Ireland

Country Name Ireland
Country Region Western Europe

Economic and Political Environment

The Banking Environment

There are only three significant banks in Ireland – Allied Irish Banks, Ulster Bank and Bank of Ireland.  Ulster Bank is a member of the Royal Bank of Scotland Banking Group (6th largest bank in the world) and has Branches and Business centres in both Northern Ireland & the Republic of Ireland.

Transaction banking in Ireland involves paper-based payments, mainly cheques, but there has been a recent, major and concerted effort by the Irish banks to reduce cheque usage.

Day-to-day operations bear major similarities to the UK.

There are no lifting fees on cross-border payments. Irish banks have introduced low-cost services in line with the EU Regulation if the payment is in EUR within the EU and the sender supplies the bank with the beneficiary’s IBAN and BIC. The banks have also introduced electronic banking services such that customers can only achieve low costs if their orders are submitted electronically. This is one of the measures to eliminate paper-based payments.

Current accounts are in wide use for working capital purposes; they can do overdrawn and also attract credit interest.

Foreign currency accounts are available in a large number of currencies including USD, GBP, JPY etc., and they can also go overdrawn and earn credit interest.

There is no distinction in the way accounts are run if the holder is a resident or non-resident, except on withholding tax (see below).

However, it is common practice – under the Irish authorities’ interpretation of KYC and Anti-Money Laundering Legislation – for them to require that the bank opening an account for a non-resident company obtain a legal opinion from the country of incorporation of that company, to confirm the existence, powers and good standing of the company.

All kinds of investment and borrowing instruments are available for longer-term engagements: savings accounts, short and long term deposits, treasury bills etc.

Cash Management Features

Ireland is a very open environment for cross-border business, but the domestic business – being like the UK – contains a large amount of payment traffic based on:

• Cash
• Cheques
• Cards
• Credit transfers
• Direct debit

So the level of automation achievable is reasonable but not complete.

Electronic banking tools are readily available to support the customer in managing activity.

There are few Ireland-imposed restrictions around the Liquidity Management structures that can be put in place, and Ireland has a wide network of favourable double tax treaties. Thus, not only is it feasible to locate a formal Treasury Centre in Ireland, it is also favourable to locate a concentration system of bank accounts there.

A Treasury Centre in Ireland would have the form of an IFSC company, which requires a licence. Most corporates clone their licence off the “coat-hanger” licences owned by the major banks. It is also common or the corporate to appoint the bank to run the operations of the Treasury Centre in outsource mode. The Irish authorities have laid down guidelines for this, whereby the corporate must pay a fee that equates to the cost of at least 1.5 bank employees, whether or not it requires this number to operate the Treasury Centre.

Withholding tax on dividends and interest is 20% - whether paid to a resident or to a non-resident but there are exceptions:

• Dividends paid to other Irish companies
• Dividends to companies ultimately controlled by a parent in another EU country
• Interest paid to an Irish parent that owns more than 51% of the payer
• nterest paid to Irish banks
• Dividends or interest paid to a resident of a country with which Ireland has an appropriate double-tax treaty

On that basis it is possible to avoid withholding tax except where an Irish resident company is receiving interest from an Irish bank.

The standard rate of corporation tax is 12.5% but there are exceptions mainly for foreign-owned based and depending on where and when the company set up:

• Some IFSC companies continue to pay 10% until 2005
• Some manufacturing companies have a rate of 10% until 2010
• Non-trading income is taxed at 25%

The standard VAT rate is 21% but there are also bands at 13.5% and 4.2% (livestock).

The arm’s-length transfer pricing principles apply, as laid down in OECD guidelines.

Interest paid by an Irish resident to a non-resident that owns 75% or more of it is treated as a dividend, unless the recipient is a resident either of an EU country or of a country with which Ireland has an appropriate double-tax treaty. Again, on the surface this is a block to thin capitalisation; in reality it isn’t.

Social security taxes for employers are 10.75% with no ceiling and from 1.1.2004 the computation will be based on wages and the value of fringe benefits as well.

None.

There are no foreign exchange controls.

The main instrument is the still the cheque, although usage is falling rapidly.

The other statistics demonstrate the efforts of the Irish banks to wean the clientele off cheques and cash:

• Massive percentage growth in electronic credit transfers
• Decline in paper credit transfers
• Large percentage growth in Direct Debits

As in the UK, cards and cash are also means of payment favoured by consumers.

Cheques are usually supported by the guarantee scheme based on the card which, as in the UK, is also a debit card. The guaranteed amount is EUR130.

