Last year Ireland attracted 100 foreign direct investment (FDI) projects, placing it 11th in terms of the most attractive investment destinations in Europe, says Ian Collins, EY Ireland tax partner and head of innovation incentives.
“This is a very strong result in a competitive market, where slow economic growth, high inflation, energy-related challenges and a volatile geopolitical environment caused the first downturn in European FDI since the pandemic in 2020.”
US investment in Ireland is at an all-time high, says Paul Sweetman, AmCham chief executive.
“US MNCs [Multinational Corporations] across Ireland were directly employing 210,000 people and indirectly supporting a further 168,000 jobs. In 2022, US MNCs spent €41 billion in the Irish economy, a 32 per cent increase on the already significant €31 billion that was spent in 2021.”
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Increasing attractiveness
There is a 15 per cent floor on corporation tax for large multinationals, but most of the western world is above this, says Cillein Barry, Partner, Tax, KPMG In Ireland.
“While the tax rate is 15 per cent, tax incentives and credits can still be offered to groups and in this regard, Ireland had a welcome development of increasing the R&D tax credit to 30 per cent.
“The R&D credit has served us well and remains a vital tool in our competitiveness, however, many businesses cannot claim it due to the nature of their activities – we should challenge ourselves to think bigger to catch the wave of future investment in areas such as AI, semiconductors and the green economy. This can include a mix of grant/subsidy support (eg under the EU Chips Act) and targeted tax incentives.”
Regional awareness
Ireland remains a favoured location for international headquarters and global business services investments, with software and IT services being the biggest project creator, followed by business and professional services, says Collins.
“We also attract investment in key knowledge-intensive sectors including cleantech, renewables, AI, quantum computing, cell and gene therapy, and other forms of advanced personalised medicine.
“Several factors drive these knowledge-based investment areas, particularly our highly skilled talent base, competitive R&D incentives, a geographical location interposed between the US & AsiaPac markets, as well as being the only English-speaking country within the EU. In Ireland, Dublin, Limerick, Cork, Shannon, Galway, and Waterford are areas in which we have seen major investments taking place recently.”
Balanced outlook
A balanced regional development is crucial to the future sustainability of Ireland’s economy and continued inbound investment from the US, says Cian Kelliher, management consulting partner, KPMG in Ireland.
“Indeed, more than half of all jobs created by US multinationals in Ireland are in regional locations, reflecting the significant opportunities available for local businesses and potential employees across the country.
“The reasons why multinationals locate in our regions include our resilient economy, access to highly qualified and skilled talent, vibrant quality of life and the strength of our world-class educational institutions.”
World-class education
One of the key reasons why multinationals choose to locate in Ireland’s regional locations is the access to highly skilled talent, with 65 per cent of all working professionals in Ireland living in regional locations outside of Dublin, says Sweetman.
“Furthermore, the strength of the educational institutions in Ireland’s regional locations is a key competitive advantage when attracting US FDI. US MNCs across the country are collaborating with third-level education institutions, increasing the potential for research, development and innovation and future-proofing Ireland’s talent pipeline.”
Future focus
In Ireland, the IDA has adopted a regional state aid map that is valid through December 31st, 2027, says Collins.
“This map serves as a blueprint for allocating financial support and incentives to businesses that are willing to invest in regions outside the economically dominant areas of the major cities.
“Additionally, specific funding programs may be available to companies that choose to locate in these targeted regions. The overarching goal of these efforts is to foster regional development, create jobs, and reduce economic disparities within Ireland.
“By encouraging companies to move to or expand in regions other than the major cities, it is hoped this policy will stimulate local economies, improve the utilisation of regional talent and resources, and promote a more balanced and sustainable economic growth across the entire country.”