Important measures for international investors in Ireland and investment managers with Irish investment funds and SPVs
On Wednesday 5 December 2012, the Irish Minister for Finance presented Budget 2013, the Irish government's fiscal programme of measures for the coming year, against an improving but still challenging economic backdrop.
This update summarises the relevant budget measures for international investors in Ireland, domestic companies and banks and multinational corporations with operations in Ireland and investment managers and arrangers with Irish investment funds and capital markets SPVs.
There were a number of measures of importance to the financial services and investment funds sector.
Real Estate Investment Trusts
The introduction of Real Estate Investment Trusts
("REITs") has been a government
objective for some years. It is now confirmed that REITs will be
introduced and will likely take the form of a listed company used
to hold property. It is expected that the regime will be similar to
those available in the US and UK.
Very little detail is available currently but it was confirmed that
qualifying income and gains will be exempt from corporation tax at
the level of the REIT itself. Investors are likely to be
subject to a modified tax regime on distributions from the
REIT.
Full details will be contained in the Finance Bill which will be
published in January 2013. International investors in Ireland will
be keen to contrast the REIT proposals with established Irish
investment property structures such as Qualifying Investor
Funds.
FATCA
The Minister for Finance announced that Ireland has become one of
the first countries to agree an intergovernmental agreement
("IGA") with the US in respect of
the Foreign Account Tax Compliance Act
("FATCA"). The IGA will allow
Irish financial institutions and investment funds to report to the
Irish tax authorities rather than directly to the US Internal
Revenue Service. This is an extremely positive step for
Ireland's investment fund and securitisation regimes, providing
certainty of treatment and efficiency for arrangers and investors.
A more detailed update from the Maples Tax Group will follow once
the IGA and the related legislation has been published.
Investment Funds
Irish authorised investment funds are generally exempt
from tax on their income and gains. A charge to tax arises on
certain "chargeable events" in respect of certain Irish
resident investors. The rate of this tax has been increased
from 30% to 33% on payments made annually or more frequently and
from 33% to 36% on other payments.
Aviation Sector
The government is examining the feasibility of
new funding sources for aircraft finance and leasing companies.
Although no detail has been published, this review is expected to
further support Ireland as a leasing centre for international
aviation leasing and finance.
Outside the finance sphere, it is intended to create an accelerated
capital allowance (tax depreciation) scheme for the construction of
certain aviation-specific facilities such as hangers. This neatly
coincides with the planned development of Shannon International
Airport in 2013 and the government's intention to support
additional aviation sector activities in Ireland. The scheme will
operate for a period of five years subject to some
restrictions.
Venture Capital
The Irish National Pensions Reserve Fund (the
"NPRF") is developing a range of
investment funds to provide equity, credit and recovery investment
to the SME (small medium enterprises) sector. This project
has been ongoing for a number of months and will see the NPRF
partner with investment managers in establishing funds ranging from
€100 million to €400 million in size. In each case, the
NPRF is acting as a cornerstone investor with further funds being
sought from third parties. The funds will invest in, or offer
credit to, SMEs across all sectors of the Irish economy. The
only restriction on investment is in relation to property.
Many of these projects are already quite advanced and will soon
have capital ready for deployment across their chosen
sector.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
