Eoghan Murphy (Dublin Bay South, Fine Gael) | Oireachtas source

I move amendment No. 76:

In page 34, to delete lines 17 to 21 and substitute the following:

“not later than 8 weeks from—

(I) 1 January 2017 where the day referred to in paragraph (e) predates 1 January 2017 and the company has not yet made the notification in writing to the authorised officer in the form prescribed by the Revenue Commissioners as required to be made by the specified return date (within the meaning of section 959A) for the first accounting period in relation to which it is such a company, or

(II) the day referred to in paragraph (e),

and where information required is not available at the time the written notification is provided to the authorised officer, that information should be provided without undue delay upon becoming available,”,”.

I propose to take amendments Nos. 76, 79 to 85, inclusive, 87 to 95, inclusive, and 97 and 98 together. These amendments are mainly technical in nature, their purpose being to make minor drafting changes and to ensure that the section 110 legislation, which deals with the taxation of special purpose structured finance companies, operates as intended. Proposals for an amendment to section 110 were initially published by the Department on 6 September 2016 to facilitate consultation on this complex and important issue.

I would like first like to address a query that was asked of my officials at the recent committee technical briefing in respect of the numbers of section 110 companies. I am informed by the Revenue Commissioners that based on 2014 account information, which is the most recent data available, 1,391 section 110 companies filed accounts for that year. The amendments which I am now proposing reflect the complexity of this topic. They provide for minor drafting changes, along with some technical changes, regarding the scope of the amendment. The main objective of the amendments is to protect the position of Irish property in the tax base. The section prevents businesses with loans which are secured over, or derive their value from, an interest in Irish land from using the provisions of section 110 to avoid payment of Irish tax on profits made on Irish property transactions. I should mention that amendments are being made simultaneously to Part 27 of the Principal Act, to insert a new regime for the taxation of Irish real estate funds, IREFs. This will eliminate the potential for any arbitrage between the two areas. While the two regimes are separate, the Revenue Commissioners have advised me that there are a number of structures which involve both a section 110 company and an Irish fund vehicle and, therefore, it is important that the interaction between the two regimes is addressed.

I will now outline the changes that will be made as a result of each amendment. Amendment No. 76 clarifies the timeframe for making a notification to be a qualifying company under section 110. The amendment clarifies that a company whose qualifying assets reached the minimum €10 million market value before 1 January 2017, and is or intends to be a qualifying company, must submit its notification to Revenue not later than eight weeks from 1 January 2017. In all other circumstances, from 1 January 2017 a company must notify Revenue of its intent to be a section 110 company within eight weeks of it reaching the minimum €10 million market value for its qualifying assets. Where the information is not available at the time of making this notification, that information should be provided to Revenue as soon as it becomes available.

Amendment No. 79 is a technical amendment to include a reference to the Global Exchange Market of the State. The Global Exchange Market is an exchange regulated market and multilateral trading facility. The Irish Stock Exchange is the competent authority for the review, approval, listing and admission to trading and oversees submissions for listing on the Global Exchange Market.

Amendments Nos. 80 to 82, inclusive, are drafting amendments to provide clarity regarding the criteria for securitisation transactions, which are carried out in conformity with legally binding documents. Amendment No. 83 relates to the definition of "loan origination business", which provides that qualifying companies which lend directly to companies, whether SMEs or larger corporates, are not impacted by this amendment. This is to ensure that qualifying companies that loan to companies which have a specified security are not inadvertently excluded. The amendment clarifies that the definition of "loan origination business" does not include the making of an advance or loan regarding a specified security to a borrower who has a specified property business as defined.

Amendments Nos. 84 and 85relate to the definition of "specified mortgage", which isdefined as a loan secured on Irish land or a return agreement which derives its value from Irish land. The amendmentsexpand the meaning of "specified mortgage" to include the portion of the specified security relating to the specified property business that is to be treated as a separate business of the qualifying section 110 company.This is an anti-avoidance provision. Also included in the definition are units in an Irish real estate fund, which is required to ensure that neither this amendment nor the IREF amendment can be circumvented in the structures which involve both.

Amendments Nos. 87 and 88 expand the meaning of "specified property business", clarifying that the definition does not include activities which are preparatory to a CLO transaction, a CMBS-RMBS transaction or a loan origination business.

Amendments Nos. 89 to 93, inclusive, make minor drafting changes which relate to the conditions whereby a qualifying company engaged in a specified property business can avail of the relief regarding the use of the profit participating note. The categories of recipients who can receive the coupon with deductibility are set out in the original section. They are an individual resident in the State who is within the charge to income tax or a company within the charge to corporation tax; an Irish or EEA pension fund; or an EEA citizen who will pay tax on receipt of the interest, without any deduction for profit participating interest, provided that the payment of the coupon of the EEA citizen is not for tax avoidance purposes.

Amendment No. 94 makes clear that financing instruments which are neither debt nor equity cannot be used to reduce the interest or distribution in relation to an EEA citizen. Amendment No. 95 expands the categories of recipients who can receive the coupon with deductibility to include an IREF and an investment undertaking which is not a personal portfolio IREF. This amendment, coupled with amendment No. 85, deals with the interaction between section 110 companies and Irish real estate funds to ensure that double non-taxation or double taxation is prevented.

Amendment No. 97 is a minor drafting amendment. Amendment No. 98 clarifies that withholding tax must be correctly applied and such tax is not refundable. I commend the amendments to the committee.