SPV Tax Benefits and Common SPV Questions

2 min read

Sep 27, 2022 9:52:08 AM | Assure

If you’re thinking about investing in private assets or looking for a legal entity  to isolate a potential financial risk, starting a special purpose vehicle can help you with your goals. Larger corporations have relied upon SPVs to spread risks since the 1980s as a way to remove liabilities off their accounting ledgers. Here, we’ll cover what an SPV is, its benefits, the frequently asked questions people have about SPVs, as well as how Assure can help you with your SPV.

What Is An SPV?

SPV Icon

Also called a special purpose entity or SPE, companies use an SPV to undertake risky ventures and avoid negative impacts on their investors and the parent company. A parent company can also use an SPV to pool debt into a single security. There have been instances (like Enron) where a company exploits accounting loopholes to hide company debt, which can lead to financial devastation for both the company and its investors.

More recently, SPVs have become the structure of choice for raising capital for investment. An SPV allows up to 250 investors to pool funds into an investment vehicle to acquire and manage private assets. 

Benefits Of SPVs

While some companies might not use SPVs, using SPVs can add to smart business strategies as a simple and flexible way to structure an investment fund. Below are a few more benefits you can enjoy when using an SPV.

  • There are special SPV tax benefits your company can enjoy. If you create your SPV in a territory that’s considered a tax haven, you can save your company from taxes.
  • It protects the assets of your parent company when you encounter financial difficulty. Stakeholders and investors like SPVs as they lessen credit risk.
  • You can enjoy lower interest rates on securitized loans, which results in the company saving money.
  • SPVs can be used to facilitate investments into various types of assets and the SPV structure can be modified to meet specific needs. For example, an SPV can be used to invest into startups, real estate, private funds, or other assets.

Common SPV Questions

There are several questions people have when it comes to special purpose vehicles. These questions range from tax questions to the legality of using special purpose vehicles.

Are Special Purpose Vehicles Legal?

An SPV is its own legal entity and has its own legal status. It allows the company or deal organizer to legally isolate financial risks and the risks their investors or partners take. While SPVs are legal, they can’t be owned by the company that the entity is created for.

Does An SPV Pay Capital Gains Tax?

An SPV is subject to a capital gains tax when it comes to transferring assets, but at a lower rate. If you transfer existing properties, you have to pay capital gains tax, as well as stamp duty land tax and a few other types of tax. The capital gains tax will be at the lower corporation tax rate. When a company sells a property, they don’t have a capital gains allowance, while an individual would have that allowance.

Investors in an SPV…

When we prepare SPV tax returns, we assume they are an Investment portfolio partnership. The IRS considers an investment portfolio partnership not to be operating as a business.

Partnership returns are unique in the sense that they are not always required to be filed. IRC 1.603 (a) 1: This section of the Internal Revenue Code states that a partnership that has no income, deductions, or credits for federal income tax purposes for a taxable year is NOT required to file a partnership return for that year.

So, SPVs and their investors file taxes if and when there is a taxable event, and if the deal is structured correctly the SPV would not have to prepare a tax return and K-1s for the investors until the exit when the SPV is shut down. At that point, income and losses would be reported by the SPV with form 1065 and to/by investors with K-1s. (Assure does all of this as part of our SPV service.)

Is It Easy To Create An SPV?

With Assure, it’s both easy and economical to create an SPV entity. Our SPV structuring and administration provide the flexibility you need. If you have special needs within your SPV, we work with you, the SPV organizer, to modify whatever is necessary.

Why Choose Assure For Your SPV Creation?

Compliance Icon-1Apart from making SPV creation easy and simple, there are other reasons to choose Assure when you create an SPV.


Low Administrative Costs

When it comes to cost-effectiveness and low administrative costs, no other provider matches Assure. Our affordable SPVs decrease administration costs by over 90%. This means when you’re looking for ways to help your company save money, our SPV structure goes a long way towards helping with that goal. Utah, where Assure is located, has the lowest registration filing and compliance fees in the country.

We Track Changes

accounting iconEven the most steadfast company goes through large and small changes, so it makes sense to track those changes. That includes membership transfers from one entity control and investor to a different entity. While it’s rare to have an investment interest transferred to a third party, we keep track of what’s required for membership transfers. This includes documents, fees, and everything else that’s involved.

Start Your SPV Today

Once you’ve decided that your company needs an SPV, then the time to act is now. We have helped form over 5,100 SPVs with every variation and asset class you can think of. Assure has three SPV tiers to choose from that suit your needs. To get started, contact Assure today by filling out our special SPV form and providing information on what you need.