Stephen Donnelly (Wicklow, Social Democrats) | Oireachtas source

Brilliant. I thank the Minister of State. I also thank the Acting Chairman for his indulgence.

This segues in to the next section but, as the Minister of State indicated, they are linked, so this is not getting into the Irish real estate funds, IREF, section. I might just mention this to the Minister of State and we can pick it up in the IREF section.

The final tax avoidance loophole I am being told about is that the vulture fund transfers the assets from the section 110 company into a different vehicle, say, a qualifying investment fund, QIF. It predates that to earlier this year because there is a provision in the section that states that transfer of assets out of section 110 will not be allowed if it is deemed that it is for tax avoidance reasons, which is very welcome. The legal interpretation the vulture funds are getting is that if that is predated before 5 September, which they are entitled to do in any accounting year, it avoids that tax avoidance scheme. Now the vulture fund will have moved its assets out of the section 110 company into a qualified investment fund and under the next section, the qualified investment fund automatically will be designated as this new vehicle called an Irish real estate fund, and then two things will happen. First, they will be capital gains tax, CGT, exempt because they will hold the assets for five years. Second, these things called investment undertakings are exempt from the Irish real estate fund, IREF, withholding tax. When the vulture fund moves its mortgages it takes them out of the section 110 box, puts them into the qualified investment fund box and says that these mortgages are now in a QIF, the QIF is an IREF, the IREF is CGT exempt and because it is owned by this thing called an investment undertaking, it is also IREF withholding tax exempt and therefore it pays no taxes. I am happy to pick that up again in the next section. It is specific to the IREF so whatever the Minister of State wants to do-----