Pearse Doherty
Question:373. Deputy Pearse Doherty asked the Minister for Finance if he will consider reviewing the taxation of section 110 companies; and if he will make a statement on the matter. [1853/21]
View answerWednesday, 31 March 2021
Questions (373)
Written answers
Section 110 of the Taxes Consolidation Act 1997 sets out a 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 bona-fide securitisation and structured finance purposes. The section 110 regime enables noteholders to invest through one structured vehicle, without giving rise to an additional layer of tax as compared to a direct investment in the underlying assets.
Securitisation allows banks to raise capital and to share risk and, by providing a repackaging and resale market for corporate debt, it lowers the cost of debt financing. It is accepted that having the option for more diversified sources of financing is good for investment and business. It is also important for financial stability in the economy, as the ability to securitise loan books plays an important role in allowing banks to meet their capital requirement obligations and to continue lending to businesses and individuals. The section 110 regime is an important part of Ireland’s offering as a location for the conduct of financial services. Ireland is not unique in having a securitisation regime, a number of other EU countries have such a regime in place as part of a competitive financial services offering. The importance of securitisation has been recognised by the European Commission through their work on Capital Markets Union, one of the aims of which is to seek to build a sustainable securitisation regime across the European Union.
The Deputy may be aware that that my officials prepared a report on Real Estate Investment Trusts, Irish Real Estate Funds and section 110 companies as they invest in the Irish property market in 2019. This report was completed and presented to the Tax Strategy Group in July 2019 and informed the 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, which enables Revenue to more effectively challenge abuse of the legislation.
While no formal review is under way, my officials, together with officials in Revenue, continue to monitor the sector on an ongoing basis, with a view to taking further action in future should it be deemed necessary.