Nama paid €158m in tax after section 110 loophole closure

Nama paid €158 million to the Revenue Commissioners last November as a preliminary tax payment after the Government moved to close off a loophole in the legislation governing section 110 companies.

This emerged in Nama's accounts for the third-quarter of last year, which were sent to the Minister for Finance, Michael Noonan, just before Christmas and have since been laid before the houses of the Oireachtas.

Nama said the payment to Revenue reflected the “estimated profit” in the period from September 6th, 2016, to the end of the year connected with its section 110 companies.

The Government moved last year to tax property loans that mainly overseas buyers had been putting into ultra tax-efficient special-purpose vehicles, known as section 110 companies.

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Legislation

The tax legislation covering these companies dated back to 1997 and was originally designed to make Ireland an attractive hub for international finance.

It emerged last year that Nama had also used these structures for some of its property loans, something that caused controversy with Opposition TDs.

The Finance Bill, enacted by President Michael D Higgins on Christmas Day, involves profits from Irish property loans contained in these section 110 companies being taxed at a rate of 25 per cent, with some exemptions. The tax was back-dated to September 6th.

Nama’s third-quarter accounts show that it made a profit of €795 million in the first nine months of last year, compared with €571 million for the same period of 2015.

Loan portfolio

It generated €4.3 billion in cash through disposals in the period and a further €900 million from the end of September to December 16th. This brought the total cash generated from its inception to €38 billion.

The agency had cash balances of €1.8 billion at the end of the third quarter.

The carrying value of its loan portfolio at the end of September was €4.9 billion, down from €6.4 billion a year earlier. This was net of a cumulative impairment provision of €1.9 billion.

In their letter sent to the Minister on December 22nd, Nama chairman Frank Daly and chief executive Brendan McDonagh said the agency was on target to deliver 2,500 residential units for 2016.

It has funded the construction of more than 3,600 homes in the Dublin area since the start of 2014.

Staff costs in the first nine months of last year amounted to just more than €25 million and were reimbursed to the National Treasury Management Agency. The agency paid primary loan servicer fees of €12.5 million in the period and legal fees of €2.7 million.