View source for Social:Qualifying investor alternative investment fund (QIAIF)

{{short description|Irish zero-tax legal structure}}

{{see|Ireland as a tax haven}}

[[File:THE CENTRAL BANK OF IRELAND (NEW HEADQUARTER BUILDING ON NORTH WALL QUAY)- ALONG BOTANIC AVENUE (JANUARY 2018)-135337 (39605114602).jpg|thumb|260px|Central Bank of Ireland ("CBI") regulates QIAIFs.  When Irish public tax scandals concerning the Section 110 SPV, also regulated by the CBI, emerged in 2016–2017, the CBI upgraded the little-used LQIAIF,<ref name="cbi1"/> to give the same benefits as Section 110 SPVs, but with full confidentiality and tax secrecy.<ref name="cbi2"/>]]

'''Qualifying Investor Alternative Investment Fund''' or '''QIAIF''' is a [[Finance:Central Bank of Ireland|Central Bank of Ireland]] regulatory classification{{efn|The QIAIF is not itself a fund, but a legal and regulatory structure that contains many different type of funds}} established in 2013 for Ireland's five tax-free legal structures for holding assets.  The '''Irish Collective Asset-management Vehicle''' or '''ICAV''' is the most popular of the five Irish QIAIF structures, and was designed in 2014 to rival the Cayman Island SPC; it is the main tax-free structure for foreign investors holding Irish assets.

In 2018, the Central Bank of Ireland expanded the '''Loan Originating QIAIF''' or '''L–QIAIF''' regime which enables the five tax-free structures to be used for closed-end debt instruments.  The L–QIAIF is Ireland's main [[Finance:Corporate haven#Debt-based BEPS tools|Debt–based BEPS tool]] as it overcomes the lack of confidentiality and tax secrecy of the [[Social:Irish Section 110 Special Purpose Vehicle (SPV)|Section 110 SPV]].{{efn|A [[Social:Irish Section 110 Special Purpose Vehicle (SPV)#Abuses|major tax scandal broke]] in Ireland in 2016 when it was discovered that U.S. distressed debt funds have used Section 110 SPVs to shield over €80 billion in distressed Irish loan balances from Irish taxation; the scandal was uncovered because Section 110 SPVs have to file Irish public accounts}}  It is asserted that many assets in QIAIFs and LQIAIFs are Irish assets being shielded from Irish taxation.{{efn|name="LQ1"|As of March 2019, a large proportion of Irish assets and real estate assets are still held via loan securities as a result of the sale of over EUR100 billion in Irish loan balances (sold for cash proceeds of EUR35 billion) by the Irish National Asset Management Agency (NAMA), as well as tens of billions in additional loan balances by other Irish banks, to US distressed debt funds from 2013 to 2019; by reference, 2017 [[Finance:Modified gross national income#Irish GDP versus Modified GNI (2009–2017)|Irish GNI was EUR181 billion]].  The Irish Real Estate Funds (IREF), which are not tax-free, are largely confined to owners of Irish property via Irish quoted REIT assets.<ref name="SBPlqiaif"/>}}<ref name="irishtimes2019"/>  Irish QIAIFs and LQIAIFs can be integrated with Irish corporate [[Finance:Base erosion and profit shifting|base erosion and profit shifting]] ("BEPS") tax tools to create confidential routes out of the Irish [[Finance:Corporation tax in the Republic of Ireland|tax system]] to Ireland's main [[Finance:Conduit and Sink OFCs|Sink OFC]], Luxembourg.{{efn|Both the IMF, and the [[Finance:Conduit and Sink OFCs|Conduit and Sink OFCs]] study, show that Luxembourg is by far the most popular destination for capital leaving Ireland; The IMF estimates that over half of the capital leaving Ireland goes to Luxembourg.<ref name="IMFL"/>}}

In March 2019, the UN identified Ireland's "preferential tax regimes" for foreign funds on Irish assets as affecting the human rights of tenants in Ireland.<ref name="un"/><ref name="cockoo"/>

