Ireland: International And Irish Tax Update - March 2017


In this edition of the Maples and Calder Tax Update, we focus on both Irish and international tax developments. 

(a) The enactment of the recent Irish Finance Act 2016 has introduced significant changes to the taxation of vehicles investing in Irish real estate. The changes impact Irish regulated investment funds and companies that utilise Ireland's securitisation tax provisions (so called "Section 110 Companies"). The changes are significant and relevant to fund managers, debt investors and property businesses.

(b) On the international front, the publication of the EU Commission's decision on State Aid with respect to Apple has attracted considerable comment. We also highlight how the OECD's Base Erosion and Profit Shifting ("BEPS") project continues to progress in relation to Action 6 and tax treaty access. 

Finance Act 2016 – Changes to Irish Real Estate Funds

Changes to the taxation of regulated Irish investment funds came into effect on 1 January 2017.  The new regime applies to funds that invest in Irish real estate and related assets.  It introduces a potential 20% withholding tax on certain events, including the sale of units, distributions and redemptions from such funds.


The new regime is primarily focused on funds authorised as Qualifying Investor Alternative Investment Funds ("QIAIFs") that have invested, or intend to invest, in specified Irish assets.  QIAIFs formed as Common Contractual Funds ("CCFs") or Investment Limited Partnerships are tax transparent, and therefore will not be directly impacted.  

QIAIFs are generally exempt from Irish tax in respect of all profits, including income and gains derived from rental, development or disposals of Irish land and buildings. Although regulated funds have been used to hold Irish real estate for over 20 years, in recent years they increased in popularity, particularly amongst international real estate investors. Noting this increased usage, the Minister for Finance announced a period of consultation in September 2016, culminating in the publication of draft legislation on 20 October 2016. This was debated and amended during October and November and was signed into law on 25 December 2016.

Summary of Tax Changes

The new legislation affects Irish regulated funds holding Irish real estate and related assets.  These are now defined as Irish Real Estate Funds ("IREFs") for tax purposes.  The key features of the regime can be summarised as follows:

(a) IREFs are Irish regulated funds that derive at least 25% of their value from Irish real estate, shares in unquoted real estate companies, Irish Real Estate Trusts ("REITs") and certain debt securities issued by Section 110 Companies;  

(b) In an umbrella fund, the 25% threshold is applied to each individual sub-fund.  A fund will also be deemed to be an IREF if its primary purpose is the acquisition of Irish real estate assets;  

(c) Where an IREF makes a distribution or redeems units it may be obliged to impose a 20% withholding tax on a percentage of the amount paid.  The withholding tax events arise in a wide variety of circumstances; 

(d) There are certain classes of exempt investor, in respect of whom no withholding tax may be levied.  These are primarily Irish taxable investors (who are already subject to Irish investment undertaking tax), Irish pension funds, regulated investment funds, life assurance funds and their EU / EEA equivalents.  These exemptions are subject to a number of anti-avoidance provisions;

(e) Where an exempt investor suffers withholding tax, such as where the payment is made through a feeder vehicle, they will be entitled to seek a reclaim of the tax withheld; and

(f) Where units in an IREF are sold or disposed of, the purchaser is obliged to deduct 20% of the consideration payable and account to the Irish Revenue Commissioners in respect of it.  The amount withheld may then be reclaimed by the seller. 

The new regime applies to accounting periods beginning on or after 1 January 2017 but may be applicable to accounting periods commencing prior to that date.

Long Term Investment Exemption

There is an exemption from withholding tax in respect of profits derived from the sale or disposal of Irish land that is held directly for five years. Initially this relief was available to a wide range of investors, however it has been restricted during the passage of the legislation.  It is now only available in respect of investors who were unable to control or select the assets or business of the fund.  Investors who do have such powers, but are regulated funds, pension schemes or life assurance companies within the EU/EEA, may also be able to benefit, provided they satisfy certain criteria.  The narrow scope of the exemption means it will require careful review if there is an intention to rely upon it.

