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 Post subject: Re: Section 110, Irish Charities, Vultures, NAMA, Tax Avoida
PostPosted: Wed Sep 07, 2016 10:47 am 
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Some tax changes can be backdated :x
http://www.independent.ie/irish-news/ho ... 59345.html
Quote:
THE controversial new law introduced to ensure that property developer Ken Rohan would not have to pay benefit-in-kind tax on his art collection was supported by the Arts and Culture division of the Department of Arts, Culture and the Gaeltacht, then headed by Michael D Higgins, the Sunday Independent has learned.
The proposal to make the law retrospective by 12 years came from the Revenue Commissioners, and not the Department of Finance which was then headed by Bertie Ahern, it can also be revealed.
Its introduction by Mr Ahern, when he was Minister for Finance, followed lobbying by the Irish Georgian Society, the National Heritage Council, Bord Fáilte and Mr Rohan himself.


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 Post subject: Re: Section 110, Irish Charities, Vultures, NAMA, Tax Avoida
PostPosted: Wed Sep 07, 2016 1:00 pm 
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Word from some Dublin professional firms re this Section 110 amendment - no problem to get around.

Vulture should be able to "preserve" all of the tax-free benefits of the Section 110 with appropriate action.

:(


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 Post subject: Re: Section 110, Irish Charities, Vultures, NAMA, Tax Avoida
PostPosted: Wed Sep 07, 2016 2:06 pm 
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They could not have that view already. In the first instance the legislation can be changed to make it more effective. In the second instance this presumably changes the effect of the previous rulings re applicability of anti avoidance rules. Also, the principle that this is a loophole to be rectified by legislation is established.


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 Post subject: Re: Section 110, Irish Charities, Vultures, NAMA, Tax Avoida
PostPosted: Wed Sep 07, 2016 2:24 pm 
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An expectation perhaps , akin to "the Fed will always have your back".


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 Post subject: Re: Section 110, Irish Charities, Vultures, NAMA, Tax Avoida
PostPosted: Wed Sep 07, 2016 9:19 pm 
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observer35 wrote:
Word from some Dublin professional firms re this Section 110 amendment - no problem to get around.

Vulture should be able to "preserve" all of the tax-free benefits of the Section 110 with appropriate action.

:(


I think there is probably a touch of bravado in response to "What the fuck is going on there, you assured us etc etc" phone calls from very angry clients...

Nothing like watching a potential bonus evaporate to make people very angry :x

It has been called a loophole and legislation has been designed to close it off. Anyone fucking around with more loopholes is likely to get mashed in due course.

It is all public. And of course, unlike Apple they can't go unlimited to hide the numbers as the owners are charities :lol:

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 Post subject: Re: Section 110, Irish Charities, Vultures, NAMA, Tax Avoida
PostPosted: Wed Sep 07, 2016 11:48 pm 
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Received this from my (Big 4) accountant this afternoon:
Quote:
The Minister for Finance today announced that, with effect from 6 September 2016, an amendment would be made to section 110 Taxes Consolidation Act 1997 ('s110') with the effect of restricting the use of profit participating loans where they are used to finance business of s110 companies related to Irish property transactions. Transactions of s110 companies unrelated to Irish property transactions are not affected by this amendment.

Broadly, the business of a s110 company that is impacted by the amendment, referred to as 'specified property business', is that part of the s110 company's activity that involves the holding, managing or both the holding and managing of so called 'specified mortgages', being any financial asset deriving its value, or the greater part of its value, from land in the State. This part of the s110 company's business is to be treated as a separate business from any other business the company may carry on and, with certain exceptions, no interest above an arm's length rate will be deductible in computing the taxable profits of that part of the business. The profit so calculated for this part of the business will be taxable at the 25% rate of corporation tax. However, it is intended that any unrealised gains of the s110 company arising on specified property business up to 6 September will be unaffected by the amendment.

Certain exceptions are made so that interest on profit participating loans used in a s110 company's specified property business will continue to be fully deductible where the interest is paid to (i) a company subject to corporation tax on the interest, (ii) certain approved funds, and (iii) a person resident in another EU or EEA country where a range of conditions are met.

