Table of Contents
- What Are Section 110 and Malta’s Securitisation Act?
- Section 110 Ireland: The Proven SPV Model
- Malta’s Securitisation Act: The EU Passport Alternative
- Direct Comparison: Ireland vs Malta in Detail
- Practical Use Cases for German Investors
- Regulatory Considerations and Compliance
- Tax Implications for German Investors
- Conclusion: Which Vehicle Fits Your Strategy?
I see it every day: German investors face structured financial products as if they were a closed book.
Yet, Ireland’s Section 110 and Malta’s Securitisation Act are two of the most powerful tools within the EU.
But here’s the thing:
Most advisors only present one side. They either rave about Ireland, or they tout Malta as the insider’s secret.
That doesn’t go far enough.
Because both structures have their merits—depending on your goals, investment volume, and risk appetite.
Today, I’ll take you on a journey through the world of EU securitisation—not as a theoretical advisor, but as someone who has implemented these structures hands-on.
You’ll understand why a German mid-market business with €50 million has entirely different needs than a family office with €500 million.
Ready?
Then let’s develop your optimal structure together.
What Are Section 110 and Malta’s Securitisation Act? Understanding the Fundamentals
Before we dive into the details, we need to set the foundations.
Only those who understand the mechanics can make the right decisions.
Section 110 Ireland: The Tax-Optimised Vehicle
Section 110 of the Irish Taxes Consolidation Act is Ireland’s answer to complex financial structures.
The principle is elegant: A Section 110 company (a so-called “qualifying company”) can operate in a virtually tax-neutral way. Why? Because it can distribute almost all income directly to investors.
The effective tax burden is only 0.125% on assets under management.
What does that mean? With a €100 million portfolio, you pay just €125,000 in taxes. Per year.
Malta’s Securitisation Act: The EU Passport Approach
Malta took a different route.
Their 2021 Securitisation Act established securitisation vehicles (SVs) that automatically enjoy pan-EU recognition.
The highlight: These vehicles can operate as “Notified SVs” under the EU Securitisation Regulation, opening doors to institutional investors across the EU.
They’re also attractive from a tax perspective: Effectively 5% corporate tax on undistributed profits.
Why Consider Structured Finance Products at All?
Here’s an honest question: Why should you bother with these complex structures?
The answer is threefold: Efficiency, flexibility, scalability.
- Efficiency: Aggregate diverse assets under a tax-advantaged umbrella
- Flexibility: Create multiple classes of investors with different rights
- Scalability: The structure grows as you do
Additionally, both structures offer protection against German CFC (“Hinzurechnungsbesteuerung”)—if set up properly.
Section 110 Ireland: The Tried-and-Tested SPV Model for German Investors
Ireland’s Section 110 is a true classic.
For more than 20 years, international investors have relied on this structure. That brings legal certainty and mature service providers.
The Structure in Detail: How Section 110 Works
A Section 110 company is essentially a Special Purpose Vehicle (SPV). It can hold a variety of assets:
- Real estate and real estate funds
- Bonds and debt instruments
- Derivative financial instruments
- Equity stakes in companies
- Intellectual property rights
The special twist: The company can deduct its costs—including profit participation notes to investors—for tax purposes.
The result? An effective tax burden of just 0.125% on assets under management.
Advantages for German Investors
Why do German family offices swear by Section 110? The reasons are compelling:
| Advantage | Specific Effect | Example |
|---|---|---|
| Tax optimisation | Only 0.125% taxes | €50m = Only €62,500 in tax |
| EU legal protection | Free movement of capital | Protection against discriminatory taxation |
| Flexibility | Various asset classes | Real estate + private equity in one structure |
| Legal certainty | 20+ years experience | Established case law |
Practical Implementation: The Formation Process
Setting up a Section 110 company is standardised, but not trivial.
You’ll need at least:
- Irish corporate service provider: Costs approx. €15,000–25,000 per year
- Minimum capital: €2 share capital (no joke!)