Future Steps

The new regime is complex and Maples and Calder expects the Revenue Commissioners to publish clarificatory guidance on a number of issues in the coming weeks. 

Funds that hold Irish land and related assets, and investors and managers of such funds, should seek tax advice on the impact of these changes.  For investors that may be exempt from withholding tax, such as EU based investment funds and pension funds, it will be critical to assess their relationship with the IREF in order to confirm the availability of tax exemptions.

Funds and administrators may have to seek declarations and information from investors to calculate the tax payable under the new regime.  There are also additional reporting and tax filing obligations that will require assistance from tax compliance agents.

Alternative Structures

Given the material changes to the taxation position, investors may re-evaluate the use of QIAIFs to hold Irish property.  In light of the increased taxation and compliance burden, it is possible that their usage will decline in the future, and existing investments may migrate to non-regulated corporate structures.  Perhaps in a move to encourage such transitions, there are two provisions in the legislation that allow investments to be restructured:

(a) Prior to 1 July 2017, it is possible to transfer the business of the IREF, or the land development aspects of the business, to a non-regulated corporate structure.  The recipient company must issue shares to the IREF investors in consideration for the property transferred.  The transfer is exempt from stamp duty.

(b) Prior to 1 January 2018, it is possible to transfer the property rental business of the IREF to a company that has elected to be an Irish REIT. This will also be exempt from stamp duty.  REITs are generally exempt from tax on rental income and gains, although this is subject to meeting a number of conditions. 

Both measures provide some degree of tax relief in respect of the restructuring. The clear legislative intention is to facilitate and encourage additional Irish REIT structures over the coming year. It is expected that many significant investors will look closely at the REIT provisions and we may see additional activity in this area during 2017.

Finance Act 2016 – Section 110 Companies and Irish Land 

The Act also introduced changes to section 110 of the Irish Taxes Consolidation Act, 1997, the primary tax legislation governing the treatment of Irish securitisation and structured finance companies. These changes can restrict the deductibility of finance costs in limited circumstances. This could lead to an increased tax charge in the Section 110 Company.

When do the changes come into effect?

The Act followed on the announcement of measures on 6 September 2016 by the Minister for Finance, Michael Noonan. The changes apply with effect from 6 September 2016.

Who is affected by the changes?

The changes relate solely to Section 110 Companies that hold loans or other financial assets that derive the greater part of their value from Irish real estate, whether residential or commercial ("Specified Mortgages"). There is no impact on other structures or asset classes, such as international financial assets or aircraft.

It was always the stated policy objective of the Irish authorities that bona fide securitisations were not affected by the proposed measures. To that end, the Act has created several "safe harbours" where the new rules will not apply. This follows on considerable consultation between the Irish Debt Securities Association and industry generally with the Irish authorities.

What do the changes do? 

Where the new provisions apply, they could restrict the ability to claim a tax deduction on certain financing costs. Primarily this will affect payments of profit linked interest (e.g. profit participating notes) and could lead to additional Irish tax cost in the company. There are however a number of safe harbours, where interest deductibility is not restricted.

The Act legislation includes four safe harbours: 

(i) a Collateralised Loan Obligation ("CLO")  transaction;

(ii) a Commercial Mortgaged-Backed Securities ("CMBS") and Residential Mortgage-Backed Securities ("RMBS") transaction; 

(iii) a loan origination business; and 

(iv) a sub-participation transaction.

If the activity of the Section 110 Company falls within one or more of these categories, then the new measures introduced for Specified Mortgages will not apply and the existing beneficial tax treatment continues. Although summarised below, the rules relating to the safe harbours do require review, as there are a number of technical points that require consideration.

CLO Transactions

In broad terms, a CLO transaction is a securitisation transaction entered into that is carried out in conformity with a prospectus, listing particulars, or legally binding documents that provide for investment eligibility criteria that govern the type and quality of assets to be acquired. The section 110 vehicle must not have the acquisition of specified mortgages as its main purpose. 

