Acquisition Of Loan Portfolios And Distressed Debt - Tax Efficient Irish Structures

Profession:Arthur Cox
 
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Article by Ailish Finnerty, Conor Hurley, Fintan Clancy, Kathleen Garrett, Alan Heuston, Caroline Devlin, Jonathan Sheehan and Gary McSharry

The acquisition of loan portfolios and distressed debt has become a particularly topical issue as banks and financial institutions seek to deleverage and investors look for opportunities. Ireland continues to lead the way in offering innovative financial services solutions for investment structures for acquiring distressed debt and loan portfolios. It offers vehicles through which investors can invest in a wide variety of assets (including loans and debts) through holding shares, units or bonds issued by these vehicles.

Aside from the compelling tax reasons described below, there are other reasons why Ireland makes sense:

An onshore jurisdiction: Ireland is a member of the EU and OECD and is a fully regulated onshore jurisdiction which is an important consideration for many investors seeking OECD/EU issuers only for their investments. The language: Ireland is the only English speaking jurisdiction in the euro-zone. The legal system: a common law jurisdiction, the Irish legal system is similar to that of the US and UK and its legal concepts will be recognised by most investors, originators and advisers. Ease of doing business: Ireland was ranked best eurozone country in which to do business in Forbes Magazine's 2010, Best Countries for Business and best in eurozone in the International Finance Corporation and World Bank ease of doing business ranking of international economies. Double tax treaties: Ireland has an extensive network of double tax treaties. Treaties have been concluded with 63 countries to date and many more are in negotiation. A recognised and responsive international financial services centre: The professional and administration services required to support the international financial services sector are available locally and are highly regarded. The Tax Regime

A variety of tax incentives and regimes exist to ensure that tax payable on Irish structures holding distressed debt and loan portfolios can be reduced to a negligible amount or even eliminated entirely. How that is achieved depends on the source of the underlying debt and the residence of the investors but typically will involve the Irish s.110 SPV described below or an Irish Qualifying Investor Fund (QIF) or a combination of both.

The Irish s.110 SPV

Section 110 of the Taxes Consolidation Act, 1997 provides a very...

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