Wednesday 26 October 2016

Firm that part funded purchase of Clerys paid €214 tax last year

Sean Duffy

Published 17/08/2016 | 02:30

Clerys department store
Clerys department store

The Irish subsidiary of a US real estate giant that part funded the €29m purchase of Clerys department store - leading to its controversial closure pending redevelopment - paid just €214 in tax on its Irish activities last year.

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QREA Ireland Limited, which manages in excess of €35m of assets in Ireland, is one of more than 2,100 companies availing of S110 tax neutral status.

QREA's US parent Quadrant, which has an estimated €5.7bn in assets worldwide, separately received some €50m in funding from the Government's Irish Strategic Investment Fund (ISIF) last November, but has undertaken no investments to date with its State funds.

Section 110 of the Taxes Consolidation Act 1997 is regarded as the cornerstone of Ireland's onshore debt-securitisation regime.

The vehicle allows investors to acquire, manage and trade in a vast range of assets, including securities, aircraft, financial assets and non-performing loans, such as mortgages, in a tax-neutral manner. There are now more than 2,100 S110 special purpose vehicles (SPVs) operating in Ireland, whose popularity has more than trebled since 2010 when €74bn (par value) worth of toxic property debts were transferred to the National Asset Management Agency (Nama).

In a statement to the Irish Independent, Quadrant stated that it "fully complies with all relevant regulatory and tax regimes" which are applicable to its companies.

Quadrant is not registered for tax purposes in Ireland, but its employees are shareholders of QREA, which manages Quadrant's interests in Ireland.

Separately, WLR Cardinal Mezzanine Fund, an Irish-based fund backed by US billionaire Wilbur Ross, has confirmed that its SPV - used to issue some €500m in profit participating loans - is now availing of the S110 scheme. WLR, a provider of mezzanine real estate finance, received €75m in ISIF funding from last year.

In a statement to the Irish Independent, WLR Cardinal confirmed the company was now availing of the mechanism. "The WLR Cardinal Fund utilises S110 exactly as the legislation intended," said a spokesperson.

WLR Cardinal flagged its intention to register as an S110 in its 2014 annual accounts which stated that the fund was to issue €500m in profit participating loans in April of last year. The application of Section 110 means the company may, like others, have a minimal tax liability on any revenues generated here.

Section 110 companies were established in 1997 to encourage financial firms to engage in activities here and have been a huge success.

Their popularity has soared in recent years: there were 124 new S110s notified to the Revenue in 2010, rising to 404 last year.

Following the extensive use of S110 vehicles in the acquisition of distressed property assets, and concerns raised in the Dáil, Revenue has launched a sample audit - known as compliance interventions - into at least 40 companies.

Irish Independent

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