Why Ireland for Structured Finance?
For the global structured finance industry Ireland offers:
- A highly regarded onshore location – Ireland is a member of the European Union and the Organisation for Economic Co-operation and Development (OECD);
- A trusted and transparent tax regime – Section 110 of the Taxes Consolidation Act 1997;
- An extensive tax treaty regime – Ireland has 68 double taxation treaties with other countries which offers an Irish resident SPV significant advantages over offshore locations;
- Clear VAT rules – in general, the activities of a qualifying SPV are exempt activities for VAT purposes and management services provided to SPVs are exempt from VAT in Ireland;
- An exemption from Irish stamp duty – no Irish stamp duty is payable on either the issue or transfer of the notes issued by an Irish SPV, provided that the finance raised by the issue of the notes is used in the course of the business of the SPV;
- An efficient listing mechanism – the Irish Stock Exchange has extensive experience in the listing of specialist debt securities and offers a turnaround time of maximum of three working days;
- A common law jurisdiction – the Irish legal system is derived from the English legal system;
- An infrastructure of experienced professionals – corporate administrators, lawyers, auditors and other service providers;
- A European passport – securities issued by an Irish SPV may, once the prospectus has been approved by the Irish Central Bank, be accepted throughout the EU for public offers and/or admission to trading on regulated markets under the EU Prospectus Directive;
- A public or private limited company structure – a private limited company can be used for most SPV transactions, meaning that the SPV can be incorporated with share capital of just €1 and in just five days (public limited companies can be used for public issues of securities);
And it is a regime that is continually being enhanced and improved. For example:
- In 2011, Ireland extended the category of assets that may be held by SPVs to include commodities and plant and machinery, such as aircraft and other chattels;
- Irish SPVs can now be used in conjunction with Irish regulated funds in dual fund/SPV structures;
- New double tax treaties with Azerbaijan, Thailand, Tunisia and Ukraine are in the course of negotiation or approval;
With over 700 professionals directly employed in the structured finance, debt securities and specialist securities industries Ireland offer a wide variety of services to the international industry including:
The Irish Stock Exchange (ISE) is one of the largest European exchanges for the listing of asset-backed securities and debt securities. To help prepare the listing application, prospectus and other legal and accounting information required for a stock exchange listing, there is a significant pool of skilled professionals. This work is carried out by stockbrokers, international banks, law firms, and a small number of stand-alone listing agents. Debt securities listed on a recognised stock exchange (which would include either market of the ISE) can avail of the quoted Eurobond exemption from withholding tax.
Ireland is home to a number of experienced corporate service providers. Their services typically include, but are not limited to, preparing books of accounts and management accounts, co-ordinating with the company’s auditors and tax agents to prepare the annual audit and to file all relevant tax returns, assisting in opening any Irish bank account(s), administrative assistance and settling company transactions, the provision of a director(s), acting as company secretary, organising and hosting board meetings, provision of trustee services in respect of the shares of the company, registering the company for corporation tax and VAT, and assisting in any share transfer or liquidation of the company. The annual cost of servicing an SPV will vary depending on its complexity and scale.
A significant number of investors, issuers, trustees, collateral managers and collateral administrators are also active in Dublin. Investors, such as banks and pension funds, allocate a portion of their investment portfolio to securitised debt, while collateral managers choose, monitor, track and value collateral throughout the life of a transaction.
Ireland’s Tax Regime
For over two decades, Ireland has had a tax regime, now known as Section 110, designed to ensure that special purpose vehicles (SPVs) may be established in a tax neutral manner. The Taxes Consolidation Act 1997 provides for the establishment of an SPV which is entitled to a tax deduction for the interest that it pays. It also provides for the tax deductibility of bad debts.
In simple terms, to fall within Section 110, SPVs must acquire, hold or manage qualifying financial assets (including bonds, loan receivables, derivatives, carbon offsets etc.) of at least €10m, be resident in Ireland and carry on no other activities than holding and/or managing such financial assets. The SPV must notify the Irish Revenue Commissioners of its existence, but no special rulings or authorisations are required in Ireland in order for the SPV to achieve this tax neutral status. The transparency of the Irish tax system is built upon the clarity of the relevant legislation.