Ms Laura McKeown
International Tax Partner

Laura is an international tax partner in the PwC Ireland Asset and Wealth Management tax practice with a specific focus on fund structuring for alternative investments.

Laura has a broad range of experience across the financial services sector and advises private equity funds, hedge funds, sovereign wealth funds and pension funds on international tax structuring projects. Laura regularly advises on the taxation implications of cross-border investment using all forms of Irish investment platforms including both regulated and unregulated funds and limited partnership structures.

Laura worked on the Irish tax desk in PwC New York where she advised Global asset managers and multi-national groups on Irish corporate and product tax structuring.

Laura leads the PwC Ireland Financial Services tax policy team. She is an active member of the Irish Debt Securitisation Association tax working group, the Irish Funds ELTIF working group and is the Vice-Chair of the Invest Europe Tax Committee working group.

Laura is a qualified Chartered Accountant with the Institute of Chartered Accountants in Ireland and a member of the Irish Taxation Institute.

Ms Rachel Devlin
International Tax Director

Rachel is an international tax director in the PwC Ireland Asset and Wealth Management tax practice with over 10 years experience in Financial Services.

Rachel focuses primarily on investment in private assets providing advice to a range of clients including hedge funds, private equity houses and sovereign wealth funds. Rachel advises on the Irish tax and cross-border implications of investing in the full suite of Irish fund products.

Rachel is a qualified Chartered Accountant with the Institute of Chartered Accountants in Ireland and a member of the Irish Taxation Institute.

Ireland – a Center of Excellence for Private Assets

Introduction

Ireland has long been renowned as a key location from an asset management perspective, offering a full suite of locally domiciled solutions and acting as a gateway to Europe for global asset managers. The industry, which exists at its core to meet the needs of investors around the world as they seek to ensure financial security and stability in retirement, continues to evolve, fuelled by changing investor preferences, an increasing focus on sustainability, regulatory requirements, technological disruption and volatility in international markets.

As of November 2024, the total number of regulated investment funds domiciled in Ireland reached 8,899, with net assets totaling almost €5 trillion¹https://www.irishfunds.ie/facts-figures/industry-statistics/total-irish-domiciled-funds/, a 22% increase from 2023. This increase strongly reflects the growing investor appetite in the Irish market for regulated products (such as the Irish Collective Asset-Management Vehicle and Investment Limited PartnershipI act). Equally, in an unregulated context, assets held by Irish Special Purpose Vehicles have surpassed €1.1trillion²ttps://static1.squarespace.com/static/61c73890f0872428c1077ab6/t/658254d01ff7056d2df94076/1703040210097/Irish+SPV+Report+-+Q3+2023.pdf, with 3,522 SPVs active as of Q3-2024³https://idsa.ie/industry-statistics/, representing more than 25% of the European market by assets.⁴https://idsa.ie/why-ireland-for-spvs/

Recent trends and developments

The global alternatives industry has continued to evolve against a backdrop of rising inflation, geopolitical uncertainty and an increased regulatory focus. The industry, which according to the PwC Asset and Wealth Management Revolution 2024 Report, is forecast to reach $24.6trillion by 2028⁵https://www.pwc.com/gx/en/issues/transformation/asset-and-wealth-management-revolution.html, has continued to see increased asset diversification with a growing demand for infrastructure, digital assets and those which are focused on the energy transition agenda in addition to the more traditional private equity and debt asset classes.

Ireland has firmly established itself as a location of choice for investors and asset managers alike and is the fastest growing major European domicile for funds, representing 19.7% of all European fund assets⁶https://www.irishfunds.ie/news-knowledge/news/now-available-why-ireland-2024-publication/. Ireland attracts international asset managers due to its open, transparent and well-regulated investment environment, its strong emphasis on investor protection, common law legal system and tax efficient product suite supported by a dynamic and innovative business culture.17 of the top 20 Global Asset Managers have Irish domiciled funds.

Market Update and Recent Trends

Funds Sector 2030: Sectoral Review

Recognising the important role that asset management and fund servicing have played in the success of the Irish private asset sector over many years, the Irish Department of Finance recently carried out a review of the Irish Funds industry “Funds Sector 2030 Review” (“the Review”). The principal focus of the Review was to ensure the sector remains resilient, future-proofed and a continued example of international best-practice. From a private assets perspective, the Review recommended implementing a package of measures, targeted at improving the attractiveness of Ireland’s existing authorised fund structures. This Review is a positive development and ultimately demonstrates the commitment to the Irish Funds sector from a government policy perspective. Positive changes are expected this year on foot of the recommendations made in the final report which was delivered to the Minister for Finance in late 2024.

Technology and Innovation

Technology is disrupting the asset management industry including the way investments are traded, securities are held and contracts are settled. This change challenges traditional infrastructure and forces industry players to adapt to technology to facilitate alternative processes, while regulators must simultaneously navigate innovation and protection. As an industry, appropriate response is needed. It was therefore positive to see the Irish Government’s acknowledgement of the future role of technology within the Funds’ industry as a key finding of the Funds 2030 Review.

Ireland is well positioned to be a leading innovator in the global asset management industry by harnessing our position as both a leading fund domicile and the European hub of some of the largest technology companies in the world. The intersection of these two sectors at a time of unprecedented digital transformation and innovation offers a unique opportunity for Ireland. There is an increasing focus from the sector on digital distribution capabilities and separately an investor appetite to gain exposure to more diverse asset classes including digital assets.