The proposed amendment will be introduced through the Finance Act process after the Budget and it may be that amendments may be made during that time. The Minister has also said that proposals in relation to the use of funds – again in relation to Irish property – are being considered and we await further detail on these.

On a somewhat separate note, the Minister referred to the use of charitable trusts by s110 companies as being subject to a separate review.

On the positive side, the Minister has strongly recognised the importance of both the securitisation and the funds industries in the broader IFS sector, referencing in particular the significant employment created within that sector.

These changes will require very careful consideration - please get in touch with your usual [Firm name] contact to talk through the fuller implications of the proposed changes.

If the part in bold is correct, then it seems that 'unrealised gains' up to today will not be affected, so basically this will have no impact if I understand the statement correctly. Perhaps any further gains from now will be taxable, but in fairness the majority of uplift in value of properties/loan books has already taken place to date and unless we exceed Celtic Tiger values, there's probably not a whole lot of growth left in Dublin - but potentially a bit more scope for value increase in regional areas.

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 Post subject: Re: Section 110, Irish Charities, Vultures, NAMA, Tax Avoida
PostPosted: Sat Sep 10, 2016 1:11 pm 
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Why Noonan's Section 110 Amendment is Built-to-Fail (hint: it was written by Big 4)

Image

Have checked this discretely with 3 of the Big 4, and sadly, SoCoDu (above) is right.

So despite Michael Noonan finally admitting that Section 110s are abusing the tax laws:

RTE: Government moves to amend Section 110 to close tax loophole used by Vulture Funds
http://www.rte.ie/news/2016/0906/814471-revenue-nama-foi/

The Big 4 have managed to find out how to neutralise it completely inside 24 hours:

1. ALL CAPITAL GAINS CAN BE SHELTERED: All portfolios can be "marked-to-market" at 5th September (i.e. you don't have to physically "sell" any assets, just "re-value" them, at 0% CGT, to 5th Sept). Given the current environment (Irish long bond yields at almost 0%, Dublin commercial property at c 2005 capitalisation values, minimal foreclosures), it will be easy for the PWC / KPMG / Deliotte's Corporate Finance Departments to produce 100 page reports uplifting the portfolio sufficiently that no other capital gains will accrue post 5th September 2016 (I'm pretty much quoting from one of the Big 4 here, who was quite excited at spending the next 6 months earning fees re-valuing over €30bn in Section 110 vulture assets). Note that while the amendment didn't explicitly state that the vultures could "mark-to-market", however every one of the Big 4 (and even the smaller ones), published notes confirming that this would be the case (i.e. it was the Big 4 who wrote Noonan's amendment to achieve his "political" requirements while preserving the tax avoidance of their vulture clients).

note: as Stephen Donnelly points out (his article below), when Government raises CGT tax rates in Budgets, it doesn't allow citizens to "mark-to-market" their assets at the old rate the night before the new rate comes in; it did for vultures.

2. ALL INCOME GAINS CAN BE SHELTERED: Noonan's amendment still allows interest deductability at an "arm's length" rate on all loans. Some of the Big 4 (who wrote the amendment) say this is code for - you can restructure to create "internal loans at high mezz rates like 15%, where the mezz loan is still based in Cayman, as per the existing Section 110 PP Notes", as long as you have (another) report from PWC / KPMG / Deliotte Corp. Finance showing the 15% p.a. rate is justified by market (how the Big 4 have gotten Revenue to interpret what an "arms length rate" is in the past). One of the Big 4 have another back-up plan (in case Revenue goes hostile), where the Vulture can create a 15% mezz rate loan that looks "less internal" (using an "orphaned" financing structure), but you will need more advice (a.k.a fees) to do it.

note: as Stephen Donnelly also notes, if you buy an Irish business, you can get tax relief against bank debt interest; however you cannot get tax relief on interest from "internal" loans you might have (which are housed in the Cayman Islands).

* * * * * *

Final word is that "only a badly advised vulture is going to incur any tax" as a result of Noonan's proposed amendment.

RESULT: Even more fees for Dublin Big 4 Firms from Vultures : Zero tax for the Irish people from Vultures.


This is more consistent with the "non-approach" Noonan took on the Charity side (discussed below):
http://www.thepropertypin.com/viewtopic.php?p=889836#p889836

It is one thing not taxing apple (jobs, MNCs etc.) but foreign vultures ........ I just don't understand it?

