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Flight of the CLOs: Dutch VAT ruling points to exodus

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Flight of the CLOs: Dutch VAT ruling points to exodus

All collateralised loan obligation (CLO) SPVs and warehouses domiciled in the Netherlands are now required to be taxed a 21% VAT rate backdated to 01 April 2019.

Implications for the CLO industry

The move will impact investor equity returns and calls into question the Netherlands as a location of choice for CLO and collateralised debt obligation investors.

Collateral management and administration fees were previously exempt from VAT in the Netherlands however, the Dutch tax authority (Belastingdienst) notified CLO SPVs that this ruling had been revoked on 21 February. While Dutch tax authorities are currently considering whether to soften their stance on the retrospective charge dating back to 01 April 2019, there are several implications for collateral management and administration fees:

  • The additional cost to managers/equity tranche is in the region of €400,000 - €500,000 per annum for a typical CLO.
  • This equates to an additional cost of circa €1,500 per day to keep these structures in the Netherlands.
  • CLO managers and investors are likely to seek a restructuring solution.

In order to avoid the extra cost, collateral managers and investors are likely to seek a restructuring solution and migrate their structures to an alternative jurisdiction with VAT protection, such as Ireland where more than 80% of European CLOs are now domiciled.

Find a solution

To discuss the restructuring or migration of your CLO structure, please get in touch with one of our capital markets team below who will support you to find an appropriate solution.

Leverage our CLO expertise

With extensive experience in providing CLO administration services to warehouse and issuance structures from our Cayman, Irish, Dutch, Luxembourg and Guernsey offices, we leverage a wide range of reputable managers, trustees and counsel to ensure your CLO operations succeed, no matter the complexity or stage of the CLO life cycle.

View our full range of CLO services here >

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