Guidance published for Irish securitisation companies

01 July 2012

Irish section 110 finance companies now commonly feature in international finance structures. Over the years their use has expanded from being the issuing vehicle in more traditional securitisation and repackaging type transactions, to a broader range of applications, such as being the issuers of Islamic finance instruments, distressed debt acquiring companies, the underlying vehicle for US life settlement funds, and, more recently as aircraft leasing companies. James Somerville of A&L Goodbody explores this trend in light of recent guidance.

Somerville believes section 110 companies are popular because of their transparent and flexible tax treatment in Ireland

There were some important changes made to the section 110 regime in the 2011 and 2012 Finance Acts and in April the Irish Revenue Commissioners issued some interpretative guidance notes on these changes. This article considers the background to these legislative changes and the content of the guidance notes.

One key factor in the popularity of section 110 companies has been their transparent and flexible tax treatment in Ireland (other factors include their onshore status and their ability to access Ireland's wide double tax treaty network). Section 110 vehicles are standard Irish companies which, provided they meet certain conditions, can avail of a specific tax regime which allows them to take trading deductions even though their activities may be passive in nature. Additionally, they retain the ability to obtain a deduction for interest...