Image

See how this relates to Project Eagle, and how Noonan's Amendment ensures that you (taxpayer) funded Cerberus' deal:
http://www.thepropertypin.com/viewtopic.php?p=891217#p891217


Last edited by observer35 on Sun Sep 18, 2016 2:44 pm, edited 8 times in total.

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 Post subject: Re: Section 110, Irish Charities, Vultures, NAMA, Tax Avoida
PostPosted: Sat Sep 10, 2016 2:01 pm 
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observer35 wrote:
It is one thing not taxing apple (jobs, MNCs etc.) but foreign vultures ........ I just don't understand it?


A couple in the midlands made an offer for a house in their area. Never heard back from agent handling the sale. Chased it up some months later to be told offer was not enough and property has been sold to a portfolio.
Note: it was confirmed only the couple expressed interest in the property. Offered price was about one third of amount paid at peak boom by owner who had subsequently gone bust and skipped the country.
Without the vultures, the entire stock of property across the country resets towards LTEV, substantially SUBSTANTIALLY less than current values, FOR ALL PROPERTIES. :shock:


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 Post subject: Re: Section 110, Irish Charities, Vultures, NAMA, Tax Avoida
PostPosted: Sat Sep 10, 2016 4:30 pm 
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It would be easy enough to amend the amendment if they wanted to.

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 Post subject: Re: Section 110, Irish Charities, Vultures, NAMA, Tax Avoida
PostPosted: Sat Sep 10, 2016 5:11 pm 
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grumpy wrote:
It would be easy enough to amend the amendment if they wanted to.

"it they wanted to" ..... that is the key problem.


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 Post subject: Re: Section 110, Irish Charities, Vultures, NAMA, Tax Avoida
PostPosted: Sat Sep 10, 2016 10:30 pm 
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Why no Irish media - even SBP (who have worked their asses off on this scandal) - is willing to "out" the "creators" of the Section 110 scandal:

Image

https://mobile.twitter.com/sundaybusiness/status/774646928084602881/photo/1

:wink:


Last edited by observer35 on Sun Sep 11, 2016 3:49 pm, edited 2 times in total.

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 Post subject: Re: Section 110, Irish Charities, Vultures, NAMA, Tax Avoida
PostPosted: Sun Sep 11, 2016 2:25 pm 
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Noonan loosing complete control of the Domestic Corporate Tax Base via Section 110.

Two very interesting articles in the Sunday Independent showing how bad the Section 110 scandal is getting:

1. Domestic lenders now using Section 110 to get all their profits tax-free.

Image

INDEPENDENT: Cardinal Capital warns of 'damage' by new S110
http://www.independent.ie/business/cardinal-capital-warns-of-damage-by-new-s110-35038346.html

Domestic lender - Cardinal Capital - has now revealed that it is probably using Section 110 to avoid all Irish taxes on it's loans to domestic borrowers and re-route profits to an offshore location (where it's backer, Carlyle Capital, is based).

(I wonder if their lawyer is Matheson, A&L Goodbody or Dillon Eustace - the holy trinity that dominate this area?).

So, while all other Irish domestic lenders - Bank of Ireland, AIB, Ulster Bank, Permanent TSB, KBC etc. - have to lend in structures that incur 12.5% corporation tax (inside the banks) and another 20 % withholding tax (on distribution of profits), Cardinal Capital is indicating that it is living in a 0% existence.

The banks are (in a normal environment), one of the biggest payers of Corporate Tax in any country.

A clear example of the domestic corporate tax base being destroyed by Noonan's Section 110 scheme.

If Cardinal Capital is using Section 110, then it is almost, a non-brainer case of illegal state aid to a company. And remember, Cardinal Capital could not use a Section 110 vehicle to give loans unless the Revenue has changed the Withholding Tax Anti-Avoidance Rules in April 2016, when it was pointed out that the Vulture's Section 110s were having difficulty with them.

CASE EXAMPLE: Revenue showing they knew vultures had S110s, AND they fixed anti-avoidance tax rules for them.
http://www.thepropertypin.com/viewtopic.php?p=886771#p886771

Is it time to give Margrethe Vestager (another call).

