Ireland Becomes 4th Largest FPI Source for India as ICAV Funds Rise

Thanks to the ease of Irish Collective Asset Management Vehicle (ICAV) funds, Ireland is becoming an increasingly popular place for investments that target India. This newfound focus on Ireland stems from the increased tax benefits provided by these funds for investors looking to gain exposure to India.

Ireland is now the 4th largest destination for India FPIs, according to NSDL data. The Irish funds did equity investments in India during the period and their assets under equity increased by more than 80%.

Data shows that Irish Funds owned Rs 4.04 lakh crore in equity assets as if January 2025 compared to Rs 2.26 lakh crorew in January 2023. Dominating the list of portfolio value growth, Ireland surpassed Mauritius and the UK during the time. Together, foreign funds now own securities worth Rs 67 lakh crores in India.

Top ten sources of FPI inflows into India

The US-Ireland tax treaty earns a profit from US investors because Ireland does not tax at the level of the fund. Rather, it issues pass-through status such that there is no tax on capital gains or dividend income. Rather than being taxed, the fund distributes the proceeds to individual investors who are taxed. In addition, the end US investor assumes the tax burden, which means that US investors (individuals) are entitled to tax credit which reduces their tax obligation in the US

ICAVs are a special kind of entity that were incorporared in Ireland in the year 2015. ICAVs are permitted to have variable capital and are not subject to compliance as ordinary companies like holding compulsory board meetings. The ICAV licence does not comel with any conditions, which means these funds do not need to seek any regulatory approval thereafter. But under Irish rules, only funds having more than 100 investors can be ICAVs, meaning only broadbased funds are permitted.

To meet the needs of growing international interest in investment in India, several Indian fund managers including ASK Advisors and DSP have launched ICAV funds.

There are 834 FPIs registered from Ireland, out of which 146 are ICAV funds. Some marquee funds like Amundi, Blackrock, and GQG Partners have ICAV funds earmarked for investing in India, as per NSDL data.

Tax specialists argue that the United States Irish funds arose primarily due to the funding route preferences of investors from the US. This is also on account of two treaties – the India-Ireland double tax avoidance agreement (DTAA) and the Ireland-US tax treaty.

The treaty between India and Ireland has specially enabled a more advantageous withholding tax rate of ten percent with respect to payments of dividends and income. In addition, it is easier Irish funds to satisfy the requirements of India’s General Anti-Avoidance Rules (GAAR).

In recent years, Indian tax authorities have gone after funds coming from places like Mauritius and Cyprus that have taken those dramatically different locations purely for tax advantages. Ireland, which is the home of many multinational companies like Meta and Google with their large operations, is a well established financial center.

Critical to this regime is that only those Irish investors are taxed in Ireland unlike other investors who are taxed in their respective countries. This scheme is particularly beneficial to investors based in the US because it means that the tax consequences of investments made through ICAV funds is effectively the same as the tax that would have been incurred had the investor invested directly himself.

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