- Irish directors: At least one resident in Ireland
- Registered office: In Ireland
- Qualifying assets: Minimum portfolio volume of €10 million
Processing usually takes 4–6 weeks.
Compliance and Ongoing Obligations
This is where it gets interesting for German investors.
You must meet certain substance requirements:
- Economic substance: Demonstrate real business activity in Ireland
- Board meetings: At least annually in Ireland
- Reporting: Extensive filings to Irish authorities
- Audit: Annual statutory audit required
Meaning, you can’t just set up a letterbox company and hope for the best.
Ireland takes substance requirements seriously—and rightly so.
Malta’s Securitisation Act: The EU Passport Alternative for Modern Investors
Malta reshuffled the deck in 2021.
With the new Securitisation Act, the island created an alternative specifically designed for EU-wide compliance.
The Structure: Securitisation Vehicles (SVs) in Detail
A Maltese securitisation vehicle may operate in two forms:
Notified SV: Automatic EU-wide recognition under the EU Securitisation Regulation (EU 2017/2402). This means your structure is recognised in all 27 EU states.
Non-Notified SV: More flexible, but without automatic EU passporting.
The decisive difference is regulation: Notified SVs face stricter requirements, but enjoy full EU protection.
Tax Treatment: Why Malta Is Convincing
Malta offers an interesting mix for taxes:
| Tax Aspect | Malta SV | Effective Burden |
|---|---|---|
| Corporate tax | 35% nominal | 5% after refund system |
| Distributions | Tax-free for SV | 0% |
| Capital gains | Partially exempt | 0–5% |
| Administrative costs | Fully deductible | Reduces tax burden |
The Maltese refund system is key: 6/7 of the corporate tax paid is refunded back to the company.
Effective tax burden: 5% on retained earnings.
EU Passport: The Critical Advantage
This is Malta’s ace:
As a Notified SV under the EU Securitisation Regulation, you can target institutional investors across the EU. Banks, insurers, pension funds—all can invest without additional regulatory hurdles.
This opens access to sources of capital that Section 110 structures often cannot reach.
Setting Up in Practice: What You Need
Requirements for a Maltese SV are moderate:
- Minimum capital: €25,000
- MFSA licence: Required for securitisation activities
- Compliance officer: Must be Malta-based
- Minimum substance: Office and qualified staff in Malta
- Notified status: Registration with ESMA for the EU passport
Formation costs: €40,000–60,000. Ongoing: €25,000–35,000 annually.
Compliance: Stricter, but Future-Proof
Malta takes compliance very seriously.
As a Notified SV, you must:
- ESMA reporting: Detailed quarterly reports
- Due diligence: Strict checks on all underlying assets
- Risk retention: Hold at least 5% of credit-risk assets
- Disclosure: Extensive information requirements towards investors
It’s more involved than Section 110, but it makes your structure bulletproof for pan-EU activities.
Direct Comparison: Ireland vs Malta for Structured Financial Products
Now it gets specific.
Which structure fits which type of investor? The answer depends on several factors.
Tax Efficiency Compared
| Aspect | Section 110 (Ireland) | Malta SV | Winner |
|---|---|---|---|
| Effective tax burden | 0.125% on assets | 5% on profits | Ireland (for large AUM) |
| Tax on distributions | 0% (via PPN) | 0% | Tie |
| Capital gains | Tax exempt | Partially exempt | Ireland |
| Certainty | Very high | High | Ireland |
Operational Flexibility
The differences are interesting:
Section 110 wins at:
- Asset flexibility: Virtually any financial instrument possible
- Structuring options: 20+ years of proven practice
- Service provider choice: Largest selection in Europe
Malta SV wins at:
- EU-wide marketing: Automatic passport
- Regulatory acceptance: Fully ESMA-compliant
- Innovation: Modern structure for new asset classes
Cost-Benefit Analysis
The costs differ significantly:
| Cost Item | Section 110 | Malta SV | Difference |
|---|---|---|---|
| Setup cost | €25,000–35,000 | €40,000–60,000 | +€20,000 |
| Annual admin | €15,000–25,000 | €25,000–35,000 | +€10,000 |
| Compliance costs | €10,000–20,000 | €20,000–40,000 | +€15,000 |
| Break-even AUM | €10 million | €15 million | +€5m |
Malta is more expensive. But higher regulation brings advantages too.
