favicon    Nexus Taxation Insight

Ireland offers a favourable taxing regime under Section 110 for a broad range of structured finance and securitisation transactions.   The Section 110 taxing regime is designed to allow an Irish tax resident special purpose vehicle (SPV) to be tax neutral provided the relevant legislative conditions are satisfied.  These SPVs are typically referred to as ‘Section 110 companies’.  This tax neutral regime has been in place for almost 25 years, with the legislation being expanded and improved upon on a regular basis.  Section 110 companies are widely used in the international financial services sector for bank loan book securitisations, as bond issuance vehicles, asset leasing vehicles, investment fund subsidiaries, investment holding vehicles and for CDO, CLO and NPL structures etc.

Section 110 criteria

In order to be regarded as a ‘qualifying company’ for the purposes of Section 110, a Section 110 company must satisfy a number of criteria, including the following:

  • Section 110 company must be tax resident in Ireland.
  • It must hold and/or manage certain “qualifying assets” which is broadly defined to include a wide range of financial assets, commodities and plant and machinery.
  • The day one value of the qualifying assets must be a minimum of €10m.
  • All transactions carried out by the Section 110 company must be on an arm’s length basis (however see below regarding profit dependant interest payments).

Benefits of Section 110

The Section 110 regime provides promoters and investors with an attractive taxing regime in a stable onshore jurisdiction.  The Irish financial services sector is well developed with experienced and cost efficient service providers.  Other key benefits include:

  • Where structured correctly a Section 110 company should be tax neutral in Ireland (see below).
  • A Section 110 company benefits from Ireland’s  extensive and growing double tax treaty network (some 72 agreements signed as at July 2015) which serve to reduce or eliminate withholding taxes on income flows and gains derived by the Section 110 company from its qualifying assets.
  • No withholding tax on interest payments by the Section 110 company to EU/tax treaty residents or on quoted Eurobonds issued by the Section 110 company.
  • No debt to equity or controlled foreign corporation legislation.

Tax neutrality

Section 110 companies are typically funded through the issuing of profit participating loans (PPLs) or other profit dependent securities.  These PPLs provide for an interest coupon equal to the residual profits of the Section 110 company, i.e. its income and gains less normal operating expenses.  The provisions of Section 110 specifically allow for a tax deduction for interest payments on PPLs (together with tax deductions for other normal operation expenses), thus achieving tax neutrality.  It should be noted that the tax deduction for PPL interest is not available in all cases, therefore careful tax structuring is required when establishing a Section 110 company.


To find out more about the Ireland’s Section 110 Tax Regime please contact Partner at Nexus Taxation, Patrick McClafferty partrickmcclafferty@nexustaxation.com