The Finance Bill 2011 (the Bill) was published by the Irish Minister for Finance on 21 January 2011. The Bill proposes a number of amendments to Ireland’s structured finance and securitisation framework, which is contained in Section 110 of the Taxes Consolidation Act 1997 (Section 110).
Since the introduction of the Irish framework over a decade ago, Ireland has become the location of choice for establishing SPVs for structured finance arrangements. Ireland has continuously adapted Section 110 to meet the changing landscape of international finance.
The current expectation is that the Bill will be signed into law by the end of February 2011.
The Bill extends the definition of “qualifying assets” (ie the assets which a Section 110 “qualifying company” (an Irish SPV) may acquire, manage and/or hold) by including carbon offsets, commodities and plant and machinery.
The carbon offset proposal is part of a broader initiative to develop Ireland as a green financial services centre.
“Commodities” is defined in the Bill as meaning tangible assets which are dealt in on a recognised commodity exchange. This is a welcome development, particularly as investors in structured products are increasingly seeking to diversify their investment risk by taking exposure to the performance of commodities without having to take such exposure through derivatives.
“Plant and machinery” is not defined in the Bill, but would include aircraft, ships, rolling stock and other forms of chattels. This is also a welcome development and should benefit the Irish leasing industry.
There are two principal technical amendments. One is intended to discourage Irish SPVs from entering into total return swaps with persons who are resident outside of the EU or a country with which Ireland has entered into a double tax treaty. Another seeks to discourage Irish SPVs from entering into ‘hybrid’ arrangements where profit participating interest payments made by an Irish SPV are not taxed in the country of receipt due to some form of participation exemption.
The Bill includes grandfathering provisions which are intended to ensure that transactions entered into before 21 January 2011 would not come within the remit of these technical amendments.