==Features==
Irish QIAIFs are subject to the EU [[Finance:Alternative Investment Fund Managers Directive 2011|Alternative Investment Fund Managers Directive 2011]] (“AIFMD”) which lays out detailed rules on the process of constructing (e.g. diversification, leverage), managing (e.g. AIFM approved managers), and marketing (e.g. qualifying investors) of QIAIFs in Europe. However, the following are considered the most important features specific to Irish QIAIFs:<ref>{{cite web|url=http://www.dilloneustace.com/uploads/files/A20Guide20to20Qualifying20Investor20AIFs202nd20Edition.PDF|title=A guide to Qualifying Investor AIFs|date=2015|publisher=Dillon Eustace}}</ref><ref name="matt">{{cite web|url= https://www.matheson.com/images/uploads/publications/Establishing_a_Qualifying_Investor_Fund_in_Ireland_October_2017.PDF|title=Establishing a Qualifying Investor AIF in Ireland|date=October 2017|publisher=[[Finance:Matheson (law firm)|Matheson (law firm)]]}}</ref><ref name="kpmg">{{cite web|url= https://assets.kpmg.com/content/dam/kpmg/pdf/2016/05/ie-qiaif-nov-2015-2.pdf|title=QIAIFs – Ireland's Regulated Alternative Fund Product|date=November 2015|publisher=KPMG Ireland}}</ref>
{{ordered list|type=lower-roman
|Irish domiciled: All of the legal wrappers in the QIAIF regime are Irish domiciled structures and subject to Irish law and Irish tax codes;
|Tax–free:  QIAIFs are exempt from all Irish taxation, including VAT and duties, and can make distributions to non–Irish residents free of any Irish [[Finance:Withholding tax|withholding tax]];<ref name="maples2"/>
|Tax secrecy:  Four of the five QIAIF wrappers do not file Irish CRO public accounts, and the reports they file with the Central Bank of Ireland cannot be shared with the Irish Revenue;<ref name="walkers">{{cite web|url=https://www.walkersglobal.com/index.php/publications/99-advisory/209-new-irish-fund-vehicle-to-facilitate-us-investment-the-icav|title=New Irish Fund Vehicle to Facilitate U.S. Investment – the ICAV|date=2015|publisher=Walkers (law firm)}}</ref><ref name="cba">{{cite news|url= https://www.irishtimes.com/news/politics/central-bank-secrecy-law-will-limit-public-disclosure-of-key-documents-1.2079188|title=Powerful Central Bank secrecy laws limit public disclosure of key documents|date=January 2016|newspaper=Irish Times}}</ref>
|No restriction on assets:  There are no restrictions on the assets the QIAIF can hold;
|Closed and open-ended options:  Irish QIAIFs can be open-ended (e.g. must meet daily liquidity requirements) or closed-ended (e.g. the L–QIAIF);<ref name="wf"/>
|Fast authorisation: The Central Bank runs a "fast track" 24–hour approval process where it doesn't review documents but relies on confirmations from Directors and Irish advisors;
|Light-touch regulation:  Irish advisory firms openly market the QIAIF regulatory regime as "light-touch",<ref name="jim2">{{cite web|url=https://www.tasc.ie/download/pdf/ireland_global_finance_and_the_russian_connection.pdf|title=TRINITY COLLEGE DUBLIN: Ireland, Global Finance and the Russian Connection|publisher=Professor Jim Stewart Cillian Doyle|page=21|quote=Regulation has been described as light touch regulation/unregulated|date=27 February 2018}}</ref> which has been confirmed from other sources.<ref name="rus3">{{cite news|url=https://www.irishtimes.com/business/financial-services/a-third-of-ireland-s-shadow-banking-subject-to-little-or-no-oversight-1.3077931?mode=sample&auth-failed=1&pw-origin=https%3A%2F%2Fwww.irishtimes.com%2Fbusiness%2Ffinancial-services%2Fa-third-of-ireland-s-shadow-banking-subject-to-little-or-no-oversight-1.3077931|title=A third of Ireland's shadow banking subject to little or no oversight: A report published on Wednesday by the Swiss-based Financial Stability Board.|newspaper=The Irish Times|date=10 May 2017}}</ref><ref name="gov">{{cite news|url=https://www.irishtimes.com/business/financial-services/former-regulator-says-irish-politicians-mindless-over-ifsc-russian-risks-1.3414779?mode=sample&auth-failed=1&pw-origin=https%3A%2F%2Fwww.irishtimes.com%2Fbusiness%2Ffinancial-services%2Fformer-regulator-says-irish-politicians-mindless-over-ifsc-russian-risks-1.3414779|quote=Irish politicians are “mindlessly in favour” of growing the International Financial Services Centre (IFSC), according to a former deputy governor of the Central Bank|title=Former Irish Central Bank Deputy Governor says Irish politicians mindless of IFSC risks|newspaper=The Irish Times|date=5 March 2018}}</ref><ref name="jim1">{{cite web|url=https://www.tasc.ie/download/pdf/seminar_on_section_110_12th_jan_2017.pdf|title=TRINITY COLLEGE DUBLIN: 'Section 110' Companies. A Success story for Ireland?|publisher=Professor Jim Stewart Cillian Doyle|quote=The same source in comparing different investment vehicles states that :- Another positive of the Section 110 Company is that there are no regulatory restrictions regarding lending as is the case with a QIF (Qualifying Investor Fund).|page=20|date=12 January 2017}}</ref><ref name="imf">{{cite news|url=https://www.irishtimes.com/business/financial-services/imf-queries-lawyers-and-bankers-on-hundreds-of-ifsc-boards-1.2811754|title=IMF queries lawyers and bankers on hundreds of IFSC SPV boards|quote=The International Monetary Fund (IMF) has raised concerns about instances where individual bankers and lawyers were appointed to hundreds of boards of unregulated special-purpose vehicles in Dublin’s International Financial Services Centre.|newspaper=The Irish Times|date=30 September 2016}}</ref>
}}

As at 2016, €435 billion in alternative assets were held in Irish QIAIFs.  Ireland is the 4th largest domicile for Alternative Investment Funds ("AIF") in the EU with 9.9% of the €4.4 trillion EU AIF market, behind Germany (31.7%), France (21.3%) and Luxembourg (13%).<ref name="kpmg"/>  It is asserted that a material amount of QIAIF assets (or AIF assets) are Irish assets being shielded from Irish taxation.<ref name="ICAV tax"/><ref name="journal"/><ref name="sunday"/><ref name="examiner"/>

=={{anchor|ICAV}}{{anchor|ICAV dominance}}ICAV==
Each of the five QIAIF legal wrappers have attributes designed for different uses. However, outside of entities that need the specific attributes of a trust law (and will use the Unit Trust QIAIF), or can only use a full company structure (and will use a VCC QIAIF), the ICAV is expected to be the dominant QIAIF wrapper.<ref name="AL"/>

* '''ICAV''' (or '''Irish Collective Asset-management Vehicle''').  Launched in 2014 for U.S. investors to avoid both U.S. tax and Irish tax on Irish investments;<ref name="walkers"/> ICAVs became the most popular Irish structure for avoiding Irish taxes on Irish assets;<ref name="ICAV tax">{{cite news| url=https://www.independent.ie/business/irish/icav-structure-rivals-section-110s-in-popularity-say-central-bank-stats-34925142.html|title=ICAV structure rivals Section 110s in popularity, say Central Bank stats|newspaper=Irish Independent|quote=Concerns have been raised that ICAVs, which are fully exempt from tax on income and profits, are being used by foreign and domestic investors to avoid paying tax on rental income in this country.|date=31 July 2016}}</ref> ICAVs meet the U.S. “check-the-box” entity criteria (i.e. the ICAV is shielded from U.S. tax);<ref name="maples2"/> ICAV filings are confidential to the Central Bank (e.g. no public CRO filings; even the Irish Revenue cannot see the filings); ICAV governance rules are the weakest of all wrappers and having their own legal identity exempts them from Irish and EU company law; ICAVs are shown to be superior tax avoidance wrappers to the Cayman Island SPCs,<ref name="cay">{{cite web|url=https://files.irishfunds.ie/1447891863-NY-Nov-2015.pdf|title=IRISH FUNDS ASSOCIATION: ICAV Breakfast Seminar New York|publisher=Irish Funds Association|date=November 2015|page=16|quote=ANDREA KELLY (PwC Ireland): "We expect most Irish QIAIFs to be structured as ICAVs from now on and given that ICAVs are superior tax management vehicles to the to Cayman Island SPCs, Ireland should attract substantial re-domiciling business|access-date=1 July 2018|archive-url=https://web.archive.org/web/20171202122946/https://files.irishfunds.ie/1447891863-NY-Nov-2015.pdf|archive-date=2 December 2017|url-status=dead}}</ref> and there are provisions to migrate from Cayman/BVI wrappers;<ref>{{cite web| url=https://www.williamfry.com/newsandinsights/news-article/2015/10/01/conversion-of-a-bvi-or-cayman-fund-to-an-irish-icav|title=Conversion of a BVI or Cayman Fund to an Irish ICAV|publisher=William Fry Law Firm|date=1 October 2015}}</ref> most new Irish QIAIFs are structured as ICAVs.<ref name="AL">{{cite web| url=https://www.algoodbody.com/media/ICAVWebinarMarch20141.pdf|title=The ICAV: Irish Collective Asset-management Vehicle|quote=The ICAV is now the most popular QIAIF in Ireland and set up take over from the Investment Company|publisher=A&L Goodbody Law Firm|date=March 2014}}</ref>
* '''Variable Capital Company''' ("VCC") (or Investment Company or PLC).  An Irish company subject to Irish and EU company law; must have asset diversification; cannot "check-the-box" for U.S. investors (which makes it ineffective for U.S. investors holding Irish assets compared to an ICAV); requires substantive governance procedures and reporting requirements; required to file public CRO accounts (and can be scrutinised by the Irish financial media); the VCC is less popular since the introduction of ICAVs in 2014 and is rarely used for new Irish QIAIFs.<ref name="matt"/><ref name="AL"/>
* '''Unit Trust'''.  Dates from 1990 and offers similar features to the ICAV (e.g. U.S. "check-the-box" functionality, no risk spreading, light governance); unlike an ICAV, it cannot be self-managed and must have an AIFM; Irish trust law has complex tax planning features (e.g. separation of legal and beneficial ownership) which are attractive to individual investors and specific jurisdictions (e.g. U.K. and Japan).<ref name="matt"/>
* '''[[Finance:Common contractual fund|Common Contractual Fund]]''' ("CCF").  Established in 2003 for pensions funds to comingle, or pool, assets but maintain full legal segregation of the assets; it is an unincorporated body with no legal identity whose existence is the contract between its investors and the manager; the Irish equivalent of the [[Finance:Fonds commun de placement|fonds commun de placement]] ("FCF") structure in Luxembourg.<ref>{{cite web| url=https://www.matheson.com/images/uploads/publications/Establishing_a_Common_Contractual_Fund_in_Ireland_November_2017.PDF|title=Pension Pooling and Asset Pooling in Ireland: Establishing a Common Contractual Fund in Ireland|publisher=[[Finance:Matheson (law firm)|Matheson (law firm)]]|date=March 2017}}</ref><ref>{{cite web| url=http://www.dilloneustace.com/uploads/files/CCFs-and-Asset-Pooling.pdf|title=CCFs and Asset Pooling|publisher=Dillon Eustace Law Firm|date=2010}}</ref>
* '''Investment Limited Partnership''' ("ILP").  Primarily aimed at [[Finance:Private equity|private equity]]–type structures with a General Partner ("GP")/Limited Partner ("LP") system; dates from the 1994 Investment Limited Partnerships Act; like a unit trust or CCF, the ILP is a contract and not a separate legal identity; the ICAV is more popular for private equity funds in Ireland.<ref>{{cite web| url=https://www.matheson.com/images/uploads/brochures/AMG_Private_Equity_Fund_Guide_March_17.pdf|title=Establishing a Private Equity Fund in Ireland|publisher=[[Finance:Matheson (law firm)|Matheson (law firm)]]|date=March 2017}}</ref>

==L-QIAIF{{anchor|L–QIAIF rationale}}==

[[File:Stephen Donnelly 2016.jpg|thumb|'''Stephen Donnelly TD''' uncovered abuses of Section 110 SPVs in 2016, and warned that making Commercial Property tax-free to foreign investors, via QIAIFs, would cause an office bubble and a housing crisis.<ref name="sdy1"/><ref name="sdy2"/>]]

Ireland is considered by some academic studies to be a major [[Finance:Tax haven|tax haven]], and [[Finance:Offshore financial centre|offshore financial centre]], with a range of [[Finance:Base erosion and profit shifting|base erosion and profit shifting]] ("BEPS") tools.<ref name="zux"/><ref name="WPaidan.regan">{{cite news|url=https://www.washingtonpost.com/politics/2019/04/25/ireland-is-tax-haven-thats-becoming-controversial-home/?noredirect=on|title=Ireland is a tax haven — and that's becoming controversial at home|author=Aidan Regan|newspaper=Washington Post|date=25 April 2019|accessdate=25 April 2019}}</ref>  Ireland's main [[Finance:Corporate haven#Debt-based BEPS tools|Debt–based BEPS tool]] was the [[Social:Irish Section 110 Special Purpose Vehicle (SPV)|Section 110 SPV]]. However, Irish public tax scandals in 2016 concerning the use of this BEPS tool – involving artificial Irish children's charities – by U.S. distressed funds, assisted by the leading Irish tax-law firms, to avoid billions in Irish taxes damaged its reputation (see [[Social:Irish Section 110 Special Purpose Vehicle (SPV)#Abuses|Section 110 abuses]]).<ref name="WPaidan.regan"/>

In late 2016, the Central Bank of Ireland began a consultation process to upgrade the little-used L–QIAIF regime.<ref name="cbi1">{{cite web|url=https://www.matheson.com/news-and-insights/article/enhancements-to-irish-loan-originating-funds-regime-announced|title=CENTRAL BANK OF IRELAND: Enhancements to the L-QIAIF regime announced|publisher=[[Finance:Matheson (law firm)|Matheson (law firm)]]|date=29 November 2016}}</ref><ref>{{cite web|url=http://www.arthurcox.com/wp-content/uploads/2016/12/Update-on-Changes-to-Loan-Originating-Qualifying-Investor-AIF-Regime.pdf|title=Update on Changes to Loan Originating Qualifying Investor AIF Regime|publisher=Author Cox Law Firm|date=December 2016}}</ref>  In February 2018, the Central Bank of Ireland changed its AIF "Rulebook" to allow L–QIAIFs hold the same assets that Section 110 SPVs could own.  However, the upgraded L-QIAIFs offered two specific improvements over the Section 110 SPV which make L–QIAIFs a superior Debt–based BEPS tool:<ref name="wf">{{cite web|url= https://www.williamfry.com/docs/default-source/articles-insights-william-fry-news-pdfs/loan-originating-funds.pdf?sfvrsn=0|title=Irish Loan Originating Funds (L–QIAIFs): An Introduction|publisher=William Fry Law Firm|date=February 2018}}</ref><ref>{{cite web|url= http://www.dilloneustace.com/uploads/files/L-QIAIF20CBI20Update202018.pdf|title=Central Bank of Ireland publishes notice of intention to amend the requirements for Loan Origination Qualifying Investor AIF|publisher=Dillon Eustace Law Firm|date=February 2018}}</ref>
{{ordered list|type=lower-roman
|Tax secrecy.  Unlike the Section 110 SPV, the L–QIAIFs are not required to file public accounts (this was how the Section 110 tax abuses were uncovered), but file confidential accounts with the Central Bank of Ireland, that are protected under the 1942 Central Bank Secrecy Act;<ref name="cba"/>
|No need for [[Social:Irish Section 110 Special Purpose Vehicle (SPV)#Structural Elements|Profit Participating Notes]] ("PPN").  Another weakness of Section 110 SPVs was their reliance on artificial PPNs to execute the BEPS movement.  L–QIAIFs do not require PPNs, and are thus more robust from an OECD compliance perspective.
}}

