Reviewing Ireland as a Business Location for Special Purpose Vehicles (SPV’s)

By John O’Neill (Guest Poster) 25th May 2013

Ireland is fast becoming one of the most favourable jurisdictions in Europe, if not the world for registering a SPV Company. A simple way to define a Special Purpose Vehicle (SPV) is that it is a legal company, formed to meet short-term investment objectives. International businesses often require setting up these temporary entities for their different financing needs, such as debt settlement, risk reduction, so on and so forth. However, not too many economies facilitate the conception of Special Purpose Vehicle (SPV) companies while the countries which allow the establishment of such companies often have rigid terms and conditions to follow.

For the various needs of entrepreneurs, Ireland has become a preferred destination to register a company and set up SPV companies. They are able to meet different requirements including asset repackaging and securitization. What makes it a stupendous option is Ireland’s double tax treaty along with the specific special tax treatment for SPV firms. Investors also favour Ireland for their SPV companies because it is a member of the European Union (EU) as well as the Organization for Economic Co-operation and Development (OECD).

Ireland also offers standardized principles and a structural approach for SPV companies, according to which the following factors are of key importance:

Section 110 Companies

Irish SPV companies must fall under the legal definition of a qualifying company. A qualifying company, also known as Section 110 Company, should be an Irish resident with the direct or indirect acquisition of qualifying assets only.

Qualifying Assets for Irish SPVs

The qualifying assets include a range of financial assets, commodities, plant and machinery.

Accounting Treatment

The Generally Accepted Accounting Principles (GAAP) of Ireland forms the common standards for SPV companies. Although other accounting standards may be opted for but the Irish GAAP is definitely a better alternative to avoid future issues. 

Market Value Requirement for First Transaction

According to the prevalent law, an Irish SPV has to follow a minimum requirement for its first transaction size. As a result, the initial acquisition of the qualifying assets for an Irish company should equal to a market value of EUR 10 million. However, the minimum requirement is mandatory only on the date of the first transaction by an SPV in Ireland. It is applicable to the following:

  • Financial Assets 
  • Swap Agreements
  • Other Financial Arrangements

Financial Arrangements

An Irish SPV is entitled to enter various financial arrangements which are legally enforceable. Some of these are listed below:

  • Shares
  • Bonds
  • Bills of Exchange
  • Receivables
  • Leases and Loans
  • Lease Portfolios
  • Promissory Notes
  • Plant & Machinery
  • Insurance Contracts
  • Reinsurance Contracts
  • Transferrable Instruments
  • Financial Derivative

 

Withholding Tax

With regard to withholding tax, Irish SPV companies are provided with several withholding tax exemptions. One of the most commonly claimed ones is the Quoted Eurobond Exemption. The Quoted Eurobond is a quoted security with a right to interest. For an Irish SPV with a non-resident owner or investor, the Quoted Eurobond Exemption refers to the exemption from withholding tax on the interest paid on Quoted Eurobonds.

Other withholding tax exemptions include Qualifying Person Exemption and Wholesale Debt Exemption.

 In a nutshell, Ireland is a globally preferred location for establishing SPV companies. This is due to the country’s attractive tax structure and legal system for international investors. 

For more information on how to register a Special Purpose Vehicle (SPV company) in Ireland, or on how to incorporate an Irish company in general please don’t hesitate to contact us.

Contact us now for further details

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