If you’re flying over the Atlantic, Pacific or Indian Oceans, chances are that the plane you’re in has a connection to Ireland.
Ireland has emerged as a hub for the aviation industry in the last few decades. Over 50% of leased aeroplanes operating in any part of the world have a connection to Ireland. Most global commercial aircraft leasing companies have a presence in Ireland (Dublin or Shannon).
But how did Ireland become geographically and commercially significant to the industry?
A Brief History of Irish Aviation
If you’re in the aviation industry, Guinness Peat Aviation (also known as GPA) is a name you’ll instantly recognise. Dr Tony Ryan, Founder of Ryanair and Aer Lingus, established GPA in the 1970s in Shannon, Ireland. During the 1980s, it became the leading European aircraft lessor. Although the GPA had its downfall in the late 1990s, by then, Ireland had become a mature market for the aviation industry with many commercial lessors and aviation professionals calling Ireland home.
Why Are So Many Aircraft Lessors and Aviation Companies Based in Ireland?
A number of economic considerations work in favour of Ireland as a popular destination for aircraft lessors and aviation companies. A few of them include:
- Low corporate tax rate of 12.5% on trading profits of Irish incorporated companies;
- No minimum capital requirements for Irish companies, which means the companies can be wholly debt-based;
- No stamp duty payable at the time of sale of aircrafts;
- Extensive network of double taxation treaties with many countries, thereby reducing or altogether eliminating withholding taxes payable on dividends;
- Lease rental payments are exempt from withholding taxes;
- Tax-efficient structuring and ease of forming remote bankruptcy special purpose entities;
- No Value Added Taxes (VAT) on cross-border lease payments;
- Signatory to Cape Town Convention and Aviation Protocol. The International Registry, which operates under the legal framework of the Convention and Protocol, is based in Ireland.
Process Agent and Aviation Finance Considerations
In spite of the prevalence of Ireland as a world-renowned aviation hub, parties to international aviation contracts related to the purchase or lease of an aircraft or engine generally choose New York or the UK as the jurisdiction governing these financing transactions. This is because of the reputations these jurisdictions have earned for having sophisticated and well-developed bodies of commercial and business law.
Typically, the parties to these transactions appoint a process agent (also known as a “contract agent”) when they don’t have a presence in the jurisdiction of the governing law of the transaction. Frequently, appointing a process agent is required to close the deal.
For more information, see our past blog article, ‘What is a Process Agent and Why Do You Need One?’.
Other Advantages: Ireland and the Aviation Industry
Although there are enough economic reasons to do business in Ireland, it wouldn’t be as compelling if the political and social environment wasn’t as favourable. The Irish government strongly backs the aviation industry and constantly takes measures to keep the climate friendly and viable by immediately addressing concerns to restore faith in its market.
The absence of any licensing or regulatory regime for holding the aircraft, and the availability of quality corporate service providers to manage the Special Purpose entities in Ireland, are also distinct advantages.
In addition, with English being the predominant business language and with the availability of highly educated English-speaking professionals, this makes Ireland an attractive destination for the global aviation industry.
Not to mention the Irish luck.
This content is provided for informational purposes only and should not be considered, or relied upon, as legal advice.