By Brian and Lorraine McCarthy
It never ceases to amaze me noting the laugh on time 2;55 “the vehicle that’s used for it …ha ha …pardon the pun” .
What are these Special Purpose Vehicles and who is encouraging the use of them ?
(List of the 68 Countries with whom Ireland currently has a Double Taxation Agreement that has been signed, of which 61 currently have force of law. (please see APPENDIX I in link)
Before we get to IRELAND AS A DOMICILE FOR SPECIAL PURPOSE
VEHICLES by Dillon Eustace one wonders whom you may know that is employed there.
Etain de Valera -She is the daughter of Eamon de Valera. During her time at Dillon Eustace, Etain worked on secondment for Goldman Sachs International, Global Securities Services Division.Secondment means the transfer, on loan, of a member of staff of a Department to another body, for a specific time period, generally to carry out specific work.
Our People Etain de Valera specialises in Asset Management & Investment Funds Dillon Eustace Ireland Law Firm.
IRELAND AS A DOMICILE FOR SPECIAL PURPOSE
Background Ireland has emerged as a favoured location for special purpose vehicles (“SPVs”) that are used in many financial transactions including securitisation, asset repackaging and financing transactions. In particular, Irish SPVs are being increasingly used as investment vehicles, whether that is for private equity, credit opportunities, distressed debt, life settlements, LPN
structures, etc. Irish SPVs are also being used in conjunction with alternative investment funds establishing in Ireland (or re-domiciling to Ireland) so that such funds can minimise foreign taxes on their underlying investments. The wide diversity of deals has emphasised Ireland’s growing importance as an onshore SPV domicile.
There are three main reasons for choosing Ireland as a location for establishing SPVs.
Firstly, Ireland has an extensive double tax treaty network which is constantly expanding.
Secondly, as a member of the EU and OECD it is not considered to be an “offshore” jurisdiction. Thirdly, Irish tax legislation provides for special tax treatment in relation to qualifying SPVs.
The terms of a treaty can ensure that the cash flows from assets can be paid to the SPV without any foreign taxes (or at reduced rates of foreign taxes) on the income and/or capital gains flows on those assets. In addition, the terms of a double tax treaty (in the absence of domestic tax legislation) may help the SPV avoid a taxable presence in the country where the investment manager to the SPV is located. There is no doubt that Ireland’s primary success as an SPV domicile is because of its double tax treaty network in avoiding foreign taxes on the relevant assets. The signing of new treaties in 2012 brings to 68 the number of tax treaties signed by Ireland with many more treaties in negotiation and expected to be signed during next year. Even in countries where it is necessary to use an SPV domiciled in
the relevant country of origin of the assets, Ireland may still be used as an SPV domicile for issuing the necessary debt and then holding the units/certificates in the underlying SPV on which flows of income and gains arise backed by the underlying assets held by the SPV.
Access to a double tax treaty with the relevant country (or access to EU Directives for EU based assets) is often critical in avoiding foreign taxes on the flows of income/gains from the units/certificates issued by the SPVs.
In addition to the above primary advantages, Ireland also offers an excellent legal and accounting/tax infrastructure, efficient listings of securities on the Irish Stock Exchange,