Pearse Doherty (Donegal, Sinn Fein)
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53. To ask the Minister for Finance if the amendment introduced in section 21 of the Finance Bill 2016 which had the expressed aim of preventing businesses with loans which are secured over, or derive their value from, an interest in Irish land from using provisions in section 110 to avoid payment of Irish tax on profits made on Irish property transactions has successfully achieved its stated objective; to outline any reviews that have been carried out to ensure this objective was achieved; and if he will make a statement on the matter. [24776/25]

Paschal Donohoe (Dublin Central, Fine Gael)
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The Finance Act 2016 made certain changes to the taxation of qualifying companies, within the meaning of section 110 Taxes Consolidation Act 1997 (“TCA 1997”). The changes, which included the introduction a new subsection (5A) in section 110, relate to the taxation of profits derived from the business of qualifying companies that involve the holding, managing or both the holding and managing of specified mortgages, including any activities which are ancillary to that business, after 6 September 2016. Specified mortgages refer to any financial assets that derive their value, or the greater part of their value, directly or indirectly from land in the State. Subsection (5A) requires that the part of the qualifying company's business that relates to specified mortgages is treated as a separate business from any other business the company may carry on and, with certain exceptions, no interest above an arm's length rate is deductible in computing the taxable profits of that part of the business.

I am advised by Revenue that the amount of interest or other distributions payable which has been restricted due to the introduction of subsection (5A) is set out below for each tax return year since 2017. This non-deductible interest will have given rise to tax being payable on certain specified mortgages as intended by the Finance Act 2016 amendments. This information was disclosed in the Form CT1 by qualifying companies which were subject to the additional rules under subsection (5A).

Officials in my Department, together with officials in Revenue, continue to monitor the sector and the operation of section 110 on an ongoing basis, with a view to taking action should it be deemed necessary.

For example, in 2019 my Department prepared a report on Real Estate Investment Trusts, Irish Real Estate Funds and section 110 companies as they invest in the Irish property market. This report was presented to the Tax Strategy Group in July 2019 and informed amendments to the section 110 regime introduced in Finance Act 2019. These amendments strengthened the significant restrictions to the deductions which a section 110 company can claim for payment of profit participating notes to a specified person. The amendments also placed the section’s main purpose test on an objective basis.

In addition, my predecessor Minister Chambers published the Report of the Funds Sector Review 2030 on the 22 October 2024. This report fulfilled the recommendation from the Commission on Taxation and Welfare for, among other things, an examination of the use and scope of the section 110 regime and made recommendations to address potential risks arising in respect of the section 110 regime through enhanced transparency. Officials in my Department are reviewing these recommendations as part of a wider consideration of the Funds Review Report along with consideration of developments at an EU level on securitisation and related policy discussions on simplified interest deductibility under the Public Consultation on the Taxation of Interest. I, in turn, will consider these matters in due course.