Retailisation of alternatives

The focus of private and retail investors is increasingly shifting towards alternative investments, bringing with it increased complexities. Unlocking this market segment with the increasing appetite for evergreen structures will require managers to reinvent business models and product offerings. Ireland is best placed to meet the demands of retail investors, not least because of its long history in the retail focused ETF market, but also given the tax certainty that can be offered throughout the lifecycle coupled with a strong regulatory landscape.

Product Update

While the ICAV and Section 110 company remain the most popular Irish regulated and unregulated structure, respectively, the broader Irish product suite has continued to develop and expand to meet the changing needs of the industry. Recent tax reforms have enhanced Ireland’s investor offering as outlined below.

Investment Limited Partnership

Amendments to the legal and regulatory framework governing the Irish regulated partnership offering has significantly enhanced Ireland’s offering for asset managers seeking to set up an onshore private fund.

As an AIFMD-compliant and EU domiciled common law partnership, the Investment Limited Partnership (ILP) has become Ireland’s flagship partnership vehicle for use as an investment fund, typically selected by managers availing of closed-ended strategies in real estate, private equity, credit, infrastructure and sustainable finance . The demand for the ILP regime will be further strengthened by the reform to the Irish holding company regime, referenced below.

Irish Holding Company

The introduction of a participation exemption for foreign dividends from 1 January 2025 enhances Ireland’s competitiveness as a product domicile and improves the holding company structure. The changes were introduced further to an extended period of stakeholder consultation and form part of a broader modernisation and simplification of Ireland’s corporate tax code.

European Long-Term Investment Funds (ELTIF)

The growth of the European and Irish alternatives market has been strengthened by the introduction of the revised regulatory framework for ELTIFs (commonly referred to as “ELTIF 2.0”) in 2024. ELTIF 2.0 is proving to be an attractive product to fund promoters and aligns with the EU’s policy priorities of channeling capital towards European long-term investments in the real economy. Furthermore, in the context of the ESG agenda, the long term nature of ELTIFs compliments the return profile of large scale infrastructure products which will be required for the transition to a greener economy.

Irish ELTIFs may be set up as umbrella Qualifying Investor Alternative Investment Fund (“QIAIFs”) or as Retail Investor Alternative Investor Funds (“RIAIF”) structures. They can be established using the full range of available legal structures, e.g., Irish Collective Asset-Management Vehicle “ICAV”, PLC, Unit Trust, Common Contractual Fund “CCF” or “ILP”. Managers can also leverage their current Irish AIF infrastructure through the addition of an ELTIF sub-fund to already established umbrellas. Further enhancing Ireland’s appeal as an investment jurisdiction, the majority of Irish ELTIFs can benefit from the Irish Central Bank’s existing 24-hour fast-track authorisation process, greatly enhancing speed to market and removing any unnecessary regulatory hurdles.

AIFMD II

AIFMD II amends Directive 2011/61/EU (the Alternative Investment Fund Managers Directive)(“AIFMD”). All EU member states, including Ireland, have until April 2026 to transpose AIFMD II into domestic law. Ireland’s existing regulatory framework which applies to Irish funds engaging in loan origination (other than those governed by the ELTIF regime), will soon be replaced by the implementation of AIFMD II. The existing Irish regime is broadly aligned with the requirements of AIFMD II, such that it is not expected that its implementation should result in any significant disruption for the Irish funds industry. In contrast, other European asset management hubs may be required to apply more stringent rules than those currently in place.

A focus on Tax

The certainty and stability of the Irish tax regime has been, and continues to be, one of the key growth drivers of the asset management industry in Ireland. In an asset management context, the national implementation of the global minimum tax rate and recent release of a public consultation on interest deductibility signals a continued focus on simplification and tax certainty.

Pillar Two

The implementation of the global minimum tax rate under Pillar Two will fundamentally change the international tax landscape. Irish policy makers have committed to preserving the tax neutrality of Irish funds and securitisation vehicles and the rules therefore have been introduced in a business friendly manner. Specifically, through the introduction of an exemption from any Pillar Two tax directly on investment funds alongside specific rules relating to the treatment of securitisation vehicles. These exemptions provide managers the ability to offer their investors certainty with respect to potentially material tax charges while also simplifying their compliance obligations.

Irish Interest Regime

The release of a public consultation on the tax treatment of interest in October last year was a welcome announcement to the private assets industry, demonstrating the Irish Government’s commitment to reducing this administrative burden and to simplifying the Irish tax regime.

Looking Forward

Ireland has firmly positioned itself as a location of choice for private assets,driven by the country’s access to the EU market, the regulatory and tax landscape as well as an extensive ecosystem of service providers. The introduction of ELTIF 2.0 has further strengthened Ireland’s position as a centre of excellence for investor funds and the upcoming AIFMD II reform will place Ireland’s loan origination framework on equal footing with other EU jurisdictions.

In order to keep pace with the ever-changing dynamics of the global alternatives sector, it is imperative that Ireland’s product suite remains competitive.The enhancements to the regulated Irish limited partnership structure and reform of the Irish holding company regime through the introduction of a participation exemption have been extremely positive for the sector. However, recent macroeconomic developments, technological disruption and the turn to sustainable finance require a continual evolution to meet the needs of an everchanging market.