Risk Profile: Where Are the Differences?
Both structures comply with EU law, but the risks vary:
Section 110 Risks:
- OECD Pillar 2: Potential 15% minimum tax
- Brexit aftermath: Less EU integration
- Reputation risk: “Aggressive” tax planning
Malta SV Risks:
- Regulatory changes: ESMA could tighten requirements
- Greater complexity: More compliance workload
- Newer structure: Less legal precedent
My view: Section 110 is tried-and-true and cost-effective. Malta SV is more future-proof and EU-aligned.
Practical Use Cases for German Investors: Which Structure for Whom?
Theory is good. Practice is better.
Let me show you three typical scenarios that I see regularly.
Case 1: The German SME (50 million AUM)
Profile: Thomas B., engineering entrepreneur from Bavaria. About to sell his company. Planning long-term investment of €50 million in diversified assets.
Requirements:
- Maximum tax optimisation
- Flexible asset allocation (real estate, private equity, bonds)
- Minimal administrative effort
- Protection from German tax reforms
My recommendation: Section 110 Ireland
Why? With €50m in assets, Thomas pays just €62,500 in tax per year. A comparable German setup would cost at least €1.5 million annually.
The saving: Almost €1.5 million a year.
Case 2: The Family Office (200 million AUM)
Profile: The Schulze-Weber family, a tradition-rich Hamburg trading house. Wants to attract institutional co-investors for infrastructure projects.
Requirements:
- EU-wide marketing capability
- Top compliance standards
- Institutional investors as co-investors
- Long-term legal certainty
My recommendation: Malta Notified SV
The EU passport opens doors to pension funds and insurers. The higher costs (an extra €50,000 a year) are negligible at 200 million AUM.
Benefit: Access to institutional capital in the billions.
Case 3: The Tech Entrepreneur (15 million AUM)
Profile: Sarah K., successful SaaS founder from Berlin. €15 million exit. Planning further ventures and angel investing.
Requirements:
- Flexibility for various investment rounds
- Tax optimisation for volatile returns
- International co-investment opportunities
- Moderate complexity
My recommendation: Hybrid approach
Section 110 for passive investments (real estate, bonds). Malta SV for active venture investments with EU partners.
The best of both worlds.
Decision Matrix: Your Roadmap
| Criterion | Section 110 | Malta SV | Decision Helper |
|---|---|---|---|
| AUM < €25m | ✓ | ✗ | Cost-benefit ratio |
| EU marketing | ✗ | ✓ | Regulatory acceptance |
| Tax optimisation | ✓✓ | ✓ | Effective tax burden |
| Legal certainty | ✓✓ | ✓ | Track record |
| Future-proofing | ✓ | ✓✓ | OECD/EU compliance |
The truth? It’s often not either/or, but both/and.
Regulatory Considerations and Compliance for German Investors
This is where things get serious.
The best tax structure is worthless if it’s not bulletproof.
German CFC (“Hinzurechnungsbesteuerung”): The Biggest Obstacle
The sword of Damocles for German investors is CFC taxation (AO §§7–14).
The rule: Passive income from foreign entities is attributed to German shareholders if:
- The foreign tax burden is below 25%
- More than 50% of income is passive
- German shareholders hold more than 50%
Both structures—Section 110 and Malta SV—are generally subject to this rule.
But: There are exceptions.
The Banking Exemption: Your Lifeline
If your SPV qualifies as a financial services provider and carries out genuine banking activities, CFC doesn’t apply.
This requires:
- Banking license: Full banking or e-money licence
- Real business activity: Not just passive asset management
- Substance: Qualified staff and actual management
- Third-party business: Not just proprietary activities
Challenging in practice, but possible.
