Investment Funds
Ireland is one of the most important destinations in the world for regulated funds.
It offers one of the best proposals in financial structures backed by its long experience in that sector. It keeps evolving and adapting to current real conditions while still offering endless investment opportunities.
Investment funds are classified as UCITS or non-UCITS. UCITS stands for “Collective Investment in Transferable Securities” and these funds are designed to meet EU Directives. As for the “Non-UCITS Funds”, they are divided into three categories: (i) Retail Investors, (ii) Professional Investor and (iii) Qualifying Investor Fund (hereinafter, QIF).
The main goal of this article is to summarize the characteristics of the constitution of a QIF and its “Eight Year Rule”.
The QIFs are considered the most common financial vehicle, as it allows a flexible investment, even with regard to the quantity limits and indebtedness. QIFs are usually structured through hedge funds, FoHFs, private equity funds, real estate funds and feeder structures.
The first essential requirement is an initial subscription of €100,000 for each investor. The investor must meet certain requirements such as a proper technical knowledge, backed by a European Union credit entity which certifies the investor’s sufficient financial expertise to price risks for each investment.
Regarding the applicable regulatory regime to QIFs, the Central Bank of Ireland is the competent authority that supervises, monitors the Irish Funds. The QIFs are admitted throughout the European Economic Area and they are considered as private investment vehicles.
Two of the great advantages of Ireland are the flexibility to establish funds in the country and the quick authorization procedure to start trading. The QIFs may be authorized only in one day; it is a fast-track authorization procedure.
On the one hand, the fund itself should be authorized and, on the other, the compliance of investor’s, promoters’ and fund management Company’ requirements must be checked. Moreover, the fund may be subject to future verification.
| All Irish funds have the same favorable tax regime. For Irish residents it is important to highlight the rule introduced in 2006, called the "Eight Year Rule" |
These funds are subject to the roll-up regime, which means that at the time that a fund investment is made a period of 8 years starts. In case the investment is not distributed or reimbursed within that period, taxes must be paid at the end of the period. In other words, the fund is not taxed during that 8-year period and, therefore, income and profits are not taxed immediately; they will only be taxed when distributed or once the period has elapsed.
These funds are subject to the roll-up regime, which means that at the time that a fund investment is made a period of 8 years starts. In case the investment is not distributed or reimbursed within that period, taxes must be paid at the end of the period. In other words, the fund is not taxed during that 8-year period and, therefore, income and profits are not taxed immediately; they will only be taxed when distributed or once the period has elapsed.
All in all, Ireland provides confidence and maturity in terms of investment; it has become one of the most appreciated European countries to establish investment funds. It offers a good tax treatment, constitution speed and, most importantly, it has entered into tax conventions for the avoidance of double taxation with more than 70 countries.
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