Europe

Irish government to close 'vulture funds' tax loophole

Michael Noonan Image copyright Brian Lawless
Image caption Irish Finance Minister Michael Noonan wants to appeal the European Commission decision

The Irish government has moved to close a loophole which is being used by so-called vulture funds to drastically reduce their corporate tax bills.

The funds control billions of euros of property assets.

They have used part of the tax code known as Section 110 to reduce tax bills to a few hundred euros a year.

Minister for Finance Michael Noonan has published an amendment to Section 110 saying concerns had been raised about "aggressive tax practices".

Mr Noonan said: "The proposed amendment targets the issues that have been raised and will ensure that the Irish tax base is appropriately protected."

Ireland's other taxing issue

Section 110 was introduced in 1997 with the intention of boosting Dublin's International Financial Services Centre.

It allowed for the creation of companies, known as Special Purpose Vehicles (SPV), which could undertake certain international transactions effectively tax-free.

The regime had little to do with activity in the Irish domestic economy, beyond work for tax and accountancy specialists.

However, following the Irish economic crash the vulture funds were advised they could use Section 110 companies to hold billions of euro of distressed property debt they had bought from Irish banks.

Section 110 is allowing them the funds to use various techniques to legally send revenues from these assets offshore and so minimise taxable profits in Ireland.

Research by the Sunday Business Post newspaper shows that many of the funds have managed to structure their businesses so the annual corporation tax charge is just 250 euros.

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