US Outbound Investment

US Outbound Investment

Denise Magyer Senior Vice President Allied Irish Bank

Agenda AGENDA 3

U.S.Outbound Investment US Outbound Investment = Foreign Direct Investment (FDI) U.S. Outbound Investment: Why Choose Ireland?

U.S. Ireland Source: America Ireland Chamber of Commerce US-Ireland Business 2017 U.S. Outbound Investment: Why Choose Ireland?

Evolution of FDI in Ireland Source: IDA Ireland Strategy, Horizon 2020 A range of services and incentives, including funding and grants, are available to those considering foreign direct investment in Ireland. These are offered by IDA Ireland, Ireland s inward investment promotion agency, to both new and existing clients. www.idaireland.com U.S. Outbound Investment Why Choose Ireland?

Survey Results 86% of companies stated that access to Europe was critical or important REASONS FOR SETTING UP IN IRELAND See our Sector Report, "Why Choose Ireland?" at www.aibcorporate.ie Source: Ipsos MRBI AIB Foreign Direct Investment Research February 2014 U.S. Outbound Investment: Why Choose Ireland?

Access to the European market ECONOMIC SIZE PER CAPITA WEALTH LARGE MARKET FOR US GOODS/SERVICES CHINA $21.3 trillion EU $19.2 China $11,000 US $18.6 INDIA $8.7 JAPAN $ 4.9 EU $35,000 Source: Cia WORLD FACT BOOK U.S. Outbound Investment: Why Choose Ireland?

Export Propensity Access to the 500m people in Europe US affiliate sales of goods and services in Ireland totaled $343 billion in 2015 > Greater than US affiliate sales in China ($165bn) and Japan ($108bn). The reason: Export-Propensity. Ireland ranks the number one export platform in the world for U.S. affiliates underscoring the importance of Ireland in the global value chains Source: Bureau of Economic Analysis 2016 based on most recent data U.S. Outbound Investment: Why Choose Ireland?.

Ease of Doing Business 1 Source: Ipsos MRBI AIB Foreign Direct Investment Research February 2014 U.S. Outbound Investment: Why Choose Ireland?

Education = Talent in Ireland Young, well educated and productive workforce Youngest population in Europe. Currently 1m people in full time education. ICT skills strategy is driving significant increases in graduates with an increase of 70-110% by 2018. Multi-lingual capabilities. Source:: IDA Ireland is the only English speaking workforce in the Eurozone U.S. Outbound Investment: Why Choose Ireland?

Tech Clusters: Dublin

Tech Clusters: Galway

Track Record

Time Zone

Tax Regime Corporate tax rate of 12.5% for active business. 25% Research & Development (R&D) Tax Credit An Intellectual Property (IP) regime which provides a tax write-off for broadly defined IP acquisitions. Attractive relief for staff assigned from abroad, key staff working in R&D. Our core offering is a competitive, businessfriendly regime with a rock solid commitment to the 12.5% corporation tax rate Update on Ireland s International Tax Strategy 2016 Minister of Finance, Michael Noonan, TD

Why are Companies using Ireland? Supply Chain Management Headquarters & IP Management High Value Manufacturing Global Business Service Centers Research, Development & Innovation

Expansion into EMEA Markets Tax efficient supply chain management Arm s length pricing and transfer pricing Operational substance in Ireland Corporate restructuring and inversions into Ireland

IRELAND as a Treasury Location IRELAND AS A TREASURY LOCATION Ireland also represents a very attractive and sustainable solution as a corporate treasury center/ group bank. The taxation of interest / treasury income at 12.5% is not targeted by BEPS. 12.5% on treasury trading profit Transparent tax regime aligned to BEPS Extensive tax treaty network & EU Directives Dedicated securitization regime Unilateral credit for foreign withholding taxes Ireland is not a hybrid haven. The taxation of interest / treasury income at 12.5% rate should meet minimum taxation level of unilateral interest base erosion measures. WHT exemption on interest & dividends No CFC or thin capitalization rules OECD based transfer pricing regime No capital duty on shares / loan issuances Published guidance on treasury activities 21 Source: EY U.S. Outbound Investment: Why Choose Ireland?

