Section 110 de Irlanda vs. Securitisation Act de Malta: Productos financieros estructurados en la UE – Vehículos especializados para inversores alemanes

What are Section 110 and Malta’s Securitisation Act? Understanding the Basics

Before we dive into the details, we need to lay the groundwork.

Because only those who understand the mechanisms can make the right decision.

Section 110 Ireland: The Tax-Efficient Vehicle

Section 110 of the Irish Taxes Consolidation Act is Ireland’s answer to complex financial structures.

The concept is elegant: A Section 110 Company (also called a “Qualifying Company”) can operate in a nearly tax-neutral manner. Why? It is allowed to pass on almost all profits to its investors.

The effective tax burden is just 0.125% on assets under management.

Specifically, that means: With a portfolio of €100 million, you pay only €125,000 in taxes per year.

Malta’s Securitisation Act: The EU Passport Approach

Malta has taken a different path.

The Securitisation Act of 2021 creates securitisation vehicles (SVs) that automatically enjoy EU-wide recognition.

The highlight: These vehicles can operate as “Notified SV” under the EU Securitisation Regulation. This opens doors to institutional investors across the EU.

Tax-wise, they’re also attractive: Only 5% effective corporate tax on profits not distributed.

Why bother with structured financial products at all?

Here’s an honest question: Why should you even bother with these complex structures?

The answer in three words: Efficiency, Flexibility, Scale.

• Efficiency: You pool different assets under one tax-optimized umbrella
• Flexibility: You can design different investor classes with distinct rights
• Scaling: The structure grows with your success

Additionally, both structures offer protection from German CFC taxation—if done correctly.

Section 110 Ireland: The Proven SPV Model for German Investors

Ireland has developed a true classic with Section 110.

For over 20 years, international investors have used this structure. This means legal certainty and seasoned service providers.

The Structure in Detail: How Section 110 Works

At its core, a Section 110 Company is a Special Purpose Vehicle (SPV). It can hold a range of assets:

• Real estate and real estate funds
• Bonds and debt instruments
• Derivative financial instruments
• Equity participations
• Intellectual Property Rights

The special feature: The company can deduct its costs—including Profit Participation Notes to investors—for tax purposes.

The result? An effective tax rate of just 0.125% on assets under management.

Advantages for German Investors

Why do German family offices swear by Section 110? The reasons are clear-cut:

Practical Implementation: The Incorporation Process

Setting up a Section 110 Company is standardized, but not trivial.

You’ll need at least:

1. Irish Corporate Service Provider: Costs approx. €15,000–25,000 per year
2. Minimum Capital: €2 share capital (really!)
3. Irish Directors: At least one resident in Ireland
4. Registered Office: In Ireland
5. Qualifying Assets: Minimum €10 million portfolio volume

The processing time is typically 4–6 weeks.

Compliance and Ongoing Duties

This is where it gets interesting for German investors.

You must fulfill certain substance requirements:

• Economic Substance: Demonstrate real business activity in Ireland
• Board Meetings: At least annually held in Ireland
• Reporting: Extensive reporting duties to Irish authorities
• Audit: Annual audits are required

This means: You can’t simply set up a shell company and hope for the best.

Ireland takes substance seriously—as it should.

Malta’s Securitisation Act: The EU Passport Alternative for Modern Investors

In 2021, Malta shuffled the deck.

With the new Securitisation Act, the island created an alternative focused specifically on EU-wide compliance.

The Structure: Securitisation Vehicles (SVs) in Detail

A Maltese SV can operate in two forms:

Notified SV: Automatic EU-wide recognition under the EU Securitisation Regulation (EU 2017/2402). This means your structure is recognized in all 27 EU countries.

Non-Notified SV: More flexible, but without an automatic EU passport.

The key difference lies in regulation. Notified SVs are subject to stricter requirements but enjoy full EU protection.

Taxation: Why Malta Is Persuasive

Malta offers an attractive tax mix:

The Maltese refund system is the key: 6/7 of the corporate tax paid is refunded to the company.

Effective tax burden: 5% on retained profits.

EU Passport: The Decisive Advantage

This is Malta’s trump card:

As a Notified SV under the EU Securitisation Regulation, you can address institutional investors EU-wide. Banks, insurers, pension funds—all can invest without additional regulatory hurdles.

This opens sources of capital often closed to Section 110 structures.

Practical Incorporation: What You Need

The requirements for a Maltese SV are moderate:

1. Minimum Capital: €25,000
2. MFSA License: Required for securitisation activities
3. Compliance Officer: Must be based in Malta
4. Minimum Substance: Office and qualified staff in Malta
5. Notified Status: Registration with ESMA for EU Passport

Set-up costs: €40,000–60,000. Ongoing costs: €25,000–35,000 per year.

Compliance: Stricter, but Future-Proof

Malta takes compliance very seriously.

As a Notified SV, you must:

• ESMA Reporting: Detailed quarterly reports
• Due Diligence: Rigorous review of all underlying assets
• Risk Retention: Retain 5% of credit-risk exposures
• Disclosure: Extensive information duties towards investors

That’s more effort than Section 110. But it makes your structure bulletproof for EU-wide activities.

