Irish Section 110 SPVs for Securitisation

What Is a Section 110 Company?

A Section 110 company is an Irish-resident special purpose vehicle (SPV) that qualifies for a bespoke tax regime under Section 110 of the Taxes Consolidation Act 1997 (TCA 1997). The regime was designed to facilitate Ireland's role as a domicile for securitisation, structured finance, CLO issuance, and other capital market transactions.

The key feature of the Section 110 regime is that it allows the SPV to achieve tax neutrality — the SPV's taxable profits are reduced to near-zero through the deduction of profit-participating note (PPN) interest payments to investors, ensuring that economic returns flow through to noteholders without an Irish corporate tax charge.

As of 2025, Ireland is the largest securitisation domicile in Europe, with over €800 billion in assets held through Section 110 structures — surpassing Luxembourg, the Netherlands, and the UK.

Qualifying Conditions

To benefit from the Section 110 regime, a company must satisfy several conditions:

1. Irish Tax Residence

The company must be incorporated and tax-resident in Ireland. This requires that the company's central management and control is exercised in Ireland (Irish-resident directors, Irish board meetings).

2. Qualifying Assets

The company must hold or manage qualifying assets with an aggregate value of at least €10 million at the time of first acquisition. Qualifying assets include:

• Financial assets: Loans, bonds, receivables, derivatives, CDOs, CLOs, RMBS, CMBS, and other debt instruments
• Commodities: Physically-settled or cash-settled commodity contracts
• Carbon credits: EU Emission Allowances and Certified Emission Reductions
• Plant and machinery: Subject to finance lease arrangements
• Receivables and trade debtibles

3. Notification to Revenue

The company must notify the Irish Revenue Commissioners within 8 weeks of the first acquisition of qualifying assets. This is a notification, not an application — the company self-assesses its eligibility.

4. Profit-Participating Notes (PPNs)

The company must fund its acquisition of qualifying assets by issuing profit-participating notes (PPNs) — debt instruments whose interest payments are calculated by reference to the company's profits. The PPN interest is deductible against the company's taxable income, reducing the effective tax charge to near-zero.

How Tax Neutrality Works

The Mechanism

1. The Section 110 company acquires qualifying assets (e.g., a portfolio of loans) funded by the issuance of PPNs to investors (typically listed on the Irish Stock Exchange)
2. The qualifying assets generate income (interest, principal repayments, recoveries)
3. The company deducts all operating expenses (administration, trustee fees, legal costs)
4. The remaining profit is paid out as PPN interest to noteholders
5. After the PPN interest deduction, the company's taxable profit is nil or near-nil
6. The company pays 12.5% corporate tax on its residual profit (typically a small retained margin — often €1,000-€5,000 per year)

Anti-Avoidance Provisions (Post-2012 Amendments)

Following concerns about the use of Section 110 companies for domestic Irish property transactions, the Finance Act 2016 and subsequent amendments introduced restrictions:

• Section 110(5A): PPNs issued to connected parties in respect of Irish land and property assets are not deductible — effectively subjecting Irish property income to the full 25% non-trading rate
• Section 110(5B): PPNs issued to parties in non-treaty jurisdictions are subject to a 20% withholding tax unless the noteholder is a qualifying fund, regulated entity, or pension fund

These amendments were specifically targeted at preventing the use of Section 110 structures to hold Irish commercial and residential property in a tax-neutral wrapper. The amendments do not affect the core use case of Section 110 — international securitisation and structured finance.

Common Use Cases

CLO Issuance

Collateralised Loan Obligations (CLOs) are the single largest category of Section 110 assets. Ireland is the dominant European domicile for CLOs, hosting approximately 80% of European CLO issuance. A typical CLO structure involves:

• A Section 110 company acquires a portfolio of leveraged loans
• The company issues rated and unrated notes to investors (AAA to equity tranches)
• Loan cash flows are distributed to noteholders according to the CLO waterfall
• The Section 110 company achieves tax neutrality through PPN interest deductions

RMBS and CMBS

Irish Section 110 companies are widely used for residential and commercial mortgage-backed securities originated by European banks. The SPV acquires a pool of mortgages, issues notes to capital market investors, and achieves tax neutrality.

Aircraft Leasing SPVs

Ireland is the world's largest aircraft leasing centre, with over 50% of the global leased aircraft fleet managed from Ireland. Section 110 companies are used to hold aircraft assets and related financing structures, though many aircraft leasing structures also use the standard 12.5% trading rate.

Fund Finance and Warehouse Facilities

Private credit funds and banks use Section 110 companies as warehouse vehicles to aggregate loan portfolios before securitisation or as financing conduits for fund-level leverage facilities.

Repackaging Vehicles

Section 110 companies are used to repackage illiquid or complex assets (e.g., insurance-linked securities, emerging market debt, distressed loans) into tradeable note form for capital market distribution.

Listing Requirements

Section 110 notes are typically listed on Euronext Dublin (the Irish Stock Exchange's regulated market) or the Global Exchange Market (GEM) — Euronext Dublin's exchange-regulated market. Listing provides:

• Tax benefits for noteholders in certain jurisdictions (listed debt may qualify for exemptions from withholding tax or capital gains tax in the noteholder's home country)
• Institutional investor access — many pension funds and insurance companies are mandated to invest only in listed securities
• Transparency — listing requires ongoing disclosure, providing investors with regular reporting

Euronext Dublin is the world's largest exchange for debt listings, with over €4 trillion in listed securities.

Regulatory and Compliance Framework

Section 110 companies are not regulated by the Central Bank of Ireland (unlike Irish funds). However, they must comply with:

• Irish company law (Companies Act 2014) — including filing annual returns with the CRO
• Revenue reporting — annual corporation tax returns, Country-by-Country Reporting (CbCR) for groups above the €750 million threshold, and FATCA/CRS reporting
• AML/CFT requirements — Section 110 companies must comply with Ireland's Criminal Justice (Money Laundering and Terrorist Financing) Act 2010

Service Providers

A Section 110 company typically appoints:

• Corporate administrator (Irish-based CSP providing directors, company secretary, and registered office)
• Cash manager (managing payments and collections on the underlying assets)
• Trustee (acting on behalf of noteholders, typically a major trust corporation)
• Auditor (registered Irish auditor for annual statutory accounts)

Key Takeaways

• Section 110 provides a tax-neutral SPV regime for securitisation, CLOs, RMBS/CMBS, and structured finance
• Tax neutrality is achieved through the deduction of profit-participating note interest, reducing taxable profit to near-zero
• The minimum qualifying asset threshold is €10 million, with Revenue notification required within 8 weeks
• Post-2016 anti-avoidance rules restrict the use of Section 110 for Irish property assets and payments to non-treaty jurisdictions
• Ireland hosts approximately 80% of European CLO issuance and over €800 billion in Section 110 assets
• Euronext Dublin provides the listing infrastructure for Section 110 notes, serving as the world's largest debt listing venue