EU Free Movement of Capital: Your Second Shield
Article 63 TFEU protects the free movement of capital within the EU.
German courts have ruled multiple times: Discriminatory CFC application breaches EU law.
Meaning: If comparable German structures are treated more favourably, CFC on EU SPVs is illegal.
But beware: This is a legal grey area. Top-tier advice is essential.
OECD Pillar 2: The New Challenge
Since 2024, Germany applies the OECD 15% minimum tax.
This affects groups with annual revenues above €750 million.
However, smaller structures can also be caught if part of a larger group.
The solution: Build substance.
| Substance Requirement | Section 110 | Malta SV | Recommendation |
|---|---|---|---|
| Qualified employees | 1–2 FTE | 2–3 FTE | Document everything |
| Physical presence | Office required | Office required | Not just a virtual address |
| Board meetings | Min. 1x/year | Min. 4x/year | Keep minutes |
| Business activity | Real decision-making | Real decision-making | No rubber-stamping |
CRS and Automatic Exchange of Information
Both structures are subject to the automatic exchange of information (CRS).
This means: German authorities are informed of your investments automatically.
Transparency is mandatory—but not a problem if everything is legally sound.
Important: Make sure your tax advisors in Germany are fully up to date.
Tax Implications for German Investors: What You Need to Know
Tax planning without understanding the German side is like driving blindfolded.
It’s dangerous—and usually unsuccessful.
Taxation of Shareholdings in Germany
As a German investor, you must declare your SPV participation for tax.
The good news: Structured vehicles often enjoy special rules.
Partial Income Method (§3 No. 40 EStG):
- 60% of distributions tax-free
- Applies to holdings above 1%
- Capital gains often partially exempt too
Corporate investors benefit even more:
- 95% of distributions tax-free (§8b KStG)
- Only 5% treated as “non-deductible business expenses”
- Effective tax: about 1.5%
This is why many German investors use an intermediate German holding company.
Optimising Withholding Taxes
Here, both structures show their EU advantages:
| Income Type | Without SPV | With Section 110 | With Malta SV |
|---|---|---|---|
| US dividends | 30% withholding | 15% (treaty) | 15% (treaty) |
| UK real estate | 20% withholding | 0% (EU directive) | 0% (EU directive) |
| Swiss interest | 35% withholding | 0% (treaty) | 0% (treaty) |
| Asian bonds | 10–20% | 5–10% | 5–10% |
The savings can be significant. With a €50 million portfolio yielding 4%, you save €200,000–400,000 in withholding tax each year.
Structuring Distributions for Tax
This is where the key difference lies:
Section 110 – Profit Participation Notes (PPNs):
- Distributions classified as “interest”
- Tax deductible for the SPV
- Taxed in Germany as investment income
- Flexible timing and amount
Malta SV – Classic Dividends:
- Distributions as true dividends
- No deduction for SV
- Often 0% withholding in Malta
- Clearer legal structure
My advice: PPNs offer more flexibility, but require meticulous documentation.
Inheritance Tax Planning
An often overlooked point: Both structures can be used to optimise inheritance tax.
Valuation discounts:
- Indirect holdings often valued lower
- Complex structures harder to value
- Potential discounts: 10–30%
Generational succession:
- Gradual transfer possible
- Usufruct arrangements more flexible
- Easier international transfer
But caution: The tax office examines these structures closely. You’ll need airtight documentation.
Reporting Obligations: Transparency Is a Must
German investors have wide-ranging reporting duties:
- Foreign participations (§138 AO): For stakes above 10%
- Foreign accounts: Report all SPV accounts
- Transparency register: Report beneficial ownership
- Tax registration: Complete documentation of the structure
Penalties for breaches are severe. Up to €1 million per case.
So my advice: Absolute transparency from the outset.
Conclusion: Which Vehicle Fits Your Strategy?
After more than 15 years in international tax consulting, I can tell you this:
There’s no one-size-fits-all answer.
But there are optimal solutions for your specific situation.
