Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I move amendment No. 48:

In page 59, line 4, to delete “lease” and substitute “finance lease”.

These amendments relate to section 38, as amended by the select committee. Section 38 included a number of amendments to the taxation of leased assets in Ireland. Following the publication of the Bill as initiated, a number of issues were raised by stakeholders.

The amendments in section 37 of the Bill, as initiated, were aimed at clarifying the rules for calculating taxable income for all lessors and lessees. Stakeholders raised concerns that aspects of the amendments may create uncertainty around how operating lessors are taxable in Ireland. Officials have considered the issues raised and concluded it is appropriate to remove operating lessors from this section at this time pending further review of those issues. Therefore, operating lessors will continue to be taxed in line with the existing rules.

I am also proposing a technical amendment to ensure the section operates as intended where lease payments may be subject to various changes throughout the lease.

Under this section, leases that bear the hallmarks of a financing transaction are to be taxed as if they were financing transactions, subject to certain criteria being met, the primary one being that the burden of wear and tear for the asset passes to the lessee.

Companies that are considered trading and taxable under case 1 of schedule D are entitled to deductions in the normal course of calculating their taxable profits. Following the publication of the Bill, as initiated, officials were made aware that there are many Irish leasing companies which are not considered to be trading, including those who, due to the amendment to this section in the Bill, as initiated, will have leasing transactions taxed as financing transactions. As such, I am bringing forward two Report Stage amendments to provide for similar treatment for these non-trading leasing companies. The effect of these amendments is that non-trading lessors will be entitled to a deduction for their interest expense, and under section 299, similar to case 1 lessors, non-trading lessors will be taxed on their net annual financing profit arising from the lease rather than their rental profit.

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