Although there are details to be confirmed in guidance, this provision should apply to more internationally focused securitisation transactions.

CMBS/RMBS Transactions 

This means a securitisation transaction involving an originator who retains a net economic interest in accordance with Article 405 of the Capital Requirements Regulation ("CRR"). This facilitates the use of Section 110 Companies for Irish focused transactions.

Loan Origination Business 

Section 110 Companies have been utilised in recent years to advance significant credit in the Irish market. The new legislation continues to enable such structures, including where the loans relate to Irish land. A loan origination business exists where the Section 110 Company is the original creditor or where the loan was acquired by the Section 110 Company on or about the date on which it was advanced (this is intended to facilitate loans to retail investors that may need to be originated by an authorised lender).

Sub-Participation Transaction

A sub-participation transaction means a Section 110 Company that enters into a sub-participation as part of a syndication by a financial institution.

Changes to Revenue Notification – Section 110 Notifications 

Section 110 Companies are required to notify the Revenue Commissioners of their intention to be a Section 110 Company. Previously this was a simple filing process, typically undertaken by corporate administrators. Significantly, if an entity does not make the necessary notification, it is not entitled to be taxed as a Section 110 Company.

New forms were published on 23 February 2017 and are of relevance for all Section 110 Companies commencing business after 1 January 2017 or who have filed the old form notifications after 1 January 2017. A significant amount of additional information is required. The period within which the notification must be made has been shortened to eight weeks. The preparation of the required notifications will likely involve input from tax advisors.

The table included below sets out a guide to the steps to be taken now for Section 110 Companies that straddle the December 2016/January 2017 period.

OECD Multilateral Instrument 

As detailed in our previous update1 on 24 November 2016, the OECD released the text of a multilateral instrument ("MLI") enabling bilateral tax treaties to be amended as part of the OECD/G20 BEPs ("BEPS") project.

Over 100 countries participated in drafting and negotiating the MLI including Ireland, the US, the UK and most EU countries. As a result, it is likely that there will be significant and swift changes to many double tax treaties in the coming years.

BEPS Action 6 on treaty abuse is aimed at preventing the granting of treaty benefits in unintended circumstances.  The BEPS Action 6 Report states that tax treaties should, at a minimum, include:

(a) a principal purpose test ("PPT") only;

(b) a PPT and either a simplified or detailed limitation on benefits test ("LOB"); and

(c) a detailed LOB provision, supplemented by a mechanism that would deal with conduit arrangements.

The MLI is the method by which the large scale amendment of treaties will be achieved. The MLI is now open for signature and a signing ceremony in Paris is planned for 5 June 2017. The MLI will be finalised and enter into force following ratification by five countries. The first treaty changes made by the MLI are likely to have effect from 1 January 2018.

Principal Purpose Test

A PPT is presented as the default option in the MLI. The PPT could deny a treaty benefit (such as a reduced rate of withholding tax) if it is reasonable to conclude, having regard to all facts and circumstances, that obtaining that benefit was one of the principal purposes of any arrangement or transaction that resulted directly or indirectly in that benefit. 

Limitation on benefits provisions

Signatory countries can supplement the PPT by choosing to apply a simplified LOB provision. This would result in additional restrictions on treaty access.

Some jurisdictions, including the UK, have already noted that they would not intend to incorporate the LOB in their treaties.

Permanent Establishment

Article 12 of the MLI allows countries to lower the threshold at which a PE (taxable presence) arises in a number of ways including through:

(a) broadening the scope of dependent agent PEs (preventing the use of commissionaire arrangements and other matters) or

(b) narrowing exemptions for fixed place of business PEs by requiring activities to be "preparatory or auxiliary" in character and/or by introducing an anti-fragmentation rule.