Case Study: The existing business model had many issues and opportunities IP License IP Ownership USP Sales Physical flow & Title US Customers RM Purchases Italy Physical flow & Title Sales Italy Customers Suppliers France France Customers Spain Spain Customers Key to flows: Legal title Physical flow Services Full-fledged entrepreneurs: procurement, manufacturing, distribution, marketing, sales, backoffice support, etc.

Real Life Case Study: Centralized model Suppliers Cost-sharing for ROW IP rights RM Title IP Ownership USP IrishCo FG Sale - Mkt price less commission CM fee FG Sale - mkt price Finished good shipped Italy France Spain US Customers RM Physical flow FG Sale mkt price Key to flows: Legal title Physical flow ROW Customers Services

Intellectual Property Exploitation Why choose Ireland for IP? Legal framework for IP protection Taxation at 12.5% on trading profits of an active brand management trade Effective tax rate can be as low as 2.5% Amortization for tax purposes R&D credits: close to 40% on the dollar for qualifying R&D spend Ireland: A Platform for Expansion into Europe 24

IRELAND as an IP Location Ireland has a very favorable IP regime with a number of large MNE s already choosing to locate their non-us IP in Ireland. Tax amortization available for acquired IP Extensive tax treaty network & EU Directives 25% refundable R&D tax credit Source: EY The royalty income received should be taxable at the 12.5% provided the company has substance in Ireland is actively carrying on an IP type trade. A deduction for tax amortization on acquired IP and interest on borrowings also available which can reduce the company s cash tax rate below the standard 12.5% rate and 0% rate is possible. Currently seeing a huge amount of interest in Ireland as an IP location. 12.5% on IP trading profit WHT exemption on outbound royalties payments Tax free exit available on migration U.S. Outbound Investment: Why Choose Ireland? Credit available for WHT on inbound royalties Interest deduction on borrowings used to acquire IP New OECD compliant patent box No stamp duty on the acquisition of IP 25

Ireland is NOT a Tax Haven. The OECD has identified four key indicators of a 1. No or nominal taxes Ireland s corporate tax rate is 12.5% 2 Lack of transparency Ireland s tax regime is fully transparent based on legislation 3. Unwilling to exchange Ireland exchanges information through Tax information tax haven Treaties, Information Exchange Agreements, EU Savings Tax Directive and (proposed) FATCA); 4 No substance requirement The 12.5% tax rate applies to trading activities only which require substance None of which apply to Ireland

Base Erosion Profit Shifting BASE EROSION & PROFIT SHIFTING (BEPS) What Is BEPS?. Tax planning strategies that exploit gaps and mismatches in tax rules that artificially shift profits to low or no-tax locations where there is little or no economic activity, resulting in little or no overall corporate tax being paid Stated simply, BEPS arises because under existing rules, it is possible for companies to artificially separate taxable profits from economic activities and value creation Raffaele Russo, Head of BEPS project 27 Source: OECD U.S. Outbound Investment: Why Choose Ireland?

What is BEPS All About? 28 Source: EY U.S. Outbound Investment: Why Choose Ireland?

A Message From Ireland s Finance Minister: Ireland is committed to the BEPS project Country by Country reporting has been implemented Transparency: Committed to the highest international standards Review of Ireland s tax code in 2017 budget Source: Address by Minister Michael Noonan TD to Irish Times International Tax Event 1/24/17 U.S. Outbound Investment: Why Choose Ireland? 29

BEPS impact on Ireland Ireland likely to be the go-to jurisdiction since it already requires substance and has a competitive tax rate. Ireland s Knowledge Development Box was created in accordance with the OECD guidelines. Multi-national companies operating in different jurisdictions will have increased compliance costs. 30 Source: AIB, EY U.S. Outbound Investment: Why Choose Ireland?

