Irish Budget 2013: Financial Services and Investment Funds
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.
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.
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.
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.
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.