{"id":10081,"date":"2022-07-04T16:50:35","date_gmt":"2022-07-04T16:50:35","guid":{"rendered":"http:\/\/legalblog.ie\/tax-on-structures-2012\/"},"modified":"2024-03-03T08:52:01","modified_gmt":"2024-03-03T08:52:01","slug":"tax-on-structures-2012","status":"publish","type":"post","link":"https:\/\/legalblog.ie\/tax-on-structures-2012\/","title":{"rendered":"Tax on Structures"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_63 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/legalblog.ie\/tax-on-structures-2012\/#S110_Entities\" title=\"S.110 Entities\">S.110 Entities<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/legalblog.ie\/tax-on-structures-2012\/#2011_Restrictions\" title=\"2011 Restrictions\">2011 Restrictions<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/legalblog.ie\/tax-on-structures-2012\/#Certain_Debt_Instruments\" title=\"Certain Debt Instruments\">Certain Debt Instruments<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/legalblog.ie\/tax-on-structures-2012\/#Instruments_Covered\" title=\"Instruments Covered\">Instruments Covered<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/legalblog.ie\/tax-on-structures-2012\/#Withholding_Tax_Exemption\" title=\"Withholding Tax Exemption\">Withholding Tax Exemption<\/a><\/li><\/ul><\/nav><\/div>\n<h3><span class=\"ez-toc-section\" id=\"S110_Entities\"><\/span>S.110 Entities<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Section 110 of the Taxes Consolidation Act allows computation of trading profits of companies which qualify for treatment on the same basis as a trading company.\u00a0 This allows deduction of expenses including interest and other funding costs.<\/p>\n<p>Companies may allow a deduction for profit participating interest and interest exceeding a reasonable commercial return subject to conditions.\u00a0 They would otherwise be treated as distributions and not tax deductible.<\/p>\n<p>The companies are subject in principle, to tax at 25% on investment income.\u00a0 However they are generally geared to have no profit by reason of the underlying funding debt.\u00a0 There may be a small profit for the purpose of notional corporate benefit for the entity.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"2011_Restrictions\"><\/span>2011 Restrictions<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Finance Act 2011 which restricted a range of reliefs \u00a0removed tax deduction for profit participating interest including in particular that exceeding a reasonable commercial rate of return.\u00a0 There are a number of exceptions where the interest is paid to:<\/p>\n<ul>\n<li>Irish tax resident person,<\/li>\n<li>a non-resident person subject to Irish \u00a0corporation tax,<\/li>\n<li>resident in an EU State, Taxation Treaty State provided that the territory taxes foreign source income generally and such interest is subject to tax in the hands for the recipient;<\/li>\n<li>or a pension fund government body or other person resident in one of the above States, which is exempt from tax generally in respect of its profits and gains, provided it is not a defined class of specified person.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Certain_Debt_Instruments\"><\/span>Certain Debt Instruments<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Profit participating interest paid on quoted euro bonds and wholesale debt instruments is tax deductible provided that the qualifying company and the entity holding the bonds and debt instruments are not specified persons and the qualifying company is not aware at the time the profit participating debt is issued that the recipient is not a person resident in the relevant \u00a0territory who would be subject to tax on the interest receipt.<\/p>\n<p>A specified person is person who controls the qualifying company through shares or voting power.\u00a0 An entity will also be a specified person where the qualifying company has acquired assets from the person, made loans to that person or has entered into swap arrangements, where the aggregate value is more than 75% of the company\u2019s assets.<\/p>\n<p>A qualifying company must be resident in Ireland for tax purposes.\u00a0 It must acquire qualifying assets which comprise financial assets set out below.\u00a0 It must carry on business in Ireland, holding and managing qualifying asset,and \u00a0does not carry on activities other than those above, save for ancillary activities.<\/p>\n<p>The value of the first transaction must be \u20ac10 million.\u00a0 All transactions must be at arms length other than for profit.\u00a0 Participating debt agreements must notify the Revenue of its intention to qualify for the purpose of a Section 110 company.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Instruments_Covered\"><\/span>Instruments Covered<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Financial assets include<\/p>\n<ul>\n<li>shares, bonds, securities, future options, derivatives and instruments,<\/li>\n<li>invoices and all types of receivables,<\/li>\n<li>obligations\u00a0 evidencing debts including loans and deposits;<\/li>\n<li>leases and loan and lease portfolios;<\/li>\n<li>hire purchase contracts;<\/li>\n<li>acceptance credit cards and other documents of title relating to the movement of goods; bills of exchange, commercial paper, promissory notes and other negotiable instruments and<\/li>\n<li>carbon offsets.<\/li>\n<\/ul>\n<p>Carbon offsets are allowances allowing emission of greenhouse gas assigned under EU Directive establishing a scheme for greenhouse gas emission allowances.\u00a0 In effect they are tradable and have value due to the overall limitation on greenhouse gas emissions.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Withholding_Tax_Exemption\"><\/span>Withholding Tax Exemption<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Withholding tax at 20% is generally applicable to payments of interest by and Irish company.\u00a0\u00a0 However there is an exception for quoted euro bonds and for payments in to the \u00a0EU or to\u00a0 a Double Taxation Treaty territory.\u00a0 Quoted euro bonds are those which carry a right to interest in a quoted and a recognised Stock Exchange.<\/p>\n<p>There is no obligation to withhold tax on interest on quoted euro bonds if the person \u00a0to whom payment is made is not in Ireland, payment is through certain intermediaries or or the person who is beneficial owner provided a declaration that they are non-resident.<\/p>\n<p>There is an exemption from the requirement to withhold tax in relation to interest paid by a qualifying company in the ordinary course of business to a person resident in an EU State or double tax treaty.\u00a0 The underlying holder must meet certain conditions.<\/p>\n<p>Interest on commercial paper falls outside the withholding tax obligation on the basis that it is not yearly interest.\u00a0 There is an exemption from withholding tax on commercial paper with a maturity of less than two years, held within a recognised clearing denominations of \u20ac500,000, $500,000 or equivalent in other currency.<\/p>\n<p>The paying agent must be situate in Ireland and the recipient must make a declaration confirming Irish residence or confirm non-Irish residence.\u00a0 Commercial paper between one and two years does not qualify as essential commercial paper for the Central Bank\u2019s purposes.<\/p>\n<!--themify_builder_content-->\n<div id=\"themify_builder_content-10081\" data-postid=\"10081\" class=\"themify_builder_content themify_builder_content-10081 themify_builder tf_clear\">\n    <\/div>\n<!--\/themify_builder_content-->\n","protected":false},"excerpt":{"rendered":"<p>S.110 Entities Section 110 of the Taxes Consolidation Act allows computation of trading profits of companies which qualify for treatment on the same basis as a trading company.\u00a0 This allows deduction of expenses including interest and other funding costs. Companies may allow a deduction for profit participating interest and interest exceeding a reasonable commercial return [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"categories":[133],"tags":[],"_links":{"self":[{"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/posts\/10081"}],"collection":[{"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/comments?post=10081"}],"version-history":[{"count":4,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/posts\/10081\/revisions"}],"predecessor-version":[{"id":32573,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/posts\/10081\/revisions\/32573"}],"wp:attachment":[{"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/media?parent=10081"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/categories?post=10081"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/tags?post=10081"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}