BEPS impact on Treasury Action 14: Making dispute resolution mechanisms more effective Action 15: Develop of a multilateral instrument for amending bilateral tax treaties Action 11: Establish methodologies to collect and analyse data on BEPS and actions addressing it Action 12: Require taxpayers to disclose their aggressive tax planning arrangements Action 13: Re-examine transfer pricing documentation Action plan on Base Erosion and Profit Shifting (BEPS) Action 8: Consider transfer pricing for intangibles Action 9: Consider transfer pricing for risks and capital Action 10: Consider transfer pricing for other high-risk transactions Action 1: Address the tax challenges of the digital economy Action 2: Neutralise the effects of hybrid mismatch arrangements Action 3: Strengthen CFC rules Action 4: Limit base erosion via interest deductions and other financial payments Action 5: Counter harmful tax practices more effectively, taking into account transparency and substance Action 6: Prevent treaty abuse Action 7: Prevent the artificial avoidance of permanent establishment status 31 Source: EY U.S. Outbound Investment: Why Choose Ireland?

BEPS impact on Treasury Action 14: Making dispute resolution mechanisms more effective Action 15: Develop of a multilateral instrument for amending bilateral tax treaties Action 11: Establish methodologies to collect and analyse data on BEPS and actions addressing it Action 12: Require taxpayers to disclose their aggressive tax planning reporting arrangements Action 13: Re-examine transfer pricing documentation Source: EY Double taxation due to conflicting jurisdictions? Increased requirements & audits Action plan on Base Erosion and Profit Shifting (BEPS) Transfer pricing calculations; impact on intercompany financings Action 8: Consider transfer pricing for intangibles Action 9: Consider transfer pricing for risks and capital Action 10: Consider transfer pricing for other high-risk transactions U.S. Outbound Investment: Why Choose Ireland? Action 1: Address the tax challenges of the digital economy Impact sales tax payments- where collected and paid Action 2: Neutralise the effects of hybrid mismatch arrangements Action 3: Strengthen CFC rules Action 4: Limit base erosion via interest deductions and other financial payments Interest deductions & Withholding tax Action 5: Counter harmful tax practices more effectively, taking into account transparency and substance calcs; Req. for substance and shift of trading activity Action 6: Prevent treaty abuse Action 7: Prevent the artificial avoidance of permanent establishment status 32

Ireland: Other considerations Brexit US Tax Reform The Apple Case 33 U.S. Outbound Investment: Why Choose Ireland?

It s Important to Have a Vision for Your Business Initial expansion planning decisions can have long-term impacts Each business decision drives tax consequences and opportunities What are my financial & regulatory requirements How will I mange foreign currency issues What do I do with cash builtup off-shore What are my income/indirect tax obligations Treas Cash AP Risk Global Business Model AR Legal Mfg What location(s) should I be in Proc IT Sales Fin Acctg What should my legal structure be How do I exploit my Intellectual property How do I fund ongoing R&D How will I distribute finished goods How will I sell & conclude sales outside the US How/where will I bill and collect from clients If/where/how should I manufacture products Anticipating and planning for each decision may help avoid unfavorable default decisions which may negate benefits on an after-tax basis U.S. Outbound Investment: Why Choose Ireland?

Some thoughts Be aware of OECD work in progress/areas of focus Choose a structure that best fits your company s risk profile. Hire the appropriate team of consultants and advisors

Questions

The Irish Advantage It is the combination of factors Highly skilled, knowledge based economy Flexibility, responsiveness & innovation Experience delivering Global Business Services Experienced & Innovative Leaders Excellent Research facilities & capabilities Stable political environment & Respected regulatory regime Irish Government partnering 12.5% CT & extensive tax treaty network The Irish Advantage Unique mix of components Source: IDA Ireland

Fun Facts FUN FACTS Ireland produces: % of the world s contact lenses %of ventilators used in acute hospitals worldwide % of the world s stents % of the world s Botox # of Jelly Beans daily % of the world s Tic Tacs 1 in burgers served in European McDonalds is made with Irish beef Driver vision systems technology is manufactured in Galway which can park your car without you being in it.

Contacts Denise Magyer Senior Vice President Allied Irish Bank 1345 Avenue of the Americas 10 th Floor New York NY 10105 212-339-8170 denise.magyer@aibny.com