Pearse Doherty (Donegal, Sinn Fein)
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68. To ask the Minister for Finance the cost of allowing the use of section 110 tax status by those involved in the business of loan origination (details supplied); and his plans with regard to stopping these businesses operating in a tax neutral manner. [31930/17]

Paschal Donohoe (Dublin Central, Fine Gael)
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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. 

If the loan origination company is a qualifying company (within the meaning of section 110 TCA 1997) then it would be able to operate in a direct tax neutral manner in Ireland.  There are a number of non-bank lenders currently active in the Irish market.  These lenders are seen as an important alternative source of credit to Irish businesses which is why it was provided that they would not be impacted by the introduction of the new subsection (5A) to section 110 Taxes Consolidation Act 1997, as passed in the 2016 Finance Act.

It should be noted that it is also possible for an Irish resident company carrying on a loan origination business to achieve near tax neutrality under the normal corporation tax rules.  Equally, if the investment bank that was based in a country with which we have a double tax agreement (and which taxes interest received from non-residents), lent directly to its Irish customers, then no Irish tax would arise on those profits.  For a non-resident lender to achieve Irish tax neutrality there is an administration burden placed on the Irish borrowers.

The main benefits of using a section 110 company are therefore the certainty which the lenders have in relation to the tax treatment available; in addition Irish borrowers would experience an increased administrative burden if a non-resident lender is used rather than a section 110 company.

I am advised by Revenue that there is no loss to the Exchequer from allowing section 110 companies carry out loan originations in a tax neutral manner.