Dáil Éireann Debate, Tuesday - 24 April 2012
215 Deputy Willie O’Dea asked the Minister for Finance the measures in the Finance Bill to support the international funds industry, the corporate treasury sector, the international insurance industry and the aircraft leasing industry; and if he will make a statement on the matter. [20081/12]
Amharc ar fhreagraI would refer the Deputy to the Explanatory Memorandum that was published with the Finance Bill — it contains information on each section of the Bill. In relation specifically to the measures to support the international financial services industry, there were 13 sections in the Bill containing 21 individual measures — sections 31-35, 37, 39, 41, 42, 47, 52, 100 and 101. The package of measures are designed to support the ambitious target of creating 10,000 jobs over the next five years as set out in the Strategy for the International Financial Services Industry in Ireland 2011-2016 which was published last July.
In summary, the measures enhance the competitive position of the sector by:
reducing double taxation in the corporate treasury and aircraft leasing sectors,
providing clarity around the tax treatment of complex financial transactions in terms of stamp duty in particular,
addressing tax issues arising for investment funds due to the UCITS* IV Directive which was implemented on 1 July 2011, and
further easing the administrative burden in relation to non-resident investors in Irish investment funds.
None of the measures have a significant cost element and the majority are aimed at simplifying the tax treatment applying to complex financial transactions in order to make it easier to do business in Ireland.
Taken together with the Special Assignee Relief Programme and Foreign Earnings Deduction, the measures represent a significant package which will support the competitiveness of the international financial services industry without significant cost to the Exchequer.
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Section of the Act |
Description |
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31 |
In Finance Act 2010 the requirement for non-resident individuals who have invested in Irish investment funds to submit written non-resident declarations (in order to obtain exemption from exit tax) was supplemented by an alternative regime whereby the investment fund itself could put in place “equivalent measures” to ensure that its unit-holders are not Irish resident. Section 31 of the Act extends the “equivalent measures” regime to include situations where; a) investments are made through intermediaries, and b) where a fund migrates to Ireland. |
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32 |
Section 32 of the Act removes a technical liability to Irish tax arising from the exchange of units in an Irish Exchange Traded Fund. |
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33, 34 and 35 |
One of the objectives of the UCITS IV Directive, which came into effect on 1 July 2011, is to enhance the ability of fund managers to rationalise their products and make them more cost effective. To this end, the Directive provides for the cross-border merger of investment funds and for new “master-feeder” structures. Ireland was one of the first countries to adopt this new Directive and changes were introduced in Finance Act 2010 in order to give the Irish industry a “first-mover” advantage. Finance Act 2012 contains three further amendments to ensure that Ireland will remain as one of the leading domiciles of choice for UCITS funds. i) Section 33 amends the provisions of section 739H TCA 1997 to ensure that an Irish investor does not suffer a charge to tax on either inbound (foreign fund merges into an Irish fund) or outbound (Irish fund merges into a foreign fund) mergers. The provisions already allow relief where units are exchanged in a reorganisation involving two Irish funds. ii) Section 34 extends the definition of a “scheme of reconstruction or amalgamation” in section 747E TCA 1997 to apply to exchanges of a material interest within the same offshore fund as well as between two offshore funds. iii) Section 35 amends section 739D(8D)(a) TCA 1997 to accommodate master/feeder structures. The amendment is required to allow for the issue of units in a master fund directly to a foreign feeder fund in exchange for the assets of that fund. |
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37 |
A suite of measures was introduced in Finance Act 2010 to facilitate Islamic Finance in Ireland. Section 37 of the Act makes two amendments to enhance the functioning of those provisions. |
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39 |
Section 39 amends section 198 TCA 1997 to remove a technical liability to Irish tax arising in respect of interest payments on Eurobonds as defined in section 64 TCA 1997, wholesale debt instruments within the meaning of section 246A TCA 1997, and asset covered securities within the meaning of section 3 of the Asset Covered Securities Act 2001, to a company that is resident in a non-Treaty country where that company is controlled by persons resident in a Treaty country or where the ultimate parent of that company is quoted on a stock exchange in a Treaty country. The measure aims to improve the competitiveness of the Irish debt market. |
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41 and 101 |
Section 41 of the Act extends the range of “carbon offsets” that a section 110 company can acquire to explicitly include forest carbon offsets — this is part of a broader initiative to develop a Green Financial Services Centre. Section 101 makes a consequential amendment to the Stamp Duty Act in order to accommodate this measure. |
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42 |
Section 42 introduces changes to interest deductibility rules to facilitate cash-pooling business in the corporate treasury sector. Deductibility is currently confined to payments to jurisdictions with which Ireland has a tax treaty. The amendment allows a deduction for interest payments to group companies in non-treaty jurisdictions by reference to the tax charged on the recipient in such jurisdictions. The change is required to facilitate cash-pooling activities of treasury operations where members of a group of companies are located in jurisdictions where Ireland does not have a tax treaty. |
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47 |
In response to representations from the international insurance industry in particular, section 47 extends the current group relief rules so that losses can be transferred between two Irish resident companies where those companies are part of a 75% group involving companies who are; a) resident in a jurisdiction with whom Ireland has a treaty, or b) “quoted” on a recognised stock exchange |
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52 |
The Act extends the existing unilateral credit relief, which currently applies to royalty payments, to include equipment lease rental payments. This allows foreign withholding taxes suffered on such payments to be offset against any Irish tax arising on same. This measure will be of particular benefit to the aircraft leasing industry. |
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100 |
Section 100 of the Act contains nine separate stamp duty amendments which extend the range and scope of stamp duty exemptions applying to certain financial transactions and confirm the stamp duty treatment of options over shares. The guiding principal in the case of investment funds is that stamp duty should not apply in situations where there is no change in economic ownership of the underlying assets being transferred. i) Extension of stamp duty exemption to cover cross-border mergers of investment funds. ii) Exemption for the transfer of Irish assets between two offshore funds (in EU/Treaty countries) in cases of reconstructions or amalgamations. iii) Extension of the existing stamp duty exemption for the transfer of a lease (other than a lease of real property) to cover the transfer of an “interest in a lease”. iv) Clarification of existing stamp duty exemption for foreign land. v) Extension of the stamp duty exemption for shares/securities of foreign companies to cover a wider range of foreign legal entities vi) Clarification in legislation that options over Irish shares are subject to the same level of duty that applies to share transfers. vii) Extension of stamp duty exemption to cover in specie transfer of pension and charity scheme assets between certain investment vehicles including unit trusts and investment companies. viii) Extension of stamp duty exemption to cover transfer of units in an exempt unit trust. ix) Exemption for the transfer of assets between an exempt unit trust and a corporate fund. |
*Undertakings for Collective Investment in Transferrable Securities.
