Senior executives of US multinational organisations in Ireland can face unique challenges when it comes to financial planning, thanks to the vast number of US rules and regulations that must be observed, as well as their exposure to fluctuating currency exchange rates.
For those executives who have lived in the United States, careful planning is advised around the treatment of US pensions like 401(k)s, as well as investment transfers, and compliance with the Foreign Account Tax Compliance Act and passive foreign investment company (PFIC) regulations on their worldwide investments.
Other common financial planning challenges for senior multinational executives include managing equity compensation and stock-option diversification, managing exposure to US federal estate tax, retirement planning and pension consolidation, and planning considerations for the next generation.
A spokeswoman for IDA Ireland acknowledges that these issues require special attention. “Careful planning is advised around the treatment of internationally mobile executives, as they need to be aware of the impact of cross-border employment on both their home location tax and legal rules, and also any local rules they need to be compliant with in jurisdictions where they may work for a period, or periods of time, throughout their career,” she says.
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Each jurisdiction has its own individual tax and legal requirements, the spokeswoman adds. “IDA Ireland does not provide specific support to individual multinational executives, other than to recommend, if asked, that they take appropriate professional international legal and tax advice for their personal circumstances.” Most multinational companies are aware of the need for their internationally mobile executives to take such professional advice, she says.
Rory McPhillips is an associate director at Davy, which works with many senior executives who have relocated from abroad to Ireland while working with multinational firms. Executives who have lived and worked in multiple countries may face intricate residency and domicile tax considerations, he says, and Davy collaborates with clients and their tax advisers to structure investment portfolios that can help navigate these differing tax scenarios and rules effectively.
“We work with senior executives in managing their equity compensation and currency risk, as a significant portion of a multinational executive’s net worth may be tied to company stock, increasing financial exposure without appropriate diversification,” he explains.
Global markets have shown resilience this year, but volatility has increased, something multinational executives must be cognisant of, McPhillips notes. “Without diversification, reliance on a single company’s stock increases financial vulnerability,” he says. Davy works with executives within multinationals to implement a diversified investment strategy to reduce not only stock specific risk but also currency risk, “which has been a major factor this year as the dollar has depreciated 12 per cent against the euro”.
The different regulatory environments can impact the type of investments they recommend to clients, he adds. “For example, US citizens residing in Ireland must navigate complex tax rules, including the stringent reporting requirements and treatment of European (UCIT) funds,” McPhillips explains. “Executives who have lived and worked in multiple countries may face intricate residency and domicile tax considerations – we structure investment portfolios that can help navigate these differing tax scenarios and rules effectively.”
For executives whose wealth is often concentrated in company stock, navigating market cycles, tax implications and career transitions requires a strategic, forward-looking approach. “Whether planning for retirement, managing relocation between jurisdictions or preparing for the next generation, a robust financial plan helps ensure that opportunities are maximised and risks are managed,” McPhillips says. Tailored financial planning and investment solutions for senior executives in the multinational sector are in demand, he adds.
For example, the issue of pensions can be one that is especially complex, as senior executives often hold multiple pensions from various employments, sometimes across multiple jurisdictions.
“This can be a very complicated area as the tax treatment of a pension contribution in one jurisdiction may be treated differently elsewhere,” McPhillips admits. “Our technical experts can help clients co-ordinate a long-term pension consolidation strategy to maximise growth, and tax relief, and ensure ongoing compliance with evolving pension regulations.”
McPhillips also points out that many of the executives he works with have found themselves in Ireland far longer than they initially planned. “A robust financial plan helps ensure that opportunities are maximised and risks are managed for the short, medium and long term.”
