Irish SPVs in Structured Finance and Fund Transactions

Author:Mr Nollaig Murphy and Andrew Quinn
Profession:Maples and Calder

Advantages of using an Irish SPV Ireland has increasingly become the jurisdiction of choice in Europe for establishing special purpose vehicles ("SPVs") to conduct structured finance or fund transactions. A significant factor in Ireland's attractiveness is the continued support of the Irish government and tax authorities and successive legislative changes to facilitate this business. Examples of this proactive policy are the 2010 and 2011 updates to Ireland's tax codes designed to facilitate and ensure certainty of treatment for SPVs to hold commodities, plant and machinery and carry out Shari'a compliant arrangements. Tax Benefits Effectively corporation tax neutral vehicle. While SPVs within the scope of Section 110 of the Irish Taxes Consolidation Act 1997 ("Section 110") are subject to Irish corporation tax in the normal course, due to the favourable rules regarding deductibility of expenditure, including interest, it is generally possible to structure a transaction so there is little or no taxable profit.

Pay interest free of withholding tax on listed notes and wide exemptions also apply where the notes are not listed. SPVs can receive investment management services from abroad without incurring an Irish VAT liability. SPVs are tax resident in Ireland for the purposes of Ireland's double tax treaties and can avail generally of their benefits to receive income free of, or subject to a reduced, withholding tax from those jurisdictions. Ireland has signed in excess of 60 such treaties (see Schedule 2 in the attached).

Other Benefits Ireland is a common law jurisdiction within the EU and a member of the OECD. Ireland has a very popular stock exchange which provides certainty as to turn around times (three days first read, two days for each subsequent read).

There is a full range of skilled service professionals (auditors, tax advisors, lawyers, administrators and listing advisors) experienced in structured finance transactions. Minimum corporate benefit is required for an Irish SPV. There is no Irish tax requirement for any profit/asset dependent fee to be kept in the SPV.

SPVs and Specific Irish Taxes Section 110 of the Irish Taxes Consolidation Act 1997

Section 110 permits an SPV's profits to be calculated as if it were carrying on a trade. Consequently, the cost of funding and related expenditure should be tax deductible. Section 110 also generally allows a payment of interest, the rate of which is dependent on the performance of the company (e.g. the "equity tranche" of a...

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