Dáil Éireann Debate, Wednesday - 6 April 2016
179. Deputy Peadar Tóibín asked the Minister for Finance the new tax liabilities, such as withholding tax on the interest paid on individual loans, that Irish businesses will face due to the acquisition of distressed loan books by special purpose vehicles, SPVs; if he has brought these taxes to the attention of business; and if some form of relief will be provided for businesses that are struggling. [6232/16]
Amharc ar fhreagraSection 246 Taxes Consolidation Act 1997 (TCA 1997) imposes on companies generally, and on others who pay interest to persons whose usual place of abode is outside the State, the obligation to deduct tax from payments of annual interest and to account to Revenue for the tax deducted.
Section 246(3) TCA 1997 provides for several exceptions/exemptions from the obligation to deduct withholding tax. The exemptions/exclusions include:
- interest paid to or by a bank carrying on business in the State;
- interest on certain securities issued by certain certified companies or specified collective investment undertakings;
- interest paid by a company to an investment undertaking that is within the gross-roll-up taxation regime;
- interest paid by a company in a fiduciary or representative capacity (except when paid to non-residents);
- interest on Government securities and securities issued by certain State-sponsored bodies;
- interest paid without deduction of tax by credit unions;
- interest which is a distribution under 'close company' rules;
- interest paid by a company authorised by the Revenue not to deduct tax;
- interest paid by a company or an investment undertaking to a company in another EU Member State, in a country with which Ireland has a tax treaty in force or in a country with which Ireland has signed a tax treaty which has yet to come into force, provided certain conditions are met;
- interest paid by finance and other companies that make loans but are not licensed banks or building societies (subject to certain conditions);
- interest paid to a special purpose securitisation company and interest paid by such a company to a person who is resident in another EU Member State, in a country with which Ireland has a tax treaty in force or in a country with which Ireland has signed a tax treaty which has yet to come into force;
- interest paid to or by the Strategic Banking Corporation of Ireland; and
- interest paid to the National Treasury Management Agency, the state acting through the National Treasury Management Agency or a National Treasury Management Agency Fund investment vehicle.
Therefore where a special purpose vehicle (SPV) has acquired a distressed loan book including the loans of an SME, there may be a requirement for the SME to operate interest withholding tax at the standard rate on any loan repayments it makes to the SPV. As the SME is not a party to the disposal of the loans, on occasion, they may not be aware of the corporate identity of the acquirer. Therefore, they may not have enough information to determine if they are required to operate the interest withholding tax. I understand that Revenue will be issuing an e-Brief this week to address the matter which will encourage SMEs in this situation to contact them about a resolution.
