Oireachtas Joint and Select Committees

Wednesday, 17 November 2021

Select Committee on Finance, Public Expenditure and Reform, and Taoiseach

Finance Bill 2021: Committee Stage (Resumed)

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

I will try to deal with the different questions put to me by Deputy Farrell. On the question regarding the orphan structure and the stand-alone company, as the committee will be aware, an orphan company is a company that is bankruptcy remote. This means that in the event of a bankruptcy, the assets of the securitisation company are ring-fenced against the liabilities of that company. The orphaning of securitisation companies is standard practice in large public capital market transactions. There are circumstances in which a company may be orphaned and not included in any consolidated financial statements, but may not meet the very strict criteria to qualify as a stand-alone entity. In those situations, the orphaned company may be considered to be part of a single company worldwide group. In such a scenario, the company is subject to the interest limitation rule but may be able to avail of group relief, subject to it not having any transactions with associated companies which give rise to interest expense.

To summarise, in a situation where an orphan company is considered to be part of a single company worldwide group, it is subject to these rules and the criteria I have just mentioned. Beyond that, if the stand-alone entity is not part of a worldwide group, it would not be covered by these rules. The reason is that in the development of the work that led up to this point, the view was formed that stand-alone entities pose significantly less risk, if any, to base erosion and profit sharing, BEPS, through interest deductions as they are generally financed by third party debt from unconnected entities. For that reason, a stand-alone entity in those circumstances would be exempt from the operation of the interest limitation rule. In circumstances where the standalone company is outside of a worldwide group and financed by third party debt from an entity that is unconnected to it, it will be exempt from the operation of this rule.

On public private partnerships, the answer is likely to be that they will be exempt from this, but it will have to be evaluated on a case-by-case basis, depending on the funding arrangement for the public private partnership in question.

The Deputy asked a question with regard to legacy debt. She also asked another question. My apologies; I cannot recall that other question.

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