I propose to take Questions Nos. 182 to 185, inclusive, together.
The proposed amendment to Section 110 of the Taxes Consolidation Act, published on 6 September, is the subject of ongoing review and discussion. It is intended to address some perceived issues with the operation of section 110. The amendment as published is not finalised and may be subject to further refinements to clarify certain aspects of the provision.
The proposed amendment relates to the corporation tax that a section 110 company must pay, and not to any potential capital gains tax (CGT) liability. This is an important distinction: corporation tax applies to profits arising during an accounting period whereas CGT is triggered by a disposal during a period. A change in the CGT rate applies to any accrued gain crystallised by a disposal of the asset after the change in the rate. However, it is incorrect to apply this logic to corporation tax because of the difference in the events which trigger the tax.
With regard to any attempts by accountancy firms or otherwise to circumvent the intention of the proposed amendment it should be noted that this is a proposed amendment. The rationale for publishing said proposal was to ensure appropriate feedback is received on a technical and complex section of the Taxes Acts. My officials are currently in consultation with a broad range of stakeholders to clarify certain aspects of the provision and to ensure the proposal successfully carries out the intention for which it was created. This is an ongoing process and I would like to reiterate that we welcome input from all stakeholders, including Deputies, on the matter.
Regarding interest deductibility, it is a long standing part of tax law that a person is subject to income or corporation tax not on their gross income, but on their profits, having taken a deduction for the expenses wholly and exclusively incurred in earning those profits. Where the interest expense of a section 110 company is calculated on an arm's length basis, and where it passes the wholly and exclusively test, then it would not be in keeping with the balance of the Irish tax system to restrict the deductibility of that interest.
In relation to section 110 companies being owned by QIAIFs, this would not change the Company Registration Office (CRO) obligations re the filing of returns. If a section 110 company has a shareholder who is an AIF, they are still obliged to file their accounts and these accounts will be publicly available via the CRO website.