It is understood that in certain cases Ireland may apply Article 12 to its treaties.  Accordingly, for foreign enterprises that engage in activity in Ireland or Irish entities that engage in activity in other countries that adopt Article 12, the MLI provisions on taxable presence will need to be carefully considered.


The MLI is a novel, ambitious and potentially revolutionary legal document.  More than 2,000 treaties could be amended through the MLI—about two-thirds of the worldwide total—if all those participating ratify the MLI.  Its framers hope that widespread adoption will contribute to a rapid and consistent implementation of the BEPS project.

In an Irish context, the impact of the MLI on outbound payments (including dividends and interest) is unlikely to be significant. This is because the Irish exemptions from withholding tax rely primarily on domestic exemptions, rather than treaty based benefits.

The effect of the MLI on a particular double tax treaty can only be determined once notifications and reservations have been provided by both parties to the OECD as depositary. It is understood that countries have begun sharing their proposed treaty choices in this regard. Until the dust settles on this process and it is formalised by each country, it will not be possible to properly measure the precise impact of the MLI.

State Aid Investigation - Apple

The EU Commission decision relating to the Apple case was published on 19 December 2016. The 130-page document contains the Commission's detailed findings and follows the initial announcement of the decision on 30 August 2016.

The Commission was investigating whether Ireland allowed Apple to adopt a method of taxation that provided it with a competitive advantage and breached EU State Aid rules. In layman's terms, the question is whether Ireland gave Apple a "sweetheart tax deal". The Commission concluded this did occur and ordered Ireland to recover approximately €13 billion, plus interest, from Apple. Ireland has denied any such anti-competitive arrangement existed. The decision is the subject of an appeal by Ireland and Apple and therefore it is likely to be several years before the issues are entirely resolved.

The Commission's decision focuses on the findings of the European Court of Justice in the Belgian Co-Ordination Centres case, and in particular the endorsement of the "arm's length" principle as a benchmark for taxation of integrated companies. The Commission is of the view that Ireland provided Apple with State Aid because Ireland failed to implement that principle. The Commission views the requirement to apply the arm's length principle as part of Article 107(1) of the EU Treaty. It was binding on EU Member States regardless of the fact that Ireland had not incorporated that principle into its domestic legislation. This finding has attracted significant comment, not least because the decision in the Belgian case was in 2003, whereas the impugned tax rulings date from 1991.

Having determined that the arm's length principle should have been applied, the Commission focused on whether Ireland applied that principle in its taxation of Apple. Apple Sales International ("ASI") and Apple Operations International ("AOI") are the primary focus of the decision. Each entity was non-Irish resident, but maintained an Irish branch. Under Irish law, at that time, only the profits derived from the Irish branch were subject to tax in Ireland. The Commission examined the profits that, in its view, should have been allocated to the branches, under the arm's length principle. Ireland had treated profits derived from Apple's intellectual property as outside the scope of Irish taxation, on the basis that the entities were not resident here. Ireland allocated the profits to non-resident head offices. The Commission determined that the absence of employees and activity in the head offices meant that a significant amount of that profit should be allocated to and taxed in the Irish branches. This finding will be studied very closely by companies that have utilised similar structures in Ireland historically.

Maples and Calder has advised a number of investors and companies on its view on the likely outcome of the case. The unresolved nature of issues, and the political commentary that it has attracted, has the capacity to create uncertainty. Similar issues are being examined in cases involving other jurisdictions. This is not solely an Irish issue, but is a matter for all companies operating in the EU.

Many companies will have been advised in the past that a tax ruling provides greater certainty on their tax position. This has not been a course of action that Maples and Calder has traditionally favoured. In the current environment, with increased disclosure and scrutiny of tax rulings, including under the Council Directive (EU) 2015/2376 and the OECD framework agreed as part of Action 5 of the BEPS project, the merits of seeking a tax ruling should be carefully considered.



The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

William Fogarty
In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions