The Irish Collective Asset-management Vehicles Act 2015 was signed into law by the Irish President on 4 March 2015.
The Act provides for a new Irish fund structure, the ICAV, which is specifically designed to meet the needs of the global funds industry. The ICAV has several advantages over the existing corporate structure for funds in Ireland - the public limited company (plc). For example, the new structure is not subject to much of the Irish and European company law and accounting rules which currently apply to Irish funds structured as plcs. This should result in lower administrative costs.
The primary advantage of the ICAV is that it will be able to elect in its classification under the U.S. “check the box” taxation rules to be treated as a transparent entity for U.S. federal income tax purposes. This will result in an ICAV being treated as a "partnership" (if it has more than one investor) or a "disregarded entity" (if it has only one investor) for US tax purposes. This will allow U.S. taxable investors to avoid certain adverse tax consequences that would normally apply to “passive foreign investment companies” under the PFIC regime.
Given the ICAV’s ability to “check the box” for US tax purposes, there will be an opportunity for existing offshore funds to re-domicile to Ireland and continue to maintain favourable tax treatment for their US taxable investors. The ICAV should enhance the attractiveness of Irish funds to investment managers seeking to market their funds in the US.
Existing plcs will also be able to convert to an ICAV and it is expected that a large number of existing plcs will take advantage of this option, in particular, to avail of the tax treatment benefits available for US taxable investors.
The Act must be brought into operation by Order of the Irish Minister for Finance but this is expected very soon. The Central Bank of Ireland has previously indicated that it will be in a position to accept applications under the Act within two weeks of its coming into operation.
To read more on the ICAV Bill, please click here.