Amundi started domiciling new ETFs in Ireland in May and has since launched 13 products on its platform to capitalise on the emerald isle’s tax treaties with other countries, particularly the US.
The rollout on its Irish collective asset management vehicle (ICAV) umbrella started modestly with three products in as many months, before the firm launched a 10-strong suite of ESG sector ETFs at once in October, ETF Streamrevealed.
The rationale behind this shift is based on the efficient Irish tax regime, including ETFs being treated as tax neutral like other fund structures regulated in Ireland.
This means income, gains derived from investments and ETF net asset value (NAV) are all exempt from Irish tax. Issuance and redemption of ETF units also do not count as taxable events, according to the Irish Funds Industry Association.
However, the main tax benefit relates to withholding tax arrangements, with Ireland not applying withholding tax to dividends paid to non-Irish resident investors and the country having favourable withholding tax arrangements with regulators such as the US Inland Revenue Service (IRS).
The industry body said: “Ireland has a broad double tax treaty network spanning over 70 countries across the EU, Middle East, Asia and Americas.
“Treaty relief under the Ireland-US tax treaty may be available to an ETF depending on the facts and circumstances resulting in a net withholding tax rate of 15% on US dividend income.”
This sum is half the standard withholding tax the IRS applies to non-US resident investors not covered by a double taxation treaty, meaning Irish-domiciled ETFs create a tangible positive impact for European investors collecting dividends from US companies.
An Amundi spokesperson told ETF Stream: “In Q2, Amundi ETF launched its first Irish ICAV. This is a great addition to our set up as we were offering Luxembourg, French and German domiciles.
“The rationale behind this is that several clients, especially institutional investors, favour this domicile for their global and US equities.”
The decision to launch ETFs from its ICAV may seem contrary to Amundi’s other priority of consolidating its ETF range with Lyxor's, which it acquired in January, given both French issuers previously domiciled the majority of their products in France and Luxembourg.
The merging of the two asset management businesses saw Amundi overtake DWS as Europe’s second-largest ETF issuer and at the end of Q3, it had a market share of 13.4% and assets under management (AUM) of €161bn, versus 10.3% and €121bn for the DWS Xtrackers range, according to Morningstar data.
Within the context of this tussle for second place in Europe, however, Amundi's move to Ireland is likely a longer-term, strategic one, given the majority of top 10 issuers already operate ETFs out of ICAV platforms.
The launch of its ICAV is also just the latest step the French issuer has taken in Ireland. In 2016, it acquired Pioneer Investment Management for €3.5bn and established Amundi Ireland. Four years later, it launched its Irish retail asset management business.
David Harte, CEO of Amundi Ireland, toldIndependent Ireland in 2021: “Amundi Ireland plans to grow assets under management in the Irish market by €10bn over the next three years.
“This growth is expected to come from both retail and institutional clients as well as our fund hosting business.”
The firm’s expansion into Irish ETFs is just its latest – and sensible move – in the country.