Qualifying investor alternative investment fund

Irish QIAIFs are subject to the EU 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: As at 2016, €435 billion in alternative assets were held in Irish QIAIFs. Ireland is the fourth-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%). It is asserted that a material amount of QIAIF assets (or AIF assets) are Irish assets being shielded from Irish taxation. ==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. ICAVs meet the U.S. "check-the-box" entity criteria (i.e. the ICAV is shielded from U.S. tax); and there are provisions to migrate from Cayman/BVI wrappers; most new Irish QIAIFs are structured as ICAVs. • 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. • Investment Limited Partnership ("ILP"). Primarily aimed at 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. ==L-QIAIF==

''' 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. Ireland's main debt–based BEPS tool was the 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 Section 110 abuses). In February 2018, the Central Bank of Ireland changed its AIF "Rulebook" to allow L–QIAIFs to 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: 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. 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 GNI*, moved out of Section 110 SPVs. 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. 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. ==Abuses==

The QIAIF regime has contributed to making the International Financial Services Centre (IFSC) one of the largest fund domiciling and shadow banking locations in Europe. Irish QIAIFs have been used in tax avoidance on Irish assets. 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. Irish QIAIFs have been used to circumvent international regulations, on avoiding tax laws in the EU and the U.S. Irish QIAIFs can be combined with Irish corporate BEPS tools (e.g. the Orphaned Super–QIF), the main Sink OFC for Ireland. QIAIFs link Ireland's strength as a corporate-focused tax haven, with the world's largest corporate BEPS tools, to more traditional tax haven type activities (why Cayman SPCs are re-domiciling as Irish ICAVs). The launch of the Irish ICAV was widely covered, and praised, by the leading offshore magic circle law firms, 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. This risk of QIAIFs was highlighted in 2014 when Central Bank of Ireland consulted the 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. 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. 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". ==See also==