Three months after the Irish Central Bank updated its AIF "Rulebook", the Irish Revenue Commissioners issued new guidance in May 2018 on Section 110 SPV taxation which would further reduce their attractiveness as a mechanism to avoid Irish taxes on Irish assets.<ref name="revp">{{cite web|url= https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-04/04-09-01.pdf|title=Section 110: entitlement to treatment|publisher=Revenue Commissioners|date=May 2018}}</ref> In June 2018, the Central Bank of Ireland reported that €55 billion of U.S.-owned distressed Irish assets, equivalent to almost 25% of Irish [[Finance:Modified gross national income|GNI*]], moved out of Section 110 SPVs.<ref name="cbi2">{{cite news|url= https://www.irishtimes.com/business/economy/tax-free-funds-once-favoured-by-vultures-fall-55bn-1.3546101|title=Tax-free funds once favoured by 'vultures' fall €55bn: Regulator attributes decline to the decision of funds to exit their so-called 'section 110 status'|newspaper=Irish Times|date=28 June 2018|author=Mark Paul|quote=Regulator attributes decline to the decision of funds to exit their so-called ‘section 110 status’|accessdate=26 April 2019}}</ref><ref name="SBPlqiaif">{{cite web|url=https://www.businesspost.ie/business/vulture-funds-new-move-slash-tax-bills-escape-regulation-422098|author=Jack Horgan-Jones|publisher=Sunday Business Post|date=29 July 2018|accessdate=26 April 2019|title=Vulture funds in new move to slash tax bills and escape regulation|quote=Fianna Fáil claims that funds have discovered a "new nirvana". Documents also reveal new strategy to avoid regulation.}}</ref><ref>{{cite news|url=https://www.irishtimes.com/business/economy/seen-heard-tax-avoiding-vulture-funds-and-transfermate-s-deal-with-ing-1.3579778|newspaper=Irish Times|author=Michael McAleer|date=29 July 2018|accessdate=19 April 2019|title=Seen & heard: Tax avoiding Vulture funds and TransferMate's deal with ING | quote=Vulture funds are putting in place new strategies to avoid tax and regulation, the Sunday Business Post reports. Citing a letter from Fianna Fail TD Stephen Donnelly to the Minister for Finance, it says the funds have moved substantial sums from the controversial Section 110 companies and into other entities called L-QIAIFs (loan-originating qualifying alternative investment funds). These do not file public accounts.}}</ref>  The L-QIAIF, and the ICAV wrapper, in particular, is expected to become an important structure for managing Irish tax on Irish assets in a confidential manner.{{efn|name="LQ1"}}<ref name="PM1">{{cite web|url=https://www.privateequitywire.co.uk/2018/05/09/264045/new-loan-origination-qiaif-regime-finally-viable-option|title=New loan origination QIAIF regime - finally a viable option?|date=9 May 2018|accessdate=19 April 2019|quote=However, the new rules combined with the strong legal and regulatory environment in Ireland, the settled and transparent requirements applicable to L-QIAIFs and the fast track authorisation process have already attracted increasing interest in L-QIAIFs among asset managers.|author=Gayle Bowen|author2=Aongus McCarthy}}</ref>

Ireland has Irish Real Estate Funds (IREFs) for holding direct Irish property which are not tax-free, their holdings relate to Irish quoted REITs (e.g. Green REIT plc), and insurance assets.  The investments by US distressed debt funds in Irish property are via loan acquisitions and thus use L-QIAIFs.<ref name="SBPlqiaif"/><ref name="PM1"/>  In addition, foreign investors in Irish property can still use the L-QIAIF by holding via structured loans domiciled abroad, thus also avoiding Irish taxes in a confidential manner.<ref>{{cite web|url=https://www.dilloneustace.com/uploads/files/ICLG_AIF18_Chapter-21_Ireland.pdf|title=Alternative Investment Funds 2018: Chapter 21 IRELAND|publisher=Dillon Eustace Law Firm|date=2018|accessdate=28 April 2019|author1=Brian Kelliher|author2=Sean Murray}}</ref><ref>{{cite web|url=http://www.arthurcox.com/publications/lending-to-irish-regulated-funds/|title=Lending to Irish Regulated Funds|publisher=Author Cox Law|author1=Kathleen Garrett |author2=Sarah Cunniff |author3= Ruth Lillis|quote=QIAIFs are not permitted to carry on a trading business, with the exception of private equity and venture capital funds, but can establish a property fund structure. This structure consists of a Property Holding Company (“PropCo”) which is established as a subsidiary of the QIAIF. An Operating Company (“OpCo”) is also often established and a declaration of trust over the shares in favour of the QIAIF is common. As a result, the OpCo gets the benefit of a tax exemption for QIAIFs.}}</ref>

==Abuses{{anchor|Abuses of QIAIFs}}==
[[File:Dublin Office sales price, as a multiple of cost of build, versus EU-28 (2016).jpg|thumb|right|260px|Comparison of the sales price as multiple of the cost of build, for a prime office in Dublin, with EU–28 countries (2016).]]

The QIAIF regime has contributed to making the [[Finance:International Financial Services Centre|International Financial Services Centre]] (IFSC) one of the largest [[Finance:International Financial Services Centre#Financial sectors|fund domiciling]] and [[Finance:Offshore financial centre#Shadow banking and securitisation|shadow banking]] locations in Europe.<ref name="WPaidan.regan"/>  Many asset managers, and particularly alternative investment managers, use Irish QIAIF wrappers in structuring funds.  However, fund structuring is a competitive market and other corporate tax havens such as Luxembourg offer equivalent products.  It is asserted that many of the assets in Irish QIAIFs are Irish assets, and particularly from the sale of over €100 billion in distressed assets by the Irish State from 2012–2017.<ref name="irishtimes2019">{{cite news|url=https://www.irishtimes.com/business/personal-finance/how-big-landlords-in-ireland-minimise-their-tax-bills-on-rental-properties-1.3917078?mode=sample&auth-failed=1&pw-origin=https%3A%2F%2Fwww.irishtimes.com%2Fbusiness%2Fpersonal-finance%2Fhow-big-landlords-are-minimising-their-tax-bills-on-rental-properties-1.3917078|title=How big landlords in Ireland minimise their tax bills on rental properties|newspaper=Irish Times|date=12 June 2019|accessdate=12 June 2019|author=Fiona Redden}}</ref><ref name="sunday">{{cite news|url=https://www.thetimes.co.uk/article/fears-over-tax-leakage-via-investors-vehicles-cpnxcl72k|title=Fears over tax leakage via investors' ICAV vehicles|quote=Internal Department of Finance briefing documents reveal that officials believe there has been “extremely significant” tax leakage due to investors using special purpose vehicles.|newspaper=Sunday Times|date=26 February 2017}}</ref><ref name="examiner">{{cite web|url=https://www.irishexaminer.com/business/how-foreign-firms-are-making-a-killing-in-buying-irish-property-417038.html|title=How foreign firms are making a killing in buying Irish property|quote=The Irish Collective Asset-management Vehicle was a nifty little tax structure introduced last year. Designed to primarily facilitate the transfer of U.S. funds into Dublin, it allows foreign investors to channel their investments through Ireland while paying no tax.|publisher=Irish examiner|date=22 August 2016}}</ref>

