A Key Location for Russian Structured Finance Deals

Author:Mr David Lawless, Conor Houlihan and Sean Murray
Profession:Dillon Eustace


In recent years Ireland has emerged as a key jurisdiction for the establishment of special purpose vehicles (SPVs) for a variety of Russian structured finance transactions.

Why Ireland – Key Reasons

We have set out below the key reasons for selecting Ireland as a location for establishing an SPV for Russian deals.

Taxation - Favourable tax laws allow the structures to be tax neutral. While the SPV itself is liable to corporation tax at 25%, the tax is applied on the SPV's taxable profits, which is generally maintained at a nominal level as there is no minimum profit required for tax purposes. This is achieved by having the SPV's tax deductible expenditure essentially equal to its income, typically through the use of profit participating loans/notes. A combination of Irish domestic provisions together with an advantageous treaty with Russia permits the SPV to get a deduction for the interest payments at the SPV level while at the same time permitting the interest payments on loans/notes between Irish SPVs and Russian counterparties to be paid gross. We have structured numerous transactions to date whereby the interest payable on the PPNs/PPLs to the Russian entities matches the interest received by the SPV on the its underlying assets (e.g. Loan Participating Notes). Furthermore, Ireland has a large double tax treaty network having signed comprehensive double taxation agreements with 59 countries, of which 48 are in effect (including a very favourable tax treaty with Russia) and the terms of the appropriate treaty can often result in the income in respect of the underlying assets acquired by the SPV being paid to the SPV without any withholding or other taxes. Onshore - Ireland is increasingly being used as an alternative to traditional offshore jurisdictions for the very reason that is not offshore. For certain groups, offshore may have negative connotations. Investors in some jurisdictions may want to purchase debt issued by EU/OECD issuers only, and the failure to access those investors if the SPV is located elsewhere may affect the pricing of a transaction. Ireland with its favourable SPV tax legislation and membership of the EU and OECD offers an attractive alternative and particularly now where there is an international trend away from investing in so-called tax havens. Legal System - Ireland is a common law...

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