Section 110 of the Taxes Consolidation Act 1997 sets out a regime for the taxation of special purpose companies set up to securitise assets. The tax provisions are intended to create a tax neutral regime for bona-fide securitisation and structured finance purposes. The section 110 regime enables noteholders to invest through one structured vehicle, without giving rise to an additional layer of tax as compared to a direct investment in the underlying assets.
Securitisation allows banks to raise capital and to share risk and, by providing a repackaging and resale market for corporate debt, it lowers the cost of debt financing. It is accepted that having the option for more diversified sources of financing is good for investment and business. It is also important for financial stability in the economy, as the ability to securitise loan books plays an important role in allowing banks to meet their capital requirement obligations and to continue lending to businesses and individuals.
To come within the section 110 regime, a company must be a “qualifying company” and fulfil a number of conditions, including in relation to the type of assets that the company can hold and in turn the nature of activities that may be undertaken by the company. To be a qualifying company, section 110 TCA 1997 requires (among other things) that:
The company is tax resident in Ireland and carries on the business of holding or managing "qualifying assets". Generally speaking, qualifying assets are assets in respect of which securitisation transactions are undertaken. This includes a broad range of financial and other assets including shares, bonds, derivatives, loans, deposits, commodities, plant and machinery and invoices and other types of receivable.
The value of qualifying assets is at least €10 million at the time they were acquired by the section 110 company
Apart from the holding or managing of the qualifying assets, the company is not carrying on any other activities.
In order to avail of this regime, a company must, amongst other conditions, notify an 'authorised officer' in Revenue that:
- it is, or intends to be, a 'qualifying company'
and
- it meets the criteria of paragraphs (a) to (e) of the definition of 'qualifying company' Section 110(1) of the TCA, 1997.
I am informed by Revenue that it is not in a position to provide the information requested regarding estimated assets under management or the number of section 110 companies that owned Irish assets.
Irish resident section 110 companies are obliged to report quarterly data to the Central Bank under section 18 of the Central Bank Act 1971. The data reported includes details of the assets held by section 110 companies. This data can be found on the Central Bank website –
www.centralbank.ie/statistics/data-and-analysis/other-financial-sector-statistics/financial-vehicle-corporations/previous-statistical-releases
In the context of the specific questions that you have raised, the Central Bank have provided information as follows:
1. The total value of assets held in section 110 special purpose companies broken down by qualifying asset type
The Central Bank has provided the below table of Section 110 special purposes companies broken down by qualifying asset type.
Outstanding Amounts - € billions
|
Assets
|
Type of Assets
|
FVC
|
Other SPE
|
Total
|
|
Assets
|
Deposits and loan claims
|
101.6
|
139.6
|
241.2
|
|
Assets
|
Securitised loans
|
153.0
|
55.3
|
208.3
|
|
Assets
|
Securities other than shares
|
324.3
|
104.1
|
428.3
|
|
Assets
|
Other securitised assets
|
19.0
|
23.8
|
42.8
|
|
Assets
|
Shares and other equity
|
24.1
|
55.7
|
79.8
|
|
Assets
|
Other assets
|
43.8
|
103.3
|
147.1
|
|
Total
|
|
665.8
|
481.8
|
1,147.5
|
2. The percentage shareholding held by persons on companies within the state and the top ten other jurisdictions for shareholders
The Central Bank have confirmed that Section 110 companies typically issue little or no equity and are typically controlled by the sponsor(s) who generally do not hold shares. The Central Bank have provided a table below of the geographical breakdown of debt securities issued.
|
Outstanding Amounts - € billions
|
FVC
|
Other SPE
|
Total
|
|
Debt securities issued
|
526.5
|
178.6
|
705.1
|
|
Ireland
|
271.8
|
71.2
|
343.0
|
|
Other Euro Area
|
84.8
|
30.2
|
115.1
|
|
United Kingdom
|
90.0
|
15.6
|
105.6
|
|
United States
|
57.4
|
42.8
|
100.2
|
|
All Other Countries
|
22.4
|
18.8
|
41.2
|
3. The number of section 110 special purpose companies broken down by transaction type that they have indicated to revenue that they engage in CDO, CLO, RMBS, CMBS, loan origination, aircraft leasing, etc;
The Central Bank have confirmed that they do not publicly provide a breakdown of the number of section 110 companies by transaction type. The have provided a breakdown of section 110 companies by activity and total assets, including the five largest FVC categories and the 5 largest Other SPE categories is set out below.
|
|
SPE Activity
|
Total Assets
|
|
FVC
|
Collateralised Loan Obligations
|
270.2
|
|
FVC
|
Other
|
142.5
|
|
FVC
|
ABCP
|
67.8
|
|
FVC
|
Residential Mortgage Backed Securities
|
50.6
|
|
FVC
|
Trade Receivables
|
44.4
|
|
Other SPE
|
Investment Fund Linked
|
141.5
|
|
Other SPE
|
Other
|
79.7
|
|
Other SPE
|
Intra Group Financing
|
60.8
|
|
Other SPE
|
Loan Origination
|
52.2
|
|
Other SPE
|
External Financing
|
43.0
|
4. The total value of funding sources from persons or companies with in the state & the top ten jurisdictions of the persons or companies indicated to revenue as funding sources;
The Central Bank confirm that Section 110 companies are funded primarily by loans and deposits received, and debt securities issued. They have set out below a table of the liability side of section 110 companies, including the geographical counterparts for loans and deposits received and debt securities issued. The total value of funding sources from companies within the state is €435.1bn.
|
Outstanding Amounts - € billions
|
|
FVC
|
Other SPE
|
Total
|
|
Loans and deposits received
|
Total
|
72.9
|
187.3
|
260.2
|
|
Loans and deposits received
|
Ireland
|
18.5
|
73.5
|
92.0
|
|
Loans and deposits received
|
Other Euro Area
|
18.3
|
23.7
|
42.0
|
|
Loans and deposits received
|
United Kingdom
|
12.9
|
22.3
|
35.2
|
|
Loans and deposits received
|
United States
|
18.6
|
38.8
|
57.4
|
|
Loans and deposits received
|
All Other Countries
|
4.5
|
29.1
|
33.6
|
|
Debt securities issued
|
Total
|
526.5
|
178.6
|
705.1
|
|
Loans and deposits received
|
Ireland
|
271.8
|
71.2
|
343.0
|
|
Loans and deposits received
|
Other Euro Area
|
84.8
|
30.2
|
115.1
|
|
Loans and deposits received
|
United Kingdom
|
90.0
|
15.6
|
105.6
|
|
Loans and deposits received
|
United States
|
57.4
|
42.8
|
100.2
|
|
Loans and deposits received
|
All Other Countries
|
22.4
|
18.8
|
41.2
|
|
Capital and reserves
|
Total
|
-1.2
|
47.8
|
46.6
|
|
Other liabilities
|
Total
|
67.6
|
68.0
|
135.6
|
|
Total
|
|
665.8
|
481.8
|
1147.5
|
