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

Section 110 of the Taxes Consolidation Act 1997 sets out the Irish regime for the taxation of special purpose companies set up to securitise assets. The tax provisions are intended to create a tax-neutral regime for securitisation and structured finance purposes.

Loan originations involve a section 110 company fronting for a foreign bank and either lending directly to larger, more sophisticated borrowers or immediately issuing newly made loans to smaller borrowers from foreign banks. Provided the foreign bank is established in one of the countries with which we have signed a double tax agreement, no Irish tax would have arisen on its interest income had it lent directly to the Irish borrowers. As the original creditor, there can be no taxable capital gain on any subsequent sale of the loans. If the loan origination company is a qualifying company within the meaning of section 110 of the Taxes Consolidation Act 1997, it can operate in a tax-neutral manner in Ireland using a section 110 company.

The Deputy will recall that in the Finance Act 2016, the reporting requirements for section 110 companies were enhanced. As a result, the Revenue Commissioners will have access to more information and at an earlier time regarding these companies. However, getting complete data from the Revenue Commissioners may take longer than the timeframe suggested by the Deputy. Given this constraint, it would not be appropriate to put the preparation of the requested report into legislation.

Regarding the Finance Act 2016 changes, the desire was to address issues relating to property and property-based loans. I acknowledge, however, that issues outside property are more complex and I want to ensure that section 110 operates in a proper manner. If concerns are raised regarding the operation of section 110 in the loan origination space, I will ask the Revenue Commissioners and my officials to investigate these concerns. Furthermore, on an ongoing basis, officials from the Department of Finance will continue to work with the Revenue Commissioners to analyse the use of the section 110 regime to minimise tax avoidance opportunities.

I cannot therefore accept the proposed amendment.

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