- In this article, Daragh O’Shea, a partner in the Financial Services Department at Mason Hayes & Curran, explains why Ireland is a suitable location for asset securitization and the formation of SPVs.
- The information is aimed at asset managers and investment advisors who want to discover why more than 30% of the eurozone’s special purpose vehicles (SPVs) are established in Ireland.
- At FlexFunds, we offer an asset securitization program to issue exchange-traded products (ETPs) through SPVs domiciled in Ireland. For more information, feel free to contact our team of experts.
In the II Annual Report of the Asset Securitization Sector 2024-2025, developed by FlexFunds in collaboration with Funds Society, the most attractive assets for securitization according to surveyed professional managers were detailed.
It was also explained that asset securitization involves the creation of a special purpose vehicle (SPV) that acquires underlying assets to issue securities backed by them. In the case of FlexFunds, and many other global financial service providers, their SPVs are established in Ireland.
In fact, in the fourth quarter of 2023, Irish securitization SPVs accounted for nearly 32% of all such vehicles in the eurozone and more than 26% by assets.
According to the Central Bank of Ireland, a record high of 3,391 SPVs were domiciled in Ireland, with EUR 1.10 trillion in assets, at the close of 2023.
In this context, Daragh O’Shea, partner in the Financial Services Department at Mason Hayes & Curran, explained why Ireland is a popular country for setting up financial vehicles.
Tax efficiency and more
First, it is an onshore jurisdiction that is a member of both the European Union (EU) and the Organization for Economic Co-operation and Development (OECD). Additionally, it is the only EU jurisdiction governed entirely by common law.
Furthermore, the country has an efficient and transparent tax regime and an extensive network of double taxation treaties. According to O’Shea, as of May 2024, Ireland had signed agreements of this type with 76 countries, 74 of which are still in force.
“These treaties allow Irish SPVs to receive income and/or capital gains on foreign assets without being subject to foreign taxes or being subject to reduced foreign tax rates,” the executive commented.
Another benefit of Ireland is that it also enjoys a special tax regime under section 110 of the Taxes Consolidation Act 1997, which allows an Irish SPV to transfer its income to investors in the most tax-efficient way possible.
According to O’Shea, 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, allowing Irish SPVs to operate effectively in a tax-neutral manner and avoid tax leakage in transactions.
Additionally, Ireland offers flexible listing options, including the Vienna MTF, Euronext Dublin, the International Stock Exchange, and the London Stock Exchange.
Lastly, it boasts a highly developed infrastructure of solution providers, including auditors, lawyers, corporate services specialists, and other professionals to advise and manage SPVs.
“FlexFunds has built a series of efficient and reliable issuance platforms with the benefits of SPVs established in Ireland. This model is increasingly common, with 91% of Irish SPVs set up by international sponsors, 70% of which are based in the UK or the United States,” O’Shea concluded.
The II Annual Report of the Asset Securitization Sector 2024-2025 by FlexFunds can be downloaded easily and for free with just a few clicks.
