IRELAND: Proposal to Amend Taxation of Special Purpose Vehicles Set Up to Securitise Assets

Monday September 12 2016

On 6^th September 2016, the Minister for Finance announced a proposed amendment to Section 110 of the Taxes Consolidation Act 1997.  Section 110 of the Taxes Consolidation Act 1997 sets out the regime for the taxation of special purpose vehicles (SPV) set up to securitise assets.

The securitisation regime was designed to improve Ireland’s offering as a location for the conduct of financial services.  It has achieved that broad goal and the financial services industry now makes use of these securitisations as a support to financial intermediation.  Such financing is useful for the productive economy as it can underpin the supply of finance to industries and companies in Ireland, Europe and further afield. The importance of securitisation has further been recognised by the European Commission through their work on Capital Markets Union, of which one of the aims is to seek to build a sustainable securitisation regime across the European Union.

Concerns have recently been raised about the possible use of aggressive tax practices by some section 110 companies to avoid paying tax on Irish property transactions.  The proposed amendments aim to address the perceived misuse of section 110 and to ensure that the tax provisions are ring-fenced for bona-fide securitisation purposes.

With effect from 6 September 2016, the Irish property business will be treated as a separate business of the Irish SPV. Payments of interest that are profit dependent or are not arm’s length will not be deductible in calculating the profits of that Irish property business, subject to certain safe harbours including broadly where payments are made to an Irish or EU person.  The rules will only apply to the calculation of profits arising after 6 September 2016.

Click on the above link for further details.