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An introduction to securitisation in Ireland - part II Back  
Last month Mark Thorne and Conor Houlihan introduced securitisation in Ireland by defining what securitisation is, examining Ireland's role in the establishment of special purpose vehicles (SPVs) and the special advantages Ireland offers in incorporating SPVs. In this, the second of a two-part series, Thorne and Houlihan examine other features of the use of SPVs including listings and ratings.
• Withholding tax exemptions
IFSC special purpose vehicles (SPVs) enjoy a general withholding tax exemption on interest payments to lenders, a benefit not available to non-IFSC SPVs. Non-IFSC SPVs may however create similar benefits by issuing securities that come within the ‘quoted Eurobond exemption’.
This exemption (which also applies to IFSC SPVs) applies only to listed bearer bonds and provides that in specified circumstances interest payments made will be exempt from tax and can be made gross. The availability of the exemption is subject to the securities being issued by a company, being quoted on a recognised exchange, being issued in bearer form and carrying a right to interest. In addition, the paying agent must be non-resident or alternatively the securities must be cleared through a recognised clearing system and investors must furnish a non-resident declaration.
Non-IFSC SPVs also benefit from an exemption from withholding tax on interest payments to corporates in any EU jurisdiction or any country with which Ireland has a double tax treaty. SPVs (both IFSC and non-IFSC) established in Ireland benefit from a network of double tax treaties with other countries. Interest or other payments received by such SPVs may therefore be free from withholding tax, depending on the country of origin of such payments.

• Accounting treatment
Irish SPVs are taxed in line with their accounting treatment and typically have no or only a residual profit. The amount of corporate income tax payable should therefore be minimal, as the Irish tax authorities do not look for any margin to be retained. The extraction of profit, if structured properly, is deductible and not taxable as a dividend.
Methods typically used to extract profits include total return swaps, the issue of a subordinated notes (subject to certain criteria) and servicing fees.

• Listing
In 1999 the Irish Stock Exchange introduced listing rules for asset backed securities, combining a comprehensive revision of the previous rules with a commitment to aggressive timing on review of documentation by the exchange. On the basis that these securities are specialist securities marketed to sophisticated investors, the conditions of listing are kept to a minimum and disclosure requirements are streamlined and in certain cases disapplied.

• Rating
The principal rating agencies will rate SPVs established in Ireland, provided their criteria are met. Generally an extensive legal opinion will be sought and the agency will be particularly concerned with collateral analysis, structural issues and any legal risks involved (e.g. insolvency etc.).

• On-going requirements
1. An Irish SPV must file annual audited accounts.

2. Issues of debt securities generally do not fall within the Irish regulatory regime for public offers as regulated by the Central Bank of Ireland, but will require the issue of a prospectus by the company complying with Irish public offer rules. This document must be filed with the Companies Registration Office.
3. An Irish SPV must file an annual tax return.

4. An Irish SPV must file details of all charges over its assets.

5. An Irish SPV must maintain a registered office located in Ireland.

6. A minimum of one of the directors must be an Irish resident, although typically to show management and control, two of the directors are Irish resident.

7. An Irish administrator is not necessary for non-IFSC SPVs, however arrangers do appoint them to prepare local accounts and tax returns and lend substance to the Irish SPV where access to sought to double tax treaties. Many administrators also provide share trustee and/or paying agency services.

8. If a SPVs Notes are listed in Ireland, an Irish paying agent is required under EU listing requirements.

Securitisation offers unique economic benefits in that it provides an originator with a relatively simple and risk free method of raising finance. The benefit to investors can also be attractive with most securitisations offering highly rated issues.
With ever increasing numbers of transactions being completed Dublin is ideally placed to take advantage of this growing market.

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