Irish challenge with CCF structure
Tax legislation for a pensions investment pooling vehicle has been passed by the Dail, the Irish parliament, as a new category of investment fund. Included in this year’s Finance Act, the vehicle is designed to provide tax transparency to pension funds using it.
“This is a new vehicle set up under contract law, rather than using a company or unit trust structure,” says Mairead O’Connor, tax manager with global accountancy firm PriceWaterhouseCoopers(PWC), in Dublin. The Finance Act explicitly states that the vehicle is transparent for tax purposes.
The aim is that a pension fund pooling investments referred to as a ‘contractual common fund’ (CCF) in the vehicle would still be able to access its own jurisdiction’s double taxation treaty (DTA) with the country in which the investments are being made. “So if a UK pension fund was using this vehicle to invest in US markets, because of the vehicle’s transparency, it would still be able to access UK-US DTAs. In effect, the Irish fund structure is disregarded for this purpose.”
The legislation also restricts the application of the pooling vehicle to pensions funds or to trustees and custodians holding pensions assets. The pooling structure will mirror the Fonds Commun de Placement structure familiar on the continent, which up to now has not been included in the Irish investment fund laws, providing for investment companies, unit trusts and partnerships. “It is the contractual nature of the arrangement that provides the transparency,” says O’Connor.
Initially, the CCF will be required to be established under the provisions of the European Union’s Ucits regulations under the terms of the Finance Act legislation. However it is envisaged that non-Ucits vehicles of this category may be introduced in the future.
The Department for Enterprise, Trade and Employment, in Dublin, which is responsible for regulations in this area, confirms it has recently received a proposal in this regard. These proposed amendments to the Ucits regulations are being examined in consultation with the Central Bank of Ireland. It is anticipated such a vehicle could be introduced shortly, says the Department.
Explaining the background to the new pooling vehicle, Brendan Logue of the Industrial Development Authority in Dublin says the initiative was taken because Ireland felt the need to “raise its profile” on the pensions front to meet the challenge of Luxembourg.
The IDA undertook market research among multinational groups about what they would like by way of pensions arrangements.