There is no cheque truncation at the collecting bank i.e. prior to presentation in the clearing. 95% of cheques are however truncated at the paying bank end. There are no plans to introduce wider cheque truncation but rather to eliminate cheques.

In Ireland there are three clearing systems. The Irish Payment Services Organisation (IPSO) is an umbrella organisation for the clearing systems, and the Central Bank of Ireland is closely involved in their supervision.

The RTGS system is operated by the Central Bank. The Paper and Retail clearings are operated by individual companies, the shares in which are owned by the direct members of the clearing.

IRIS is Ireland’ RTGS system for processing large-value payments, mainly between banks. IRIS is run by the Central Bank.

IRIS is Ireland’s link into TARGET. It has 22 participants.

There is no minimum or maximum threshold amount.

Opening hours are the standard 07:00-17:00 CET for customer payments and an extra hour for interbank.

The IPCC system clears cheques and paper credit transfers.

It has only 6 members: the big three banks plus National Irish Bank, Permanent TSB and BNP Paribas.

Paper items are exchanged bilaterally between the operations centres of the members. The amounts of each exchanged are communicated to IPSO. Twice a day IPSO totals he traffic between each pair of members and calculates the difference. It then informs the party that owes more than it received for it to pay the other party, in IRIS. So, at each cycle there are 15 IRIS payments made (unless the total of any bilateral exchange is exactly zero).

The value-dating is:

• Credit and debit on D+1 if both accounts are in the same bank
• Credit and debit on D+3 if not

It is possible to arrange a same-day payment by cheque if the debit and credit accounts are both in central Dublin and the cheque is for over EUR635,000. A special presentment is arranged on the debit bank and it has to make an IRIS payment to clear the cheque.

IRECC operates in exactly the same way as IPCC – bilateral exchanges totalled twice a day by IPSO and resulting in IRIS payments. IRECC imposes no maximum payment size.

The normal cycle is that items introduced on D clear on D+2.

The Irish banks permit several ways of initiating these, trying to squeeze out the paper versions.

Browser-based eb systems are offered for retail and small business, and file import and host-to-host solutions for corporates.

A company using direct debits has to set a scheme up with its bank in order to be authorised to do so. Then, each debtor has to sign a mandate which is given to the creditor. The creditor lodges it with its own bank and then the mandate is copied to the debtor’s bank. Only when the debtor’s bank has registered that mandate will it pay on a direct debit.

Individual debits do not have to be authorised, but the creditor has to inform the debtor in advance before presenting each claim: this can being the form of an annual schedule.

The debtor has the right to reclaim each debit through the banking system.

Debit, credit and charge cards are in wide usage. The ATM networks of banks are interoperable, and cross-bank operations are cleared through IRECC as direct debits. There is a large EFTPOS network and EFTPOS operations are introduced also into the IRECC to the credit of the retailer’s bank and the debit of the consumer’s. Operations to the debit of foreign cards clearly do not clear this way: they are introduced by the retailer’s bank into the card networks.

Visa and Access (i.e. Mastercard) are in wide circulation as credit cards, and Amex and Diner’s as charge cards.

There is no e-money scheme.

Electronic Banking

All kinds of companies make use of EB-systems, nearly all SME companies, mid-corporates and large corporates.

The banks offer their proprietary solutions for corporate electronic banking. Most are browser-based. Options also exist for file upload and host-to-host for higher volume users.

Liquidity Management

Ireland is a very friendly environment for Liquidity Management, due to lack of distinction between residents and non-residents, lack of withholding tax, the wide network of double tax treaties, and the absence of lifting fees and Central Bank Reporting.

All systems ZBA, Notional Pooling and Interest Enhancement are allowed, but Zero Balancing is most widely used.

The main issue, given the continuing need for the handling of paper instruments and possibly cash as well, is keeping the day-to-day activity housed together with the treasury activity.

There are only six members of IRECC and IPCC and if the construction is to keep day-to-day activity with one or more of those banks and Liquidity Management with another, there will be a number of cross-bank transfers. These will have to be done through IRIS at increased cost, since concentration via IRECC has to be done for value D+2.

The better construction is to keep day-to-day activity housed together with the treasury activity in one of the main banks, and then to mesh Ireland into a regional scheme.

Legal Entity types that exist in the corresponding country

Ireland Legal Entity Types - Mainstream

Ireland Legal Entity Types - Non-mainstream

Other legal entity that exist: