Loophole allowing Vulture Funds to pay almost no Irish profit tax shut

The so called Section 110 rule allowed companies to escape normal corporation taxes and has been widely used by the giant US investment funds that have bought up billions of euros of loans here since the crash.

The Minister for Finance, Michael Noonan today published a proposed amendment that would limited that favourable tax treatment only to non-Irish assets.

Unusually, the change will kick in immediately so investors who previously bought Irish loans based on the old tax regime will be hit with a tax hike on all future income.

Section 110 was first developed to facilitate so called securitization – a process where mortgages are bundled together and sold on the bond markets, but it is now widely used by investors in everything from property loans to airplanes.

But the low taxes paid by so called vulture funds who stand to reap billions of euro after buying Irish assets at knock down prices in recent years has caused a public backlash.

“A number of concerns have been raised recently about the possible use of aggressive tax practices by some section 110 companies to avoid paying tax on Irish property transactions.  In light of these concerns, and due to the highly technical and complex nature of the amendment, I am now publishing a proposed amendment to section 110 Taxes Consolidation Act 1997,” Michael Noonan said.

“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 bona-fide securitisation purposes.  The securitisation and funds industries are essential areas in the broader IFS sector, a sector which now employs over 38,000 people directly in over 400 companies, 200 of which are Irish owned,“ he said.