Tuesday, 21 February 2012
Department of Finance
Financial Services Regulation
Question 156: To ask the Minister for Finance the number of charitable trusts registered at the International Financial Services Centre; the total funds channelled through these trusts during the years 2007 to 2011, inclusive, and the tax foregone by exempting these trusts from Irish corporation tax. [9296/12]
The 6 charities listed below are eligible charities for the purposes of a tax exemption and have their addresses at the IFSC.
|CHY8877||Treoir, The National Federation of Services for Unmarried Parents||14 Gandon House Custom House Square IFSC Dublin 1|
|CHY12414||HEAnet Ltd||5 Georges Dock IFSC Dublin 1|
|CHY9928||National College of Ireland||Mayor Street IFSC Dublin 1|
|CHY15929||National College of Ireland Foundation Limited||National College of Ireland Mayor Street IFSC Dublin 1|
|CHY17364||RD 8 Dollymount Charitable Trust||C/O Eureko Reinsurance Ireland Limited Georges Dock House IFSC Dublin 1|
|CHY17960||Clowns Without Borders - Ireland||C/o 14 Gandon House IFSC Dublin 1|
Revenue is not aware that any of these charities has any involvement in the business of the IFSC itself.
As the deputy may be aware, however, in certain financial transactions it is common practice for the shares in special purpose companies (SPCs) to be owned by a public charity. This ensures that, firstly, the SPC is not consolidated into the balance sheet of the financial institution (“the originator”) that has transferred loans to the SPC thereby ensuring that the originator is in a position to make further loans and, secondly, that the originator will not be liable for any non-performing loans included in the assets transferred to the SPC. The use of a charitable trust for these purposes is a common occurrence internationally in certain financial transactions.
As a general rule, special purpose companies are established as “orphan” companies. A typical structure for an orphan company would consist of an Irish private limited company (i.e. the SPC), the entire issued share capital of which is held on trust for charitable purposes. The trustee holders of the share capital can be individuals or nominee shareholder companies (charitable trust companies), all of whom hold their shareholding under declaration of trust executed in favour of Irish charities. Charitable trusts are used internationally in special purpose company structures.
It is important to note that the charity is a shareholder in the company and does not hold any assets or liabilities. All assets and liabilities are held by the SPC. It is the company, not the charity, which carries on the business— and funds are not channelled through the charity. Instead, any residual profits left in the SPC after its business is completed are paid by way of dividend to the charitable trust. SPCs are not entitled to any tax deduction for the payment of such dividends.
The number of such charitable trusts cannot be readily determined or estimated by reference to any identifying feature. It is likely that the total amount of residual dividends they receive, being incidental to the main business, is relatively small.