This article was originally published in Financial Services Quarterly Report.
While Ireland is widely recognised as a centre for UCITS funds and it led the way in the development of regulated hedge fund structures, its offering in relation to real estate and private equity funds is less well known. Real estate and private equity funds have generally been established in off-shore jurisdictions such as the Channel Islands or using structures such as the English limited partnership. More recently, Luxembourg has used its double taxation treaty network to facilitate the establishment of efficient real estate and private equity fund structures investing through multiple conduit structures in Europe, Asia and beyond. The development of similar products in Ireland was hampered by the perception that Irish funds did not possess these inherent tax advantages.
This article reviews the regulatory regime in place in Ireland for both real estate and private equity funds and demonstrates how Irish securitisation vehicles are being used to gain access to Ireland's double taxation treaty network.
Qualifying Investor Funds
Real estate and private equity funds cannot be established as UCITS and while there are other structures in place, it is the Qualifying Investor Fund ("QIF") that is the structure of choice for such private funds.
The QIF is aimed at institutional and sophisticated private investors who must meet minimum subscription requirements. As a tax exempt vehicle, the QIF is exempt from Irish tax on its income and gains and is also exempt from withholding tax on its income distributions to non-Irish resident investors, provided a non-resident declaration is in place. A qualifying investor is defined as a natural person with minimum net worth (excluding main household and residence goods) in excess of €1,250,000 or an institution owning or investing, on a discretionary basis, a minimum of €25,000,000. There is an initial minimum subscription requirement in the QIF of €250,000 (or its equivalent in other currencies) per investor and no limit on subsequent subscriptions.
Regulatory Framework and Legal Structures
QIFs are established in Ireland under the non-UCITS regulatory regime and are governed by the Financial Regulator's Guidance Note 1/07 and the Non UCITS Notice NU 24. While the regulatory framework in relation to appointment of service providers and governance applies to QIFs, they are not subject to any investment or borrowing restrictions, and QIFs established as investment companies or investment limited partnerships are exempted from the requirement to produce half-yearly reports. QIFs are most commonly established as investment companies or unit trusts, but they may also be established as investment limited partnerships or common contractual funds. As onshore EU domiciled funds, QIFs will meet the requirements of, and be passportable under, the Alternative Investment...