[[File:Dublin Office sales price versus EU-28 (2016).jpg|thumb|260px|Comparison of the sales price of Dublin prime office with EU–28 countries (2016).]]

Irish QIAIFs have been used in tax avoidance on Irish assets.<ref name="journal">{{cite news|url=http://www.thejournal.ie/tax-laws-ireland-qiaif-icav-2971661-Sep2016/|title=There are yet more Irish laws that allow foreign property investors to operate here tax-free|quote=Certain funds in operation here are seeing foreign property investors paying no tax on income. The value of property owned in these QIAIFs is in the region of €300 billion.|author=Cianan Brennan|newspaper=TheJournal.ie|date=10 September 2016}}</ref><ref>{{cite news|url=https://www.independent.ie/business/commercial-property/kennedy-wilson-firm-pays-no-tax-on-its-1bn-irish-property-assets-34942829.html|title=Kennedy Wilson firm pays no tax on its €1bn Irish property assets with QIAIFs|newspaper=Irish Independent|date=6 August 2016}}</ref><ref>{{cite news|url=https://www.irishtimes.com/business/commercial-property/clerys-owner-exploits-tax-avoidance-loophole-1.2816212|title=Clerys owner exploits tax avoidance loophole: Majority of shuttered Dublin store owned by collective asset vehicle (ICAV)|newspaper=Irish Times|date=4 October 2016|quote=Icavs were introduced last year following lobbying by the funds industry, to tempt certain types of offshore fund business to Ireland. It has since emerged, however, that the structures have been widely utilised to avoid tax on Irish property.}}</ref><ref>{{cite web|url=http://www.broadsheet.ie/2016/04/18/nothing-to-see-here-35/|title=Nothing to see here|publisher=Broadsheet.ie|date=18 April 2016}}</ref>  It transpired that the regulator of Irish QIAIFs, the Central Bank of Ireland, was paying rent to a U.S. entity using an Irish QIAIF ICAV to avoid Irish taxes on the rent.<ref>{{cite news|url=https://www.irishtimes.com/news/ireland/irish-news/central-bank-landlord-a-vulture-fund-paying-no-irish-tax-says-sf-1.2771263|title=Central Bank landlord a vulture fund paying no Irish tax using a QIF, says SF|newspaper=Irish Independent|date=28 August 2016}}</ref>  Irish QIAIFs have been used to circumvent international regulations,<ref>{{cite news|url=https://www.irishtimes.com/business/economy/tax-trickery-in-ireland-a-safe-haven-you-can-bank-on-1.1409039|title=Tax 'trickery' in Ireland: A safe haven you can bank on|quote=Ireland is a wonderful, special country in many ways. But when it comes to providing foreigners with lax financial regulation or tax trickery, it is a goddamned rogue state|newspaper=Irish Times|date=29 May 2013}}</ref>  on avoiding tax laws in the EU and the U.S.<ref>{{cite news|url=https://www.independent.ie/business/irish/strong-evidence-ireland-aiding-eu-banks-taxavoidance-schemes-35569517.html|title='Strong evidence' Ireland aiding EU banks' tax-avoidance schemes|quote="The massive profitability levels of European banks in Ireland suggests that large profits may be reported in Ireland as a tax-avoidance strategy,"|newspaper=Irish Independent|date=28 March 2017}}</ref><ref>{{cite news|url=https://www.businesspost.ie/news/irish-tax-haven-benefits-offshore-asset-shifts-ny-fed-416529|title=Irish 'tax haven' benefits from offshore asset shifts, reports New York Federal Reserve|quote="The massive profitability levels of European banks in Ireland suggests that large profits may be reported in Ireland as a tax-avoidance strategy,"|newspaper=Irish Independent|date=13 May 2018}}</ref>  Irish QIAIFs can be combined with Irish corporate BEPS tools (e.g. the Orphaned Super–QIF),<ref name="superQIF"/> to create confidential routes out of the [[Finance:Corporation tax in the Republic of Ireland|Irish corporate tax system]] to other tax havens such as Luxembourg,<ref name="IMFL">{{cite web | url=https://www.imf.org/en/Publications/CR/Issues/2018/06/28/Ireland-Selected-Issues-46027|page=20|quote=Figure 3. Foreign Direct Investment - Over half of Irish outbound FDI is routed to Luxembourg|title=Ireland:Selected Issues|publisher=[[Organization:International Monetary Fund|International Monetary Fund]]|date=June 2018}}</ref> the main [[Finance:Conduit and Sink OFCs#Sink OFC|Sink OFC]] for Ireland.<ref name="superQIF">{{cite web|url=https://www.scribd.com/document/321040583/Ireland-as-a-Location-for-Distressed-Debt-Section-110-QIF-Super-QIF-Davy-Stockbokers|title=Ireland as a location for Distressed Debt: Orphaned Super QIF Example|publisher=Davy Stockbrokers|date=2014}}</ref><ref name="gtt">{{cite web|url=https://www.grantthornton.ie/globalassets/1.-member-firms/ireland/insights/publications/grant-thornton---spv-taxation.pdf|title=Irish SPV Taxation|quote=Irish withholding tax on transfers to Luxembourg can be avoided if structured as a Eurobond|publisher=Grant Thornton|date=30 September 2015}}</ref><ref name="mhcxx">{{cite web|url=https://www.mhc.ie/uploads/Silver_Linings_Daragh_Bohan.pdf| title=Mason Hayes and Curran:Silver Linings from Ireland's Financial Clouds with QIAIFs and Section 110 SPVs| publisher=Mason Hayes & Curran Law|date=May 2016}}</ref>

