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Financial Services

Financial Services . Shari’a compliant funds and Islamic Finance An Irish perspective October 2009. TAX. Ireland – a snapshot from a Fund’s perspective. The growth over the last decade. Worldwide / European alternative investment funds. Source: IFIA website (http://www.irishfunds.ie ).

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Financial Services

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  1. Financial Services Shari’a compliant funds and Islamic Finance An Irish perspective October 2009 TAX

  2. Ireland – a snapshot from a Fund’s perspective

  3. The growth over the last decade

  4. Worldwide / European alternative investment funds Source: IFIA website (http://www.irishfunds.ie )

  5. Funds in Ireland • Number of funds administered – approx 10,000 • Number of people employed in the Funds industry – approx 12,000 • Largest hedge fund administration centre in the world • Largest number of stock exchange listed investment funds • Fastest growing European and UCITS administration centre

  6. Why Ireland?

  7. What makes an ideal jurisdiction for funds • Marketability of the Fund • Legal and regulatory environment • Infrastructure to support – service providers • Taxation – fund and investors

  8. Politically stable and neutral country EU Member State (35+ years) – gateway to the European market Member of Euro-zone Geographically located with convenient time zone Deep pool of local expertise – young and well-educated workforce A credible and business friendly regulatory regime – investor-friendly investment policies; liberal exchange regulations The Irish regulatory regime offers a more rapid approval system than most comparable jurisdictions Why Ireland: Non-tax reasons

  9. Ireland is the only English speaking country within the Euro-zone – Is that important! Why Ireland: Non-tax reasons

  10. No Irish tax on income earned by Regulated Funds No Irish tax on distribution or redemption payments made to investors who are non-Irish resident No Irish stamp duty or capital duty on establishment of a collective investment fund or on creation, transfer or selling of units or shares in a fund Most of the services provided to a fund are exempt from VAT (sales tax) Rich network of double tax treaties Why Ireland: Tax reasons In summary, a non-Irish resident does not suffer any Irish tax on any income or capital received from an Irish Fund

  11. Ireland’s Network of Tax Treaties

  12. Ireland’s Network of Tax Treaties

  13. Non Resident Investor Irish tax resident Fund Investment within or outside Ireland No Irish Tax on distribution / redemption No Irish tax on Fund’s income Low or No Withholding Tax owing to Tax Treaty benefits

  14. Why Ireland Is Not A Tax Haven • 1. Founding Member State of OECD • 2. Long-standing EU Member State • 3. Tax Treaties • Currently 46 Double Tax Treaties in place • Another 5 Treaties signed • Another 18 Treaties either negotiated or under negotiation • 4. Corporation Tax Take • 1997 36% €2.0bn+ • 2008 12.5% €6.0bn+ • 5. Transparency of Tax System • 6. Accession to EU Arbitration Convention

  15. Recent developments in IrelandIslamic Finance • The Irish Financial Regulator has set up a dedicated team to deal with the establishment of Shari’a compliant investment funds. • The Irish Revenue Authorities issued a Tax Briefing on 8 October 2009 confirming that: • the taxation of a Shari’a compliant fund, its investors and service providers should be on the same basis as that applicable to a conventional fund, its investors and service providers • the tax treatment of companies engaged in Ijarah transactions should be on the same basis as that applicable to leasing or hire-purchase transactions • the tax treatment of a General / Family (Life) Takaful / ReTakaful company should be the same as that applicable to a conventional general insurance / reinsurance company or a life assurance company

  16. The importance of the Tax Briefing • From a fund’s perspective: • The fund should not be subject to any Irish tax. • No Irish tax should arise on distributions from the fund to non resident investors.  • An Irish regulated fund can be marketed throughout the EU without requiring any further authorisations.

  17. The importance of the Tax Briefing • From a leasing (Ijarah) company’s perspective • Ireland is considered an ideal location for international leasing, particularly aircraft leasing • As Ireland does not apply any withholding tax on outbound lease rentals, most Irish tax treaties contain favourable provisions in respect of withholding taxes on lease rental payments (nil or reduced rate of withholding tax) • Taxable trading (business) income of the leasing company should be subject to tax at 12.5% • The company should be entitled to tax depreciation at 12.5% p.a.on the cost of its plant & machinery (leased asset). • No Irish withholding tax is applied on dividend payments to a shareholder that is resident in an EU Member State or in a jurisdiction with which Ireland has concluded a double tax treaty • There are no Controlled Foreign Corporation (CFC) rules in Ireland. Moreover, Ireland has a very limited transfer pricing regime

  18. The importance of the Tax Briefing • From an insurance (Takaful) company’s perspective • Ireland is becoming an increasingly popular location to locate insurance and reinsurance companies  • An Irish regulated Takaful / ReTakaful company should be able to sell insurance policies throughout the EU without seeking any further authorisations. • It should be possible for an Irish regulated Takaful / ReTakaful company to set up its presence in any EU Member State without requiring any regulatory approvals • Taxable trading (business) income of the Takaful / ReTakaful company should be subject to tax at 12.5%

  19. Contact details Kashif Jahangiri Director, Financial Services Tax KPMG Ireland +353 1 700 4060 kashif.jahangiri@kpmg.ie www.kpmg.ie http://www.kpmg.ie/industries/fs/islamicfinance/index.htm The information contained herein[or insert the title of the presentation, report, or talkbook]is of a general nature and is not intended to address thecircumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. © 2008 KPMG Ireland, the Irish member firm of KPMG International, a Swiss cooperative. All rights reserved. Printed in Ireland.

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