Finance Bill 2012 was signed into law by President Higgins on 31 March 2012 and has now been enacted as Finance Act 2012. It contains a number of favourable provisions for the financial services industry which should continue to enhance Ireland’s fund offering. In particular, the Finance Act contains provisions whereby no Irish tax charge will arise on funds re-domiciling to Ireland on cross-border funds mergers involving Irish funds. Similar stamp duty changes were introduced, providing for an exemption on the merger of an Irish fund into a foreign fund and an exemption from Irish stamp duty where Irish assets are transferred on a reorganisation or a merger of two funds located in an EU country, or country with which Ireland has a double tax treaty. An exemption has also been introduced for the transfer of a foreign property in exchange for the issue of units or shares in an Irish regulated fund and for the transfer of assets between an Irish exempt unit trust and an Irish fund. The latter amendment in particular should facilitate the change of status of exempt unit trusts into regulated corporate Irish funds, a more attractive proposition for foreign institutional and pension funds.
As announced in Budget 2012, the rate of tax on payments to Irish investors by Irish funds increased to 30% and 33% for regular distributions and other distributions respectively. However, in the case of Irish corporate investors, this rate has been reduced to 25% following the Committee Stage amendments. This change should simplify the corporation tax compliance process for corporate investors who, from 1 January 2012, will no longer need to reclaim the tax imposed above 25% in respect of these investments. This also applies to payments received from funds located in the EU, EEA or OECD countries, with which Ireland has a double tax treaty where that fund is similar to an Irish regulated fund.
A technical charge to Irish tax on the disposal of units in an Irish fund other than by way of redemption has been removed. This typically applied in relation to Exchange Traded Funds (ETFs), as such investors do not transact directly with the investment undertaking. This amendment should assist in cementing Ireland’s reputation as location of choice for ETFs.
The administration procedures in respect of certain offshore funds redomiciling to Ireland have been simplified. The fund will no longer be required to obtain declarations of non-Irish tax residence from each investor in the fund. Instead the re-domiciled fund may make a declaration that at the date of redomiciliation to Ireland no units were held by Irish tax residents. This provision applies to funds from certain offshore jurisdictions including Cayman Islands, Bermuda, Guernsey, Jersey and the Isle of Man.