NAMA's tax affairs, and the legal structures it utilises to carry out its mandate, are a matter for NAMA to determine within the perimeter of its mandate and applicable law, including tax law. As we know the establishment of Section 110 companies is completely legal as it is permitted under Irish law and tax codes. As we also know, this House recently moved to change legislation governing the tax treatment of certain activities carried out within Section 110 companies.
In 2009, prior to passing the NAMA Act and prior to the establishment of NAMA, as part of the efforts of the Government of the time in planning for NAMA, Section 110 company structures were evaluated, considered and adopted as being central to ensuring tax neutrality and respecting the tax equivalent treatment of NAMA as a commercial body.
In 2010, resulting from this planning, NAMA established its Group structure which included a number of Section 110 companies. I am advised that the proposed structure was first presented to the NAMA Board in February 2010 and was formally approved by the Board in June 2010. The Revenue Commissioners were informed of the proposed structure in 2010 and raised no objection to it.
It is important to note that NAMA's use of Section 110 structures is not new information. NAMA has repeatedly and publicly disclosed its utilisation of SPVs, which include Section 110 structures, in its Annual Reports. The C and AG has also been aware of NAMA's use of Section 110 company structures since NAMA's inception. In October 2010, the C and AG published its Special Report entitled "National Asset Management Agency - Acquisition of Bank Assets." Appendix E within this report outlines in detail NAMA's Group Structure and its use of Section 110 Companies. It also contains a detailed description of the principal tax benefits that accrue to a qualifying Section 110 company. This report is publically available at: https://www.nama.ie/fileadmin/user_upload/SpecialReportNAMAAcquisitionOfBankAssetsOct2010.pdf.
NAMA's accounts have been audited, since inception, by the C and AG and filed with Revenue and reflect activity by NAMA that is, and has been, operating in full compliance with the tax code. Following the change that we, as a legislature, made to the tax law governing Section 110 companies last year, NAMA paid €158 million to the Revenue Commissioners as a preliminary tax payment to reflect its expected tax obligations under this new tax regime. Thus, NAMA has always and continues to act in accordance with tax law. Through this payment, NAMA is now simply moving, as would be expected, to operate in line with the recent change to tax legislation.
Under Section 214 of the NAMA Act, NAMA, the Agency - which owns 49% of the NAMA Group companies, is exempt from income tax, corporation tax and capital gains tax. NAMA Group companies, which contain all of the assets, liabilities and activities of NAMA, do not benefit from such an exemption and are tax-equivalent to any other market operator.
The tax exemption of the NAMA Agency does not adversely affect the Exchequer given that any surplus generated by the NAMA Group companies will accrue to the NAMA Agency and will vest in the State on a tax neutral basis.
The purpose of utilising Section 110 companies was to ensure that there was no unnecessary cash leakage from within the NAMA Group. This is no different to any other market operator. In NAMA's case, this was particularly important given the need to redeem guaranteed senior debt expeditiously and also the need to apply available cashflow to fund development projects ultimately intended to preserve and enhance the State's return from acquired assets, as required by Section 10 of the NAMA Act. Under an alternative tax regime, the amounts applied by NAMA towards debt redemption and development funding may well have been different.
I would also point out to the Deputy that all NAMA proceeds, whether through tax payments or a dividend surplus at dissolution, are ultimately destined to be transferred to the State.
I am advised that some NAMA entities are minority shareholders in a limited number of investments. NAMA is a passive investor and has no active management role or controlling interest in these structures. The corporate structures relating to NAMA's minority interests are ultimately a matter for the investment vehicle managers and/or directors. I am further advised that, in any event, the investment vehicles in which NAMA has an interest have not, to NAMA's knowledge, availed of the Section 110 tax exemptions.