2. Stephen Donnelly pointing out how Noonan's amendment is probably the end of Corporate Tax in Ireland.

As things stands, vulture funds could take €10bn to €20bn offshore over the next decade
http://www.independent.ie/business/why-i-had-no-option-but-to-leave-the-social-democrats-35039074.html

Good article by Donnelly on why Noonan's amendment is designed to fail (as we discussed in the link above)
http://www.thepropertypin.com/viewtopic.php?p=890585#p890585

However Donnelly also notes that the exclusion of property assets from Noonan's amendment, effectively means that there is no further need for non-property related corporates to pay Irish Corporate or Withholding Taxes (or VAT, as S110s are also exempt here). We gave the humorous example of how you could buy and re-develop a dalkey house with S110 (below), but while Noonan has cut off this (amendment blocks property activities), it leaves any other non-property related businesses free.

CASE STUDY: How to use Section 110 on Strawberry Hill House, Vico Road, Dalkey, Co Dublin
http://www.thepropertypin.com/viewtopic.php?p=888842#p888842

* * * * * *

Both examples show Noonan's loss of control of the Section 110s in the domestic economy, is going to see further billions in annual Irish corporate and Irish withholding taxes (and Irish VAT duties) lost. The Limerick ex. school teacher is way out his depth here (as we have seen on our Apple tax posts). The IFSC Dublin law firms are running rings around him.

Image


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 Post subject: Re: Section 110, Irish Charities, Vultures, NAMA, Tax Avoida
PostPosted: Sun Sep 11, 2016 8:16 pm 
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Split out some posts that interrupted O35 in the thread...

viewtopic.php?f=4&t=66377

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 Post subject: Re: Section 110, Irish Charities, Vultures, NAMA, Tax Avoida
PostPosted: Mon Sep 12, 2016 9:58 pm 
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St. Wilbur Ross who unilaterally saved Ireland and made a shed-load and good luck to him.

Established a 500M Mezz financing vehicle with Cardinal Capital as JV partner in 2014. No activity in 2014. S 110 vehicle. PWC the auditors, Maples the solicitors.

The accounts are here, largely uninteresting..

https://www.scribd.com/document/323769831/Wlr-Cardinal-Mezzanine-Finance-Company-Limited-31-12-14

The ownership of the company is noted in the accounts. Would you say it is:

A. Solas - a charitable entity aiming to shine a light on those less privileged in society by highlighting their plight.

B. The Mulally Fund - a charitable entity striving to make a set of headphones for Una with unique sounds that make her happy.

C. Halligan's Tache - a charitable entity striving to have the guy whacked for being so annoying.

D. The WLR Cardinal Mezzanine Finance Charitable Trust - a charitable entity whose founders seemed desperate to get out of the office and couldn't give a crap as no-one looks at this shit.

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 Post subject: Re: Section 110, Irish Charities, Vultures, NAMA, Tax Avoida
PostPosted: Mon Sep 12, 2016 10:22 pm 
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Nice one grumpy !

Image

I love the way that they don't even bother to hide the Charitable Trust names any more.

However, this is another level of Section 110 Irish tax avoidance again. An ordinary Irish financing business for the Irish domestic market (like Bank of Ireland, AIB etc.) setting themselves up in a nice cosy fully Irish tax free world (no Irish Corp Tax, Irish Withholding Tax or even Irish VAT/Duties) for themselves.

Couple of points re your investigation above:

1. This would be another illegal EU state aid case (like Apple) to Cardinal Capital (unless the Revenue is willing to allow all Irish lenders and Banks use Section 110 to avoid all their Irish taxes).

2. Cardinal Capital would not have been able to use the Section 110 structure if it wasn't for the fact that the Revenue removed its Withholding Tax Anti-Avoidance for Section 110.

Irish Revenue amending Irish Witholding Tax Anti-Avoidance Laws to fit Section 110s into Domestic Economy
http://www.thepropertypin.com/viewtopic.php?p=886771#p886771

3. While post Noonan's Amendment, Cardinal can't do this for property related mezz loans, but they can do for all other non-property related loans (i.e. Business Loans etc.). Non-property lending in Ireland, is now a zero Irish tax (and Irish VAT) activity.


Last edited by observer35 on Mon Sep 12, 2016 10:35 pm, edited 2 times in total.

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