Amundi EFT relocation highlights attractiveness of Ireland as fund hub

Robert Dever and Conor Durkin of Pinsent Masons were commenting following the strategic move by Amundi, made in a bid to optimise tax efficiency. Amundi has moved the fund to Ireland in order to benefit from the more favourable double taxation treaty between Ireland and the US, according to a company spokesperson.

“The recently announced fund merger by Amundi follows a similar shift to Ireland by the French asset manager in 2023 and highlights the attractiveness of Ireland as a location for domiciling ETFs,” said Dever.

Ireland is the leading domicile for European ETFs, with Irish-domiciled ETFs representing more than 70% of the total European ETF market. This significant market share is a testament to Ireland's attractiveness as a hub for ETFs. One of the primary benefits of relocating EFTs to Ireland is the significantly lower withholding tax on US dividends. In Luxembourg, the withholding tax rate stands at 30%, whereas in Ireland, it is reduced to 15%. This reduction allows investors to benefit from higher net returns, making the fund more attractive.

In addition to this, there have been a number of recent regulatory developments that have enhanced the attractiveness of Ireland as a domicile for ETFs. These include confirmation from the Central Bank of Ireland (CBI) that it is possible for an undertaking for collective investment in transferrable securities (UCITS) to have both listed and unlisted share classes without the requirement to redesignate the fund as a ‘UCITS ETF’ as well as updates regarding daily disclosure of ETF portfolio holdings and clarification that the CBI is open to engaging with the industry to develop an effective approach to alternative models of portfolio transparency.

“These recent regulatory developments illustrate that the Central Bank is responsive to market developments and willing to address the requirements of the ETF industry,” said Durkin.

Additionally, Ireland has a wide network of double tax treaties having signed 78 comprehensive agreements to date, of which 75 are currently in effect. For non-US investors seeking to invest in US stocks, an Irish-domiciled ETF will often represent the optimum investment vehicle as it can take advantage of the lower 15% rate of withholding tax on dividends. This compares to the 30% withholding tax if non-US residents invest directly in US stocks or through EFTs domiciled in other EU member states such as Luxembourg. Non-US investors investing in US stocks may also seek to invest in Irish-domiciled ETFs in order to mitigate against the exposure to US estate tax.

Dever said: “Another notable aspect of the Irish funds tax regime of which Irish-domiciled ETFs are a part is that the fund is exempt from Irish tax in respect of income and gains derived from its investment. Furthermore, Irish withholding tax does not generally apply in respect of payments from the ETF to non-Irish resident investors.”