06 Feb 24
Establishing SPVs in Ireland
Over the last number of decades, Ireland has emerged as a leading European jurisdiction for the establishment of Special Purpose Vehicles (SPVs).
SPVs are typically incorporated to facilitate a range of structured finance transactions including securitisations, repackaging programmes, aircraft leasing platforms, alternative lending arrangements, and investment vehicles. Ireland’s SPV framework underpins the success of the financial services, aviation leasing, capital markets, and investment fund industries.
Ireland’s attractiveness as a jurisdiction for the establishment of SPVs is based on several factors such as:
Highly regarded and trusted legal framework
Legal certainty and reliability of framework remain key factors driving investor decision-making with regard to jurisdictional choice. The growth in Ireland’s SPV industry is fuelled by its highly regarded and trusted legal framework. Ireland is a common law jurisdiction, similar in many respects to the US and UK, with legal concepts easily recognised by most investors, originators, and advisors.
Further, Ireland’s structured finance and securitisation industry is supported by a wide network of specialists including legal, tax, accounting, and corporate services providers. Over 3,900 people are directly employed in roles involved in the establishment and administration of SPVs in Ireland.
EU & OECD Member
Another advantage of structuring transactions through Ireland is its status as an EU, eurozone and OECD member state. EU/OECD issuers are highly sought after by many originators and potential investors. Additionally, with a growing worldwide trend away from investing in tax havens, many investors take comfort from Ireland’s status as an onshore jurisdiction.
Another factor for Ireland’s popularity is the strong affinity between Ireland and the US and UK, driven by a common culture and language. In Q4 2022, 38% of assets held in Irish SPVs were located in Ireland, the UK or US. 86% of Irish-domiciled SPVs were established by international sponsors, with the UK and US accounting for 65% of these sponsors.
Passport to Europe
Irish SPVs are considered to hold a ‘passport to Europe’. Once approved by the Central Bank of Ireland, securities issued by an Irish SPV can be accepted throughout Europe for public offerings and admission to trading on regulated markets.
Ireland’s favourable tax framework for qualifying issuers under Section 110 of the Taxes Consolidation Act 1997 can minimise tax leakage, and in many cases achieve a tax-neutral status.
Ireland has an ever-expanding network of double tax treaties, with over 74 double tax treaties in place as of July 2023. Depending on the particular treaty, SPVs can receive income on their underlying assets free from withholding tax or at a reduced rate.
There are a number of withholding tax exemptions on interest paid by an SPV, these include the “quoted eurobond” exemption, which is generally available in respect of interest on securities listed on a recognised stock exchange, subject to the satisfaction of certain conditions. Alternatively, investors can rely upon an exemption from withholding tax for Section 110 companies which permits interest payments made to a resident in an EU/tax treaty partner country to be paid gross, subject to certain conditions.
Cost Efficient Jurisdiction
Ireland is widely recognised as a cost-efficient jurisdiction compared to competing jurisdictions. Factors include no thin capitalisation requirements, minimal retained profit and competitive service provider markets.