Direct Comparison: Ireland vs Malta for Structured Financial Products

Now it gets concrete.

Which structure fits which investor type? The answer depends on several factors.

Tax Efficiency Compared

Operational Flexibility

Here we see interesting differences:

Section 110 wins for:

• Asset flexibility: Virtually all financial instruments possible
• Structuring options: 20+ years proven practice
• Choice of service providers: Largest offering in Europe

Malta SV wins for:

• EU-wide marketing: Automatic passport
• Regulatory acceptance: Fully ESMA compliant
• Innovation: Modern structure for new asset classes

Cost–Benefit Analysis

The costs differ significantly:

Malta is more expensive. But the higher regulation brings advantages.

Risk Profile: What Are the Differences?

Both structures are EU-compliant. But the risks differ:

Section 110 risks:

• OECD Pillar 2: Potential minimum tax of 15%
• Brexit impact: Less EU integration
• Reputational risk: “Aggressive” tax planning

Malta SV risks:

• Regulatory changes: ESMA can tighten requirements
• Higher complexity: More compliance effort
• Newer structure: Less legal precedent

My assessment: Section 110 is proven and cost efficient. Malta SV is more future-proof and EU-conformant.

Practical Use Cases for German Investors: Which Structure for Whom?

Theory is good. Practice is better.

Let me show you three typical scenarios I see regularly.

Case 1: The German Mid-Cap (50 Million AUM)

Profile: Thomas B., mechanical engineering entrepreneur from Bavaria. Sale of his company is pending. Plans long-term investment of €50 million in diversified assets.

Requirements:

• Maximum tax optimisation
• Flexible asset allocation (real estate, private equity, bonds)
• Minimal administrative burden
• Protection from German tax reforms

My recommendation: Section 110 Ireland

Why? With €50 million in assets, Thomas pays only €62,500 taxes annually. An equivalent German structure would cost at least €1.5 million.

The savings: Almost €1.5 million per year.

Case 2: The Family Office (200 Million AUM)

Profile: Schulze-Weber family, traditional Hamburg trading house. Wants to attract institutional co-investors for infrastructure projects.

Requirements:

• EU-wide marketing
• Highest 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 for €200 million AUM.

The upside: Access to institutional capital worth billions.

Case 3: The Tech Entrepreneur (15 Million AUM)

Profile: Sarah K., successful SaaS founder from Berlin. Exit for €15 million. Plans further ventures and angel investments.

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). Plus Malta SV for active venture investments with EU partners.

The best of both worlds.

Decision Matrix: Your Guide

The truth? Often it’s not “either-or,” but “both-and.”

Regulatory Considerations and Compliance for German Investors

Now it’s getting serious.

Because even the best tax structure is worthless if it’s not watertight.

German CFC Taxation: The Biggest Hurdle

The sword of Damocles for German investors is CFC taxation (AO § 7–14).

The rule: Passive income of foreign entities is attributed to German shareholders if:

• The foreign tax burden is under 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 Exception: Your Lifeline

If your SPV qualifies as a financial services provider carrying out genuine banking business, CFC taxation does not apply.

This requires:

1. Banking license: Full bank license or e-money license
2. Real operations: Not pure asset management
3. Substance: Qualified staff, genuine management
4. Third-party business: Not just own-account transactions

Challenging in practice, but doable.

EU Free Movement of Capital: Your Second Shield

Article 63 TFEU protects the free movement of capital in the EU.

German courts have repeatedly ruled: Discriminatory application of CFC taxation contravenes EU law.

This means: If equivalent German structures are favored for tax purposes, CFC taxation on EU SPVs is unlawful.

But beware: This is a legal grey area. You need top-notch advice.

OECD Pillar 2: The New Challenge

Since 2024, the OECD minimum tax of 15% applies in Germany.

This affects groups with annual revenues over €750 million.

But beware: Smaller structures can get caught if they’re part of a larger group.

The solution: Build up substance.

CRS and Automatic Exchange of Information

Both structures are subject to automatic exchange of information (CRS).

This means: German authorities automatically learn of your interests.

Transparency is mandatory. But not a problem if everything is set up properly.

Important: Ensure your German tax advisors are fully informed.

Tax Implications for German Investors: What You Need to Know

Tax planning without an understanding of the German side is like driving blindfolded.

Dangerous and usually unsuccessful.

Taxation of Holdings in Germany

As a German investor, you must declare your participation in the SPV.

The good news: Special rules often apply to structured vehicles.

Partial-income procedure (§3 no. 40 EStG):

• 60% of distributions are tax-free
• Applies if you hold at least 1%
• Disposals partially exempt as well

Corporations benefit even more:

• 95% of distributions tax-free (§8b KStG)
• Only 5% counted as “non-deductible expenses”
• Effective burden: approx. 1.5%

That’s why many German investors use a German holding company.

Withholding Tax Optimization

This is where both structures’ EU advantages show:

The savings can be significant. With a €50 million portfolio at 4% yield, you save €200,000–400,000 in withholding taxes each year.