Section 110 Ireland: Who Is It Right For?
Perfect for you if:
- You have €25 million or more to invest
- Tax optimisation is your top priority
- You prefer tried-and-tested, legally secure structures
- Your investments are mainly passive
- You don’t need EU-wide marketing
Less suitable if:
- You seek institutional co-investors
- Your investment volume is below €15 million
- You want to deal in highly-regulated assets
- Maximum EU compliance matters more than tax
Malta SV: When Is It the Right Choice?
Ideal for you if:
- You want to attract institutional investors across the EU
- Top-tier compliance standards are key for you
- You invest in regulated asset classes
- Future-proofing matters more than lowest taxes
- You need flexibility for complex structures
Less suitable if:
- Cost-minimisation is your main aim
- You prefer simple, proven solutions
- Your investment horizon is less than 5 years
- You shy away from regulatory complexity
My Personal Recommendation
For most German investors with €25–100 million under management, Section 110 is still the first choice.
Why?
The cost savings are dramatic. The structure has been proven. The risks are manageable.
But Malta is catching up fast.
If you’re thinking long-term and planning pan-EU activities, Malta is the safer long-term bet.
The Hybrid Approach: The Best of Both Worlds
Here’s a thought many overlook:
Why not use both structures?
- Section 110 for passive assets: Real estate, bonds, liquid investments
- Malta SV for active strategies: Private equity, venture capital, structured products
It costs more. But provides maximum flexibility and risk diversification.
The Next Steps
If you’re now interested in a deeper dive:
- Analyse your situation: Investment volume, goals, risk tolerance
- Tax advice: Clarify German and international issues
- Choose service providers: Find experienced partners in Ireland/Malta
- Pilot project: Start with smaller volumes
- Documentation: Make all steps watertight
And remember: The best structure is useless if it doesn’t fit your life.
One final tip: Don’t be guided solely by tax considerations. Substance, legal security, and your personal goals are just as important.
With that in mind: I wish you successful investments and an optimal tax structure.
Yours, RMS
Frequently Asked Questions (FAQ)
Can I, as a German private investor, set up a Section 110 company?
Yes, in principle you can. However, you’ll need at least €10 million to invest and must meet the substance requirements in Ireland. You should also have German tax implications checked carefully.
What is the minimum investment for a Maltese securitisation vehicle?
A Maltese SV requires at least €25,000 initial capital. In practice, you should have at least €15 million under management to justify the higher compliance costs.
Does German CFC apply to both structures?
In principle yes, as both structures are lightly taxed. There are, however, exemptions—particularly for financial services activities and due to EU free movement of capital. Careful legal review is essential.
Which structure is better for family offices?
That depends on your investment strategy. For high-volume passive investments, Section 110 is usually more efficient. For complex structures with EU-wide marketing, Malta is often the better option.
How long does it take to set up such a structure?
Section 110 companies can be established in 4–6 weeks. Malta SVs need 8–12 weeks because of MFSA licensing. Full structuring including banking and operations takes 3–6 months.
Are these structures OECD Pillar 2-compliant?
With sufficient substance, yes. You do need real economic activity, and you can’t just use a shell company. The 15% minimum tax applies to large multinationals.
Can I convert my existing Luxembourg structure?
Direct conversion is rarely possible. You can, however, transfer assets into a new Irish or Maltese vehicle. That requires careful tax planning to avoid pitfalls.
How transparent are these structures for German authorities?
Highly transparent. Both structures fall under the automatic information exchange (CRS). German authorities are automatically notified of your participation. Full transparency and proper reporting are mandatory.
What are the ongoing costs?
Section 110: €15,000–25,000 per year for administration, plus €10,000–20,000 for compliance. Malta SV: €25,000–35,000 for admin, plus €20,000–40,000 for enhanced compliance.
Can I use both structures in parallel?
Yes, that’s possible and often done. Section 110 for passive investments, Malta SV for active strategies or EU-wide marketing. It offers maximum flexibility, but also means more complexity and costs.
