Ireland is a tried, trusted and established jurisdiction for incorporating Special Purpose Vehicles (SPVs) used in structured finance and capital markets transactions.
For structured finance transactions, Irish SPVs are typically used to acquire and hold portfolios of physical or financial assets. An SPV will usually be funded with debt, which may be in the form of loans or debt securities. For straight corporate debt issuances, Irish SPVs are used to issue debt and then pass the funds raised on to a wider group for corporate purposes.
The Central Bank of Ireland produces regular statistical reports in relation to the number of SPVs domiciled in Ireland and the quantum and variety of assets they hold. These evidence Ireland’s popularity and illustrate its leading position. For example, as of the end of Q4-2021, Irish securitisation SPVs represented 30.9% of euro area securitisation vehicles and 26.2% of euro area assets.
The benefits associated with Irish SPVs can be attributed to Ireland’s status as an on-shore jurisdiction, which is an EU and OECD member state. As an EU member state, the benefits and protections of the EU’s financial services regulatory framework apply in Ireland. In addition, Ireland is now the only fully common law jurisdiction in the EU. We have experienced and predictable courts with extensive experience adjudicating complex commercial and financial litigation. Furthermore, we have an efficient and transparent taxation regime and a comprehensive double tax treaty network (approximately 73 countries) which usually applies to these SPVs.
Ireland has a special tax regime which is applicable to securitisations. The regime is set out in section 110 of the Taxes Consolidation Act 1997, often simply referred to as ‘section 110.’ It is designed to allow an Irish SPV, which complies with the regime’s requirements, to pass its revenues on to investors as tax efficiently as possible.
An SPV that qualifies under section 110 can deduct most expenses for tax purposes. This includes interest and profit participating coupons payable on debt securities issued to certain types of investors. In addition, no Irish stamp duty is charged on the transfer of debt securities, and a specific VAT exemption applies to many services provided to the SPV.
There are certain criteria that need to be met in order for an SPV to qualify under section 110. These include holding and/or managing ‘qualifying assets’, Irish tax residency, carrying on business in Ireland, and ensuring that its first qualifying assets acquired have a total value of 10 million euro. We can advise you on the specifics of setting up a section 110 SPV.
Irish SPVs which issue debt securities will often opt to list them at a stock exchange or trading venue, because this meets investor expectations and to avail of the quoted Eurobond exemption. The Irish Stock Exchange, which trades as Euronext Dublin, is recognised as a leading debt listing venue. It has a speedy and cost-effective mechanism for listing debt securities. Euronext is the #1 bond listing venue worldwide with over 52,000 bonds listed on its markets by issuers from 100 + jurisdictions.
However, it is not a requirement for an Irish SPV to list its debt securities in Dublin. Other EU and international exchanges are also used, including the Vienna MTF, TISE in the Channel Islands and the London Stock Exchange. This flexibility is part of the attraction of using an Irish SPV. Depending on the particular circumstances of the transaction, we can advise on which exchange/venue to list at and assist in doing so.
Due to our well developed and internationally focussed financial services sector, Ireland is a global centre of excellence for corporate services providers, accountants, lawyers and other professional advisors needed to advise and administer SPVs. This ensures experienced independent directors, combining good governance with an international, outward looking and business friendly approach.
All of the above aggregates into the attraction of using an Irish SPV and makes Ireland the country of choice for sponsors and arrangers used to operating under a common law framework that want to set up their SPVs within the EU.
For more information, contact a member of our Debt Capital Markets team.
The content of this article is provided for information purposes only and does not constitute legal or other advice.