Aviation SPVs in Ireland: Why Corporate Services Providers Are Essential

With over half of the world’s leased aircraft managed through Irish structures, Ireland has firmly established itself as the global capital of aviation finance. Central to these transactions is the Special Purpose Vehicle (“SPV”), a legal entity that plays a pivotal role in structuring aviation leasing deals. Their role is fundamental to how modern aviation leasing structures are designed and executed. Below, Shane O’Connell, Chief Financial Officer, outlines how SPVs function within the industry and the tax and regulatory considerations that govern their use in Ireland.

Understanding SPVs in Aviation

Within the aviation sector, aircraft owning entities or SPVs are traditionally used to separate aircraft ownership and funding from the parent company’s main financial statements. These entities are typically set up with minimal capital and serve a focused role, to hold one or more aircraft, enter into leasing arrangements and manage the related cash flows. This structure allows for clearer asset tracking, streamlined financing arrangements and reduced exposure to broader corporate risks. SPVs are used in aviation financing transactions for a number of strategic reasons, primarily asset protection, by ring-fencing the aircraft within a standalone legal entity, the structure ensures that, in the event of a lessee default, creditors’ claims are limited to the SPV’s assets rather than the wider group’s portfolio. This model also provides enhanced financing flexibility, with lenders generally more willing to provide credit when their exposure is confined to a specific asset. From a regulatory perspective, SPVs offer clarity and recognition under international frameworks such as the Cape Town Convention, which facilitates the registration and enforcement of security interests. In addition, jurisdictions such as Ireland provide a favourable tax environment, allowing for access to double tax treaties and efficient withholding tax arrangements.

Setting Up an Aviation SPV

The most commonly used company type for aircraft owning entities is a Designated Activity Company (DAC), a form of private limited company that is permitted to have its securities admitted to trading or listed on any market . Aviation SPV structures typically fall into two categories: on-balance sheet and off-balance sheet. An on-balance sheet SPV is a wholly-owned subsidiary of the parent company, with its assets and liabilities consolidated into the parent’s financial statements. In contrast, an off-balance sheet SPV, often referred to as an orphan SPV, is structured to be legally independent, with its shares held by charitable trust. This creates a bankruptcy-remote vehicle that isolates risk, enhances tax efficiency and facilitates cross-border leasing arrangements. The setup process involves incorporation under the Companies Act 2014, appointment of directors, provision of a registered office and preparation of constitutional documents.

Tax Considerations for Aviation SPVs in Ireland

Ireland’s tax framework remains a key driver of its appeal as a jurisdiction for aircraft leasing and financing. Companies incorporated in Ireland are subject to corporation tax, with a range of structuring options available to optimise tax efficiency, most notably the Section 110 regime under the Taxes Consolidation Act 1997. This regime provides a specialised tax treatment for qualifying Irish-resident entities involved in the holding and financing of financial assets, including aircraft, engines, and lease receivables.

To qualify as a Section 110 company, an entity must meet specific criteria, including:

• Being tax resident in Ireland;

• Acquiring, holding, or managing qualifying assets in Ireland;

• Meeting the “Day-One” test, whereby the market value of qualifying assets is at least €10 million on the date of acquisition;

• Engaging solely in activities related to the business of the company;

• Notifying Revenue of its Section 110 status; and

• Ensuring all transactions, other than Profit Participating Notes, are conducted on an arm’s length basis.

When structured appropriately, the regime allows for the deduction of funding costs and operating expenses, resulting in minimal profit leakage.

In addition to Section 110, Ireland offers a number of other tax features relevant to aviation transactions. Aircraft in free circulation within the EU are not subject to customs duties, although imports from outside the EU may trigger customs considerations, including potential U.S. tariffs . VAT is generally chargeable on aircraft sales where the aircraft is located in Ireland at the time of transfer, while leases to non-Irish lessees typically fall outside the scope of Irish VAT. Withholding tax exemptions on interest and dividends are often available, particularly where a valid tax residency certificate is provided to support treaty access. Stamp duty may also apply, depending on the nature of the transaction.

Ireland’s participation in the OECD’s BEPS initiative has introduced further considerations for aviation SPVs, particularly through the principal purpose test, which may limit treaty access where tax benefits are deemed a primary motive. As a result, it is now standard practice for SPVs and related entities to demonstrate genuine operational substance in Ireland. Tax residency is determined by where the company is managed and controlled, and non-resident entities may trigger Irish tax obligations if they maintain a fixed place of business or act through an authorised agent in the State.

Regulatory and Legal Infrastructure in Ireland

Ireland’s regulatory framework for aviation finance is underpinned by its early and active adoption of the Cape Town Convention, which came into force domestically in 2006. As the first EU member state to ratify the Convention, and home to the International Registry of Mobile Assets, Ireland has positioned itself as a global leader in the recognition and enforcement of international interests in aircraft. The implementation of “Alternative A” under the Aircraft Protocol further strengthens creditor protections by providing a clear, enforceable timeline for asset recovery in insolvency scenarios, enhancing Ireland’s appeal for structured finance and securitisation transactions. Locally, aviation SPVs must also comply with the Companies Act 2014, including obligations around annual returns, statutory registers, and audited accounts. In addition, robust AML and KYC requirements apply, particularly given the international profile of lessees, and aircraft must be duly registered with both national aviation authorities and the International Registry where applicable.

The Role of a Corporate Services Provider

In aircraft leasing transactions, the role of a Corporate Services Provider (“CSP”) is critical to ensuring that the structure is correctly established and administered in line with Irish legal and regulatory requirements. CSPs manage the day-to-day corporate governance and administrative functions of the SPV, including board support, statutory filings and beneficial ownership registers. They also provide ongoing company secretarial and compliance support, ensuring that any changes to directors, service providers or transaction terms are properly documented and implemented. Given the complexity and scale of aviation transactions, CSPs are typically equipped with specialist teams who understand the accounting treatment required for aircraft leasing structures and who carry out detailed onboarding and monitoring procedures to meet AML and KYC obligations. Their involvement brings clarity, control and precision to the transaction, helping ensure that each deal is executed smoothly, securely and in full compliance with European Regulations.

How We Can Help

Cafico International has extensive expertise in the establishment, operation and management of SPVs for clients within the aviation industry. We deliver a full suite of services to support the smooth operation of each SPV, including formation, directorships, registered office provision, lease accounting, financial reporting and corporate governance. Our internal processes are built around precision, responsiveness and regulatory rigour. With a guaranteed 24-hour response time and a dedicated point of contact, our client-first approach ensures responsive, reliable support at every stage of the transaction.

For more information on how Cafico International can assist your business, please contact Shane O’Connell, Chief Financial Officer.