QIAIFs link Ireland's strength as a corporate-focused tax haven, with the world's largest corporate BEPS tools,<ref name="zux">{{cite news|url=https://www.irishtimes.com/business/economy/ireland-is-the-world-s-biggest-corporate-tax-haven-say-academics-1.3528401?mode=sample&auth-failed=1&pw-origin=https%3A%2F%2Fwww.irishtimes.com%2Fbusiness%2Feconomy%2Fireland-is-the-world-s-biggest-corporate-tax-haven-say-academics-1.3528401|title=Ireland is the world's biggest corporate 'tax haven', say academics|quote=New Gabriel Zucman study claims State shelters more multinational profits than the entire Caribbean|newspaper=Irish Times|date=13 June 2018}}</ref> to more traditional tax haven type activities (why Cayman SPCs are re-domiciling as Irish ICAVs).<ref>{{cite web|url=https://www.maplesandcalder.com/expertise/investment-funds/eu-regulated-funds/irish-collective-asset-management-vehicles/| title=Irish Collective Asset-management Vehicle (ICAV) and Cayman SPCs|quote=Across our global funds practice, we see many ICAVs being set up as parallel funds to the Cayman Islands and British Virgin Islands structures for managers looking to offer leading offshore and onshore fund solutions to their investors. We have advised on some pairing of onshore and offshore vehicles in combined structures.|publisher=[[Company:Maples and Calder|Maples and Calder]]|date=2016}}</ref>  The launch of the Irish ICAV was widely covered, and praised, by the leading [[Finance:Offshore magic circle|offshore magic circle]] law firms,<ref name="walkers"/> the largest of which, [[Company:Maples and Calder|Maples and Calder]], claimed to have been one of its chief architects.<ref name="maples2">{{cite web|url=https://www.maplesandcalder.com/news/article/the-icav-maples-and-calder-checks-the-box-1256/| title=The ICAV – Maples and Calder Checks the Box|quote=Since then we have retained our position as the leading Irish counsel on ICAVs and to date have advised on 30% of all ICAV subfunds authorised by the Central Bank, which is nearly twice as many as our nearest rival. |publisher=[[Company:Maples and Calder|Maples and Calder]]|date=March 2016}}</ref>

The ability of foreign institutions to use QIAIFs and the ICAV wrapper, to avoid Irish taxes on Irish assets, has been linked to the bubble in Dublin commercial property, and by implication, the Dublin housing crisis.<ref name="sdy1">{{cite news|url=https://www.independent.ie/business/commercial-property/tax-breaks-for-commercial-property-will-fuel-bubble-35189754.html| title=Tax breaks for commercial property will fuel bubble| quote=They'll do this by making commercial property investment, mainly by large foreign landlords, entirely tax-free. This will drive up commercial rents, suppress residential development, put Irish banks at risk, and deprive the State of much-needed funds.|newspaper=Irish Independent|date=6 November 2016}}</ref><ref name="sdy2">{{cite web|url=http://stephendonnelly.ie/finance-bill-could-turn-commercial-property-bubble-into-next-crash/| title=Finance Bill Could Turn Commercial Property Bubble into next Crash| publisher=Stephen Donnelly T.D.|date=6 November 2016}}</ref><ref name="WPaidan.regan"/> Despite Dublin's housing crisis, and issues of housing affordability, foreign landlords (also called "cuckoo funds") operate in Ireland on a tax-free basis.<ref name="irishtimes2019"/><ref name="cockoo"/>  It is asserted that property development, and over-inflation of property prices via tax incentives, are favoured historical economic strategies of the two main Irish political parties, Fianna Fáil and Fine Gael.<ref name="ft">{{cite news|url=https://www.ft.com/content/67ae51e2-5e35-11df-8153-00144feab49a|title=How bankers brought Ireland to its knees|newspaper=[[Social:Financial Times|Financial Times]]|date=15 May 2010|author=David Gardner|accessdate=25 April 2019}}</ref>{{efn|As discussed in [[Finance:Modified gross national income|Modified gross national income]], the high levels of BEPS tools in Ireland's economy means that its GDP is artificially inflated (e.g. in 2018, Irish GDP was 163% of Irish GNI*); academics have noted that the Irish State has traditionally ''bridged'' the gap to the distorted Irish GDP, by increasing the level of credit in the economy, and may have used property debt as the main tool for this.<ref name="ber">{{cite web|url=https://www.socialeurope.eu/wp-content/uploads/2017/01/p_imk_wp_175_2017.pdf|author=Heike Joebges|title=CRISIS RECOVERY IN A COUNTRY WITH A HIGH PRESENCE OF FOREIGN-OWNED COMPANIES: The Case of Ireland |publisher=IMK Macroeconomic Policy Institute, Hans-Böckler-Stiftung|date=January 2017}}</ref>}}

