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Industry Updates

Irish Budget 2013: Financial Services and Investment Funds

06 Dec 2012

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.

Related Services

Legal Services

Access to market leading legal advice across a wide range of industries and sectors is paramount to the success of businesses seeking international expertise with local support. The Maples Group's legal services teams are globally coordinated, with consistent systems, policies and procedures across all offices, and connected by a common goal: to deliver the highest quality advice and solutions to our clients. Offering an extensive range of legal services, we advise financial, institutional, business and private clients on the laws of the British Virgin Islands, the Cayman Islands, Ireland, Jersey and Luxembourg, delivering time zone convenience and accessibility from these and other leading key international financial centres. Through constructive dialogue and engagement with governments, regulators and industry associations, we have helped shape financial industry innovation and regulation in many of the jurisdictions in which we operate.

Tax

Our market leading Tax team is at the forefront of innovation in developing new structures and strategies for international and Irish clients on cross-border tax matters. 

Regulatory & Compliance

Risk management and regulatory compliance have become key priorities for clients with both regulators and investors demanding greater transparency and enhanced reporting. Compliance with these obligations means ensuring a clear understanding of the ongoing requirements and often the aggregation, calculation, maintenance, reconciliation and submission of extensive data sets to various parties on a regular basis. The Maples Group has unrivalled expertise in regulatory matters, particularly in the field of anti-money laundering and counter-terrorist financing. We pride ourselves on our established relationships with regulatory bodies and have had significant involvement with the development of financial services law and policy both locally and internationally. Our ability to draw on this experience enables us to provide prompt, pertinent and clear advice that adds real value and helps our clients determine how best to maintain compliance across multiple jurisdictions.