Tax Structuring of Distributions

This is where the main difference lies:

Section 110 – Profit Participation Notes (PPNs):

• Distributions classified as “interest”
• Tax-deductible for the SPV
• Taxed as capital income in Germany
• Flexible timing and amount

Malta SV – Classic Dividends:

• Distributions as regular dividends
• Not deductible for the SV
• Often 0% withholding tax in Malta
• Clearer legal structure

My recommendation: PPNs offer more flexibility, but careful documentation is essential.

Inheritance Tax Planning

Often overlooked: Both structures can aid inheritance tax planning.

Valuation discounts:

• Indirect holdings often valued lower
• Complex structures harder to value
• Potential discounts: 10–30%

Generational Transfer:

• Gradual transfer possible
• Use of usufruct models more flexible
• Facilitates international relocation

But beware: The tax authorities scrutinize these structures carefully. You need watertight documentation.

Reporting Obligations: Transparency Is Required

German investors have extensive reporting duties:

1. Foreign shareholdings (§138 AO): For stakes over 10%
2. Foreign accounts: Report all SPV accounts
3. Transparency register: Declare beneficial owners
4. Tax filing: Complete documentation of the structure

Penalties for violations are draconian: up to €1 million per case.

So my advice: Absolute transparency from the beginning.

Conclusion: Which Vehicle Fits Your Strategy?

After more than 15 years in international tax consultancy, I can tell you one thing:

There’s no universal solution.

But there are optimal solutions for your specific situation.

Section 110 Ireland: Who Is It For?

Perfect for you if:

• You have over €25 million to invest
• Tax optimisation is your top priority
• You prefer proven, legally secure structures
• Your investments are mainly passive
• You don’t plan EU-wide marketing

Less suitable if:

• You’re looking for institutional co-investors
• Your holding is under €15 million
• You deal in highly regulated assets
• Maximum EU conformity is more important than lowest tax

Malta SV: When Is It the Better Choice?

Ideal for you if:

• You want to approach institutional investors across the EU
• Highest compliance standards are important to you
• You invest in regulated asset classes
• Future-proofing is more important than the lowest tax
• You need flexibility for complex structures

Less suitable if:

• Cost minimisation is your top priority
• You prefer simple, tried-and-tested solutions
• Your investment horizon is under 5 years
• You dislike regulatory complexity

My Personal Recommendation

For most German investors with €25–100 million to invest, Section 110 remains the first choice.

Why?

The cost savings are dramatic. The structure is tried and tested. The risks are manageable.

But Malta is catching up fast.

If you’re thinking long-term and planning EU-wide activities, Malta is the more future-proof choice.

The Hybrid Approach: The Best of Both Worlds

Here’s a consideration 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 it offers maximum flexibility and risk diversification.

The Next Steps

If youre eager to dive deeper now:

1. Analyse your situation: Investment volume, goals, risk tolerance
2. Tax advisory: Clarify German and international issues
3. Service provider selection: Find experienced partners in Ireland/Malta
4. Pilot project: Start with smaller volumes
5. Documentation: Document each step thoroughly

And remember: The best structure is useless if it doesn’t match your life.

One last tip: Don’t let tax considerations alone drive your decision. Substance, legal certainty and your personal goals are just as important.

With that in mind: Wishing 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 this is possible. However, you need at least €10 million to invest and must fulfil the substance requirements in Ireland. You should also have the German tax implications professionally reviewed.

What is the minimum investment for a Maltese securitisation vehicle?

A Maltese SV requires at least €25,000 in share capital. In practice, you should really have at least €15 million in assets under management for the higher compliance costs to be worthwhile.

Does German CFC taxation apply to both structures?

In principle, yes, as both are low-taxed structures. However, there are exceptions, especially for financial service activities and due to EU free movement of capital. Careful legal review is essential.

Which structure is better suited for family offices?

That depends on your investment strategy. For passive investments with high volumes, Section 110 is usually more efficient. For complex structures with EU-wide marketing, Malta is often the better choice.

How long does it take to set up such a structure?

Section 110 Companies can be set up in 4–6 weeks. Malta SVs require 8–12 weeks due to MFSA licensing. The full set-up, including banking and operational structure, takes 3–6 months.

Are these structures OECD Pillar 2 compliant?

With sufficient substance, yes. But you must demonstrate real economic activity and cannot run them as mailbox companies. The 15% minimum tax applies to large multinational Groups.

Can I convert my existing Luxembourg structure?

A direct conversion is usually not possible. However, you can transfer the assets into a new Irish or Maltese structure. This requires careful tax planning to avoid pitfalls.

How transparent are these structures to German authorities?

Very transparent. Both are subject to automatic exchange of information (CRS). German authorities automatically learn of your involvement. Full transparency and proper reporting are mandatory.

What ongoing costs should I budget for?

Section 110: €15,000–25,000 annually for administration, plus €10,000–20,000 for compliance. Malta SV: €25,000–35,000 for administration, plus €20,000–40,000 for enhanced compliance requirements.

Can I use both structures in parallel?

Yes, thats possible and often done: Section 110 for passive investments, Malta SV for active strategies or EU-wide marketing. This offers maximum flexibility, but also increases complexity and costs.