This risk of QIAIFs was highlighted in 2014 when Central Bank of Ireland consulted the [[Finance:European Systemic Risk Board|European Systemic Risk Board]] ("ESRB") after initial, and unsuccessful, lobbying by IFSC tax-law firms to expand the L–QIAIF regime, so as to remove Irish taxation from Irish loan investments.<ref>{{cite web|url=https://docplayer.net/31887836-Loan-origination-qiaifs-central-bank-consults.html| title=Loan Origination QIAIFs – Central Bank Consults| quote=ESRB: Nonetheless, if not subject to adequate macro and micro–prudential regulation, this activity could grow rapidly and introduce new sources of financial stability risk. It could also raise the financial system’s vulnerability to runs, contagion, excessive credit growth and pro-cyclicality.|publisher=Dillon Eustace Law Firm|date=14 July 2014}}</ref>{{efn|As discussed earlier in relation to Irish Section 110 SPVs, at the time Irish Section 110 SPVs were being used to avoid Irish taxation on Irish loan investments, however Section 110 SPVs had to file Irish public accounts, which led to a public scandal in 2016 when the level of Irish taxes being avoided by U.S. funds was revealed}}

In March 2019, the UN Special Rapporter on housing, Leilani Farha, formally wrote to the Irish Government on behalf of the UN, regarding its concerns regarding "preferential tax laws" for foreign investment funds on Irish assets which were compromising the human rights of tenants in Ireland.<ref name="un">{{cite news|url=https://www.thejournal.ie/un-ireland-vultures-funds-tax-4563403-Mar2019/|title=UN says Ireland applies 'preferential tax laws' to vultures funds and it 'cannot continue'|newspaper=TheJournal.ie|author=Christina Finn|date=27 March 2019|accessdate=29 March 2019|quote=A UN SPECIAL Rapporteur on housing has sent a letter to the Irish government noting that they have facilitated housing financing through “preferential tax laws and weak tenant protections among other measures”.}}</ref><ref name="cockoo">{{cite news|url=https://www.independent.ie/business/personal-finance/property-mortgages/threat-to-tax-cuckoo-funds-as-fg-feels-the-heat-on-housing-crisis-38030843.html|title=Threat to tax 'cuckoo funds' as FG feels the heat on housing crisis|newspaper=Irish Independent|author1=Kevin Doyle |author2=Donal O'Donovan|date=19 April 2019|accessdate=19 April 2019|quote=The funds pay no corporation tax, no income tax and no capital gains tax in most cases.}}</ref>

In April 2019, Irish technology entrepreneur Paddy Cosgrave launched a Facebook campaign to highlight abuses of QIAIFs and L-QIAIFs, stating: "The L-QIAIF runs the risk of being a weapon of mass destruction".<ref name="WPaidan.regan"/><ref>{{cite news|url=https://www.thetimes.co.uk/article/paddy-cosgrave-a-weird-press-conference-and-1-000-cash-in-brown-envelopes-7vj8tgtg9|title=Paddy Cosgrave, a weird press conference and €1,000 cash in brown envelopes|newspaper=The Sunday Times|author=Gavin Daly|date=21 April 2019|accessdate=26 April 2019}}</ref>

==See also==
*[[Finance:Corporation tax in the Republic of Ireland|Corporation tax in the Republic of Ireland]]
*[[Finance:International Financial Services Centre|International Financial Services Centre]]
*[[Finance:Matheson (law firm)|Matheson (law firm)]]
*[[Company:Maples and Calder|Maples and Calder]]
*[[Finance:Offshore magic circle|Offshore magic circle]]
*[[Finance:Ireland as a tax haven|Ireland as a tax haven]]

==Notes==
{{notelist}}

==External links==
* [https://www.centralbank.ie/regulation/how-we-regulate/authorisation/orion-applications/qiaif-guidance QIAIF Guidance Central Bank of Ireland]
* [https://www.centralbank.ie/docs/default-source/Regulation/industry-market-sectors/Funds/AIFS/Guidance/aif-rulebook-march-2018.pdf?sfvrsn=4 Central Bank of Ireland: AIF Rulebook March 2018]

==References==
{{reflist|colwidth=30em}}

{{Investment-management}}

[[Category:Investment funds]]
[[Category:Offshore finance]]
[[Category:Legal entities]]
[[Category:Tax avoidance]]
[[Category:Corporate tax avoidance]]

{{Sourceattribution|Qualifying investor alternative investment fund (QIAIF)|1}}