05 Oct 23

Section 110 Special Purpose Vehicles (SPV) explained

Ireland continues to be one of the top global locations of choice for the establishment of Special Purpose Vehicles (SPVs), which are companies used to facilitate a wide range of structured finance transactions. A significant contributing factor to Ireland’s dominance in the market has been the popularity of the Section 110 framework, which is designed to operate as a tax-neutral regime and is a cornerstone of Ireland's structured finance and securitisation industry.

The Section 110 regime is utilised by SPVs involved in a wide range of financial transactions, including securitisations, financing transactions, leasing transactions, and asset repack transactions.


Section 110 of the Taxes Consolidation Act 1997 (the TCA) introduced a special tax treatment for certain ‘qualifying’ Irish SPVs meeting the specific requirements set out in the TCA that are commonly referred to as Section 110 companies.

Qualifying criteria for Section 110 companies:

  • Must be a tax resident in Ireland;

  • Must acquire, hold, or create qualifying assets and manage those assets in Ireland;

  • On the first day the SPV acquires the qualifying asset(s), the market value of such qualifying asset(s) must be at least €10 million (known as the Day-One test);

  • Must not engage in activities other than those related to the business of the company;

  • Must notify the Irish tax authorities that the company meets all the requirements of a Section 110 company; and

  • All transactions or arrangements, other than “Profit Participating Notes” (subsection 4 of Section 110 TCA), must be entered into by way of a bargain made at arm’s length.

Tax Residency

All Section 110 companies must be tax resident in Ireland.

A company is deemed to be tax resident if it is incorporated in Ireland on or after 1 January 2015 unless it is treated as a tax resident company in another country under a double taxation agreement.

The company must, in addition to being resident, carry on the business of holding and managing qualifying assets in Ireland.

There are two elements to this requirement.

Firstly, the company must carry on a business. Structures that involve no active management (active management which is outsourced to an appropriate manager is acceptable) or review over a prolonged period of time are unlikely to be carrying on a business.

Secondly, the business must be conducted in Ireland. The company should undertake significant acts in Ireland, including strategic decision-making and oversight of operations by the company’s directors. This may be evidenced by the location of certain functions, including directors’ meetings taking place in Ireland. It is common practice to appoint Irish resident directors to S110 companies.

Qualifying Assets

Under the TCA, the definition of “qualifying asset” consists of any financial asset or any interest (including a partnership interest) in a financial asset, commodities, or plant and machinery.

Examples of financial assets include shares, bonds, securities, options, swaps, derivatives and similar instruments, invoices and receivables, debt obligations, lease and loan portfolios, carbon offsets, contracts for insurance and re-insurance, commercial papers, promissory notes and other types of negotiable or transferable instruments.

The scope of qualifying assets was later extended under the Finance Act 2011 to include plant and machinery, leased assets, and other commodities.

Commodities refer to tangible assets which are dealt with on a recognised commodity exchange. Although not specifically defined, plant and machinery includes aviation assets, ships, motor vehicles, rolling stock, and other equipment.

Day-One Test

Under the Day-One test for Section 110 companies, there is a requirement for the market value of all qualifying assets to not be less than €10 million on the date they are first acquired. The Day-One test only applies on the date of the first transaction.

Tax Treatment

Under Section 110 of the TCA, taxable profits of qualifying companies are calculated on the same basis as a trading company. Typically, the cost of financing, management fees, arrangement fees, swap payments, administration fees, and other applicable costs will be tax deductible. Any surplus income is subject to tax at a rate of 25%. In most cases however, with careful structuring, Section 110 companies can achieve a tax-neutral position.

S110 companies are not subject to VAT on their activities. Certain portfolio management services may be provided to S110 companies on a VAT-exempt basis. To the extent that a S110 company may incur input VAT costs from service providers, it may be possible to recover all or some of the liability depending on the location of the assets of the S110 company.

S110 companies also do not fall within the remit of stamp duty when issuing or transferring notes or bonds.

Regulatory Requirements

There is a requirement for all S110 companies to register with the Central Bank of Ireland within five working days of their first financial transaction. Thereafter, they are required to file quarterly statistical returns.

Otherwise, S110 companies are subject to general Irish company law regulatory requirements such as filing annual audited accounts, filing annual tax returns, having a registered office in Ireland, and a minimum of one EEA resident director.

For further information please contact Yolanda Kelly.