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Redomiciled PLCs in the Irish Balance of Payments

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Background

Beginning in 2008, in reaction to proposed changes to corporate tax rate changes 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, irrespective 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’. The effect of these profits on the Primary Income1 of the Irish Balance of Payments is shown in Table 1 below.

Table 1: Net Income of Redomiciled PLCs € million
 200820092010201120122013201420152016
Total2921,5945,2605,5487,1026,4776,8554,6665,786

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 1.

Primary IncomeExcluding PLC Income
2008-25.763-26.055
2009-28.2-29.794
2010-26.299-31.559
2011-32.138-37.686
2012-31.765-38.867
2013-27.643-34.12
2014-28.682-35.537
2015-54.786-59.452
2016-47.64-53.426

The foreign assets of these enterprises are classified as ‘Direct Investment Abroad’ in the International Investment Position (IIP) statistics. These PLCs have had a significant effect on the stock of Irish FDI abroad, as shown in Figure 2.

Remainder of FDITotal Redomiciled PLCs
200899.83095134823.537067231
2009125.14979.844
2010139.284115.231
2011133.728121.938
2012163.5704148.733757032
2013177.2756210.71162
2014184.6132325.56517
2015362.655476472.874784203
2016354.10157845444.68570301

As none of the shareholders own more than 10% of the equity in these companies, their liabilities are classified in the IIP as ‘Portfolio Investment – Equity’. Proportionally they have a smaller impact on this sub-heading as Portfolio Investment liabilities are dominated by investment funds. Redomiciled PLCs data, compared to Ireland's total Portfolio liability, is shown in Figure 3.

Redomiciled PLC LiabilitiesPortfolio Investment Liabilities
200821.0621280.707
200979.8771464.61
2010123.0521668.152
2011125.1871727.826
2012149.1331917.029
2013205.4141859.476
2014326.5152400.315
2015474.1382846.141
2016442.0522936.37

1 ‘Primary Income’ less ‘Other Primary Income’ equals ‘Net Factor Income’ in the National Accounts.

Enquiries to:

Christopher Sibley, (+353) 01 498 4305

John Flanagan, (+353) 01 498 4054

Central Statistics Office

Ardee Road

Rathmines

Dublin 6

D06FX52