Irish FinMin proposes amendments to close tax loophole

Irish Finance Minister Michael Noonan on Tuesday published a proposed amendment to Section 110 of the Taxes Consolidation Act after claims it is being used by vulture funds to establish companies to buy up distressed property loans while paying little or no tax in Ireland.

Section 110 is at the heart of Ireland's structured finance regime. It allows for organizations to achieve a neutral tax position provided certain conditions are met. This regime, which has been in existence since 1991, is widely used and internationally regarded.

"The proposed amendment targets the issues that have been raised and will ensure that the Irish tax base is appropriately protected," Noonan said in a statement.

"Further targeted proposals in relation to the use of funds in the Irish property market are also being considered," the Irish minister said.

Once enacted, this provision will come into effect from Sept. 6, 2016, according to the Irish government.

In response to opposition pressure, the Irish government asked revenue authorities to examine the tax law to see if it was being abused by funds to make money on assets in Ireland without paying tax in the country.

"I am publishing this proposed amendment to address the perceived misuse of Section 110 and to ensure that the tax provisions are ring-fenced for bonafide securitization purposes," he said.

The securitization and funds industries are essential areas in the broader international financial services sector in Ireland, a sector which now employs over 38,000 people directly in over 400 companies, 200 of which are Irish owned.

"I wish to reaffirm the stance that Ireland has extensive protections under our tax code to prevent tax avoidance," he added. Endit