for rates (a form of property tax) for a period of 10 years;
  • tax allowance of double the rent actually paid for a period of 10 years;
  • 100% allowances on capital expenditure on commercial premises in the IFSC.
  • no withholding taxes on dividends and interest

Certificate

In making an application for a certificate to trade within the IFSC the following information is required:-

Promoters

General information on the promoters outlining size, history, performance and principal shareholders. Recent Profit and Loss Accounts and Balance Sheets should also be provided. In the case of individuals and start-up operations, information should be provided on the promoters' track record in the proposed financial services activity.

Proposed International Financial Services Activity

Details of the proposed activity/service, including a technical description of the activity for which a certificate is sought.

Marketing Information and Plans

Details of the demand for the services in proposed markets and the expected growth of these markets. Details on competitors and of the advantages the project will have over competitors. Details on the marketing plans for the project.

Accommodation and Facilities

An outline of office space requirements, whether this will be rented or purchased and details, where relevant, of interim arrangements for the period prior to transferring to the IFSC. Proposed investment in equipment (office equipment/work stations) and details of any special facilities required.

Management and Staffing

Details of organisation, structure, management and special skills requirements.

Financial/Capital Structure

Details on financing requirements and how these will be funded (share capital, loans etc).

Projections

Detailed projections of Profit and Loss Accounts and Balance Sheets for the first three years and of the realistic full potential of the project.

Contribution to the Irish Economy

Details of:-

  • contribution of the project to the development of the IFSC
  • potential for employment
  • demand for local services
  • other benefits of the proposed project

All initial enquiries should be directed through the IDA which has been given the task of marketing the IFSC throughout the world. The Irish government is determined to ensure that the IFSC is not perceived as a "brass plate centre", hence it is necessary for detailed proposals of projects of economic substance to be submitted. Employment is seen as an important, but not necessarily a key factor in considering any application.

6.2

REGULATION - IFSC

The Central Bank Act 1989 provides that the Central Bank will perform a supervisory role over the activities of companies carrying on business within the IFSC. The legislation contemplates the establishment of self-regulatory organisations but does not attempt, unlike the Financial Services Act 1986 of the United Kingdom, to legislate in detail for the rules and functions of such organisations. It leaves a certain amount of flexibility to the Central Bank.

This article is intended to provide general guidelines. Specialist advice should be sought about specific facts.