In 2019 the net income of redomiciled PLCs was €4.2bn. Figure 6.1 shows the effect of the net income of redomiciled PLCs in the balance of payments primary income figures. Users often refer to primary income as repatriated profits’ of multinationals based in Ireland. This group of PLCs reduce that outflow in the balance of payments as shown in Figure 6.1.

Background

Beginning in 2008, in reaction to proposed changes to corporate tax rates in the United Kingdom and the United States, a number of multinational corporations relocated their group headquarters to Ireland.

Conducting little or no real activity in Ireland, these companies hold substantial investments overseas. By locating their headquarters in Ireland, the profits of these PLC’s are paid to them in Ireland, even though under double taxation agreements their tax liability arises in other jurisdictions. These profit inflows are retained in Ireland with a corresponding outflow only arising when a dividend is paid to the foreign owner.

Treatment

The statistical treatment regarding profit inflows and outflows is adhered to. A direct investor is entitled, in proportion to its equity share, to the income generated by its subsidiaries, associates and branches, whether the income is distributed in the form of dividends (or branch profits) or retained as reinvested earnings. (Reinvested earnings are calculated as the difference between the company’s earnings and distributed dividends.) Profits of the overseas subsidiaries are recorded as ‘direct investment – income on equity – inflows’.