Mairead Farrell (Galway West, Sinn Fein) | Oireachtas source

This section amends the hybrid rules in part 35C of the principal Act and it proposes, among other things, changes to the definition of "associated enterprises". Many of Ireland's anti-hybrid rules are applicable only where there is a transaction between so-called associated enterprises, the definition of which this Bill looks to make clearer.

The amendments to section 20 also include a new provision that a transaction between associated enterprises should not include a transaction between enterprises who were associated at the time the transaction was entered into but are neither associated enterprises at the time the payment arises under the transaction nor at the time a deduction in respect of the payment arises. It is said that this provision will only apply where it is reasonable to consider that the arrangement as a result of which those enterprises cease to be associated enterprises was entered into for bona fide commercial reasons and not to avoid the application of the anti-hybrid rules.

Given that there is a new provision where enterprises that were deemed to be associated at the time the transaction was entered into but are deemed to be non-associated thereafter, what criteria will be used to decide that these enterprises are genuinely no longer associated? Does the Minister see a risk that anonymous special purpose vehicle, SPV, structures could be used to disguise their associations? If companies are associated but then set up an orphan structure by way of another company, an SPV, which is deemed to be independent because it uses a trustee ownership structure, would this allow them to avail of this new provision